InternationalgFinancialgManagementgTestgBan
k
,InternationalgFinancialgManagementgTestgBan
k
ch1
Student:g
ThegfirstgtwogcolumnsggivegthegmaximumgdailygamountsgofgbeergandgwhiskeygthatgSoutherngIrelandgandgN
ortherngIrelandgcangproducegwhengtheygcompletelygspecializegingonegorgothergproduct.gTheglastgtwogcolum
nsggivegeachgcountry'sgconsumptiongwithoutgtrade.
1. IsgNortherngIrelandgbettergoffgwhengitgtradesgwithgSoutherngIreland
?gTrue False
2. NowgsupposegthatgSoutherngworkersgreceivegagraisegtog€2gpergday.gWillgtradegbegpossiblegatgthegexchan
gegrategyougfoundgingtheglastgquestion?
True False
3. NowgsupposegthatgSoutherngworkersgaregpaidg€1gpergdaygbutgthegNortherngworkersgreceivegagraisegtog
£2gpergday.gWillgtradegbegpossiblegatgthegexchangegrategyougfoundgingthegquestiongbeforegtheglastgques
tion?
True False
4. Whatgmajorgdimensiongsetsgapartginternationalgfinancegfromgdomesticgfinance?
A. Foreigngexchangegandgpoliticalgrisks
B. Marketgimperfections
C. Expandedgopportunitygset
D. Allgofgthegabove
5. Angexamplegofgagpoliticalgriskgis
A. expropriationgofgassets.
B. adversegchangegingtaxgrules.
C. thegoppositiongpartygbeinggelected.
D. bothganswersga)gandgb)garegcorrect.
6. Productiongofggoodsgandgservicesghasgbecomegglobalizedgtogaglargegextentgasgagresultgof
A. naturalgresourcesgbeinggdepletedgingonegcountrygafterganother.
B. skilledglaborgbeingghighlygmobile.
C. multinationalgcorporations'geffortsgtogsourceginputsgandglocategproductionganywheregwheregcostsgar
eglowergandgprofitsghigher.
D. commongtastesgworldwidegforgthegsameggoodsgandgservices.
7. Recently,gfinancialgmarketsghavegbecomeghighlygintegrated.gThisgdevelopment
A. allowsginvestorsgtogdiversifygtheirgportfoliosginternationally.
B. allowsgminorityginvestorsgtogbuygandgsellgstocks.
C. hasgincreasedgthegcostgofgcapitalgforgfirms.
D. answersga)gandgc)garegbothgcorrect.
,InternationalgFinancialgManagementgTestgBan
k
8. Japanghasgexperiencedglargegtradegsurpluses.gJapaneseginvestorsghavegrespondedgtogthisgby
A. liquidatinggtheirgpositionsgingstocksgtogbuygdollargdenominatedgbonds.
B. investinggheavilygingU.S.gandgothergforeigngfinancialgmarkets.
C. lobbyinggthegU.S.ggovernmentgtogdepreciategitsgcurrency.
D. lobbyinggthegJapaneseggovernmentgtogallowgthegyengtogappreciate.
9. Supposegyourgfirmginvestsg$100,000gingagprojectgingItaly.gAtgthegtimegthegexchangegrategisg$1.25g=g€1.0
0.gOnegyearglatergthegexchangegrategisgthegsame,gbutgthegItalianggovernmentghasgexpropriatedgyourgfirm'
s
assetsgpayinggonlyg€80,000gingcompensation.gThisgisgangexamplegof
A. exchangegrategrisk.
B. politicalgrisk.
C. marketgimperfections.
D. nonegofgthegabove,gsinceg$100,000g=g€80,000g×g$1.25/€1.00
10. Supposegyougstartgwithg$100gandgbuygstockgforg£50gwhengthegexchangegrategisg£1g=g$2.gOnegyearglater,gt
hegstockgrisesgtog£60.gYougareghappygwithgyourg20gpercentgreturngongthegstock,gbutgwhengyougsellgthegsto
ckgandgexchangegyourg£60gforgdollars,gyougonlyggetg$45gsincegthegpoundghasgfallengtog£1g=g$0.75.gThisgl
ossgofgvaluegisgangexamplegof
A. exchangegrategrisk.
B. politicalgrisk.
C. marketgimperfections.
D. weaknessgingthegdollar.
11. SupposegthatgGreatgBritaingisgagmajorgexportgmarketgforgyourgfirm,gagU.S.-
basedgMNC.gIfgthegBritishgpoundgdepreciatesgagainstgthegU.S.gdollar,
A. yourgfirmgwillgbegablegtogchargegmoregingdollargtermsgwhilegkeepinggpoundgpricesgstable.
B. yourgfirmgmaygbegpricedgoutgofgthegU.K.gmarket,gtogthegextentgthatgyourgdollargcostsgstaygconstantga
ndgyourgpoundgpricesgwillgrise.
