Chapter 21, Corporate Finance Questions and
Answers High Grade 2023
Globalization refers to the removal of barriers to free trade and the closer integration of national
economies. - -True
-The production of goods and services has become highly globalized due to emergence of large
multinational companies. - -True
-Country risk has no effect on a firm's cash flows. - -False
-Stockholder wealth maximization is the accepted goal for firms in all countries around the
world. - -False
-The European manager's goal is to earn as much wealth as possible for a firm while considering
the overall welfare of both the stockholders and stakeholders. - -True
-The foreign exchange market is a group of international markets connected electronically where
currencies are bought and sold in wholesale amounts. - -True
-Tokyo is the largest foreign exchange trading center. - -False
-When a U.S. bank in Chicago gives a quote of £0.5089/$, it is a direct quote. - -False
-The bid quote is the rate at which the dealer will sell foreign currency. - -False
-The decision to accept international projects with a positive NPV increases the value of a firm,
and it should be consistent with maximizing stockholder wealth. - -True
-A Eurodollar is defined as a U.S. dollar deposited in a bank outside the United States. - -True
-If the foreign exchange rate is the price in foreign currency for a dollar, then the exchange rate
quote is called - -an indirect quote.
-A European quote is the same as - -an indirect quote.
-Which of the following is an indirect quote from an American perspective? - -£0.5125/$
-The bid quote represents the rate at which - -the dealer will buy foreign currency from you.
-The ask quote represents the rate at which - -the dealer will sell foreign currency to you.
-Given that the spot rate is $1.5136/€ and the 90-day forward quote is $1.4974/€, we can say that
- -the U.S. dollar is at a forward premium against the Euro.
Answers High Grade 2023
Globalization refers to the removal of barriers to free trade and the closer integration of national
economies. - -True
-The production of goods and services has become highly globalized due to emergence of large
multinational companies. - -True
-Country risk has no effect on a firm's cash flows. - -False
-Stockholder wealth maximization is the accepted goal for firms in all countries around the
world. - -False
-The European manager's goal is to earn as much wealth as possible for a firm while considering
the overall welfare of both the stockholders and stakeholders. - -True
-The foreign exchange market is a group of international markets connected electronically where
currencies are bought and sold in wholesale amounts. - -True
-Tokyo is the largest foreign exchange trading center. - -False
-When a U.S. bank in Chicago gives a quote of £0.5089/$, it is a direct quote. - -False
-The bid quote is the rate at which the dealer will sell foreign currency. - -False
-The decision to accept international projects with a positive NPV increases the value of a firm,
and it should be consistent with maximizing stockholder wealth. - -True
-A Eurodollar is defined as a U.S. dollar deposited in a bank outside the United States. - -True
-If the foreign exchange rate is the price in foreign currency for a dollar, then the exchange rate
quote is called - -an indirect quote.
-A European quote is the same as - -an indirect quote.
-Which of the following is an indirect quote from an American perspective? - -£0.5125/$
-The bid quote represents the rate at which - -the dealer will buy foreign currency from you.
-The ask quote represents the rate at which - -the dealer will sell foreign currency to you.
-Given that the spot rate is $1.5136/€ and the 90-day forward quote is $1.4974/€, we can say that
- -the U.S. dollar is at a forward premium against the Euro.