C. togprotectgU.K.gmarketgshare,gyourgfirmgmayghavegtogcutgthegdollargpricegofgyourggoodsgtogkeepgt
hegpoundgpricegthegsame.
D. bothgb)gandgc)garegcorrect
12. SupposegMexicogisgagmajorgexportgmarketgforgyourgU.S.-
basedgcompanygandgthegMexicangpesogappreciatesgdrasticallygagainstgthegU.S.gdollar.gThisgme
ans
Agyourgcompany'sgproductsgcangbegpricedgoutgofgthegMexicangmarket,gasgthegpesogpricegofgAmerican
.g importsgwillgrisegfollowinggthegpeso'sgfall.
B.g yourgfirmgwillgbegablegtogchargegmoregingdollargtermsgwhilegkeepinggpesogpricesgstable.
C.gyourgdomesticgcompetitorsgwillgenjoygagperiodgofgfacingglessenedgpricegcompetitiongfromgMexicangi
mports.
D.g bothgb)gandgc)garegcorrect
13. SupposegMexicogisgagmajorgexportgmarketgforgyourgU.S.-
basedgcompanygandgthegMexicangpesogdepreciatesgdrasticallygagainstgthegU.S.gdollar,gasgitgdid
gingDecemberg1994.gThisgmeans
Agyourgcompany'sgproductsgcangbegpricedgoutgofgthegMexicangmarket,gasgthegpesogpricegofgAmerican
.g importsgwillgrisegfollowinggthegpeso'sgfall.
B.g yourgfirmgwillgbegablegtogchargegmoregingdollargtermsgwhilegkeepinggpesogpricesgstable.
C.gyourgdomesticgcompetitorsgwillgenjoygagperiodgofgfacingglittlegpricegcompetitiongfromgMexicangimports.
D.g bothgb)gandgc)garegcorrect
14. SupposegthatgyougaregagU.S.gproducergofgagcommodityggoodgcompetinggwithgforeigngproducers.gYo
urginputsgofgproductiongaregpricedgingdollarsgandgyougsellgyourgoutputgingdollars.gIfgthegU.S.gcurrenc
ygdepreciatesgagainstgthegcurrenciesgofgourgtradinggpartners,
A. yourgcompetitivegpositiongisglikelygimproved.
B. yourgcompetitivegpositiongisglikelygworsened.
, InternationalgFinancialgManagementgTestgBan
k C. yourgcompetitivegpositiongisgunchanged.
k
,InternationalgFinancialgManagementgTestgBan
k
ch1
Student:g
ThegfirstgtwogcolumnsggivegthegmaximumgdailygamountsgofgbeergandgwhiskeygthatgSoutherngIrelandgandgN
ortherngIrelandgcangproducegwhengtheygcompletelygspecializegingonegorgothergproduct.gTheglastgtwogcolum
nsggivegeachgcountry'sgconsumptiongwithoutgtrade.
1. IsgNortherngIrelandgbettergoffgwhengitgtradesgwithgSoutherngIreland
?gTrue False
2. NowgsupposegthatgSoutherngworkersgreceivegagraisegtog€2gpergday.gWillgtradegbegpossiblegatgthegexchan
gegrategyougfoundgingtheglastgquestion?
True False
3. NowgsupposegthatgSoutherngworkersgaregpaidg€1gpergdaygbutgthegNortherngworkersgreceivegagraisegtog
£2gpergday.gWillgtradegbegpossiblegatgthegexchangegrategyougfoundgingthegquestiongbeforegtheglastgques
tion?
True False
4. Whatgmajorgdimensiongsetsgapartginternationalgfinancegfromgdomesticgfinance?
A. Foreigngexchangegandgpoliticalgrisks
B. Marketgimperfections
C. Expandedgopportunitygset
D. Allgofgthegabove
5. Angexamplegofgagpoliticalgriskgis
A. expropriationgofgassets.
B. adversegchangegingtaxgrules.
C. thegoppositiongpartygbeinggelected.
D. bothganswersga)gandgb)garegcorrect.
6. Productiongofggoodsgandgservicesghasgbecomegglobalizedgtogaglargegextentgasgagresultgof
A. naturalgresourcesgbeinggdepletedgingonegcountrygafterganother.
B. skilledglaborgbeingghighlygmobile.
C. multinationalgcorporations'geffortsgtogsourceginputsgandglocategproductionganywheregwheregcostsgar
eglowergandgprofitsghigher.
D. commongtastesgworldwidegforgthegsameggoodsgandgservices.
7. Recently,gfinancialgmarketsghavegbecomeghighlygintegrated.gThisgdevelopment
A. allowsginvestorsgtogdiversifygtheirgportfoliosginternationally.
B. allowsgminorityginvestorsgtogbuygandgsellgstocks.
C. hasgincreasedgthegcostgofgcapitalgforgfirms.
D. answersga)gandgc)garegbothgcorrect.
,InternationalgFinancialgManagementgTestgBan
k
8. Japanghasgexperiencedglargegtradegsurpluses.gJapaneseginvestorsghavegrespondedgtogthisgby
A. liquidatinggtheirgpositionsgingstocksgtogbuygdollargdenominatedgbonds.
B. investinggheavilygingU.S.gandgothergforeigngfinancialgmarkets.
C. lobbyinggthegU.S.ggovernmentgtogdepreciategitsgcurrency.
D. lobbyinggthegJapaneseggovernmentgtogallowgthegyengtogappreciate.
9. Supposegyourgfirmginvestsg$100,000gingagprojectgingItaly.gAtgthegtimegthegexchangegrategisg$1.25g=g€1.0
0.gOnegyearglatergthegexchangegrategisgthegsame,gbutgthegItalianggovernmentghasgexpropriatedgyourgfirm'
s
assetsgpayinggonlyg€80,000gingcompensation.gThisgisgangexamplegof
A. exchangegrategrisk.
B. politicalgrisk.
C. marketgimperfections.
D. nonegofgthegabove,gsinceg$100,000g=g€80,000g×g$1.25/€1.00
10. Supposegyougstartgwithg$100gandgbuygstockgforg£50gwhengthegexchangegrategisg£1g=g$2.gOnegyearglater,gt
hegstockgrisesgtog£60.gYougareghappygwithgyourg20gpercentgreturngongthegstock,gbutgwhengyougsellgthegsto
ckgandgexchangegyourg£60gforgdollars,gyougonlyggetg$45gsincegthegpoundghasgfallengtog£1g=g$0.75.gThisgl
ossgofgvaluegisgangexamplegof
A. exchangegrategrisk.
B. politicalgrisk.
C. marketgimperfections.
D. weaknessgingthegdollar.
11. SupposegthatgGreatgBritaingisgagmajorgexportgmarketgforgyourgfirm,gagU.S.-
basedgMNC.gIfgthegBritishgpoundgdepreciatesgagainstgthegU.S.gdollar,
A. yourgfirmgwillgbegablegtogchargegmoregingdollargtermsgwhilegkeepinggpoundgpricesgstable.
B. yourgfirmgmaygbegpricedgoutgofgthegU.K.gmarket,gtogthegextentgthatgyourgdollargcostsgstaygconstantga
ndgyourgpoundgpricesgwillgrise.
C. togprotectgU.K.gmarketgshare,gyourgfirmgmayghavegtogcutgthegdollargpricegofgyourggoodsgtogkeepgt
hegpoundgpricegthegsame.
D. bothgb)gandgc)garegcorrect
12. SupposegMexicogisgagmajorgexportgmarketgforgyourgU.S.-
basedgcompanygandgthegMexicangpesogappreciatesgdrasticallygagainstgthegU.S.gdollar.gThisgme
ans
Agyourgcompany'sgproductsgcangbegpricedgoutgofgthegMexicangmarket,gasgthegpesogpricegofgAmerican
.g importsgwillgrisegfollowinggthegpeso'sgfall.
B.g yourgfirmgwillgbegablegtogchargegmoregingdollargtermsgwhilegkeepinggpesogpricesgstable.
C.gyourgdomesticgcompetitorsgwillgenjoygagperiodgofgfacingglessenedgpricegcompetitiongfromgMexicangi
mports.
D.g bothgb)gandgc)garegcorrect
13. SupposegMexicogisgagmajorgexportgmarketgforgyourgU.S.-
basedgcompanygandgthegMexicangpesogdepreciatesgdrasticallygagainstgthegU.S.gdollar,gasgitgdid
gingDecemberg1994.gThisgmeans
Agyourgcompany'sgproductsgcangbegpricedgoutgofgthegMexicangmarket,gasgthegpesogpricegofgAmerican
.g importsgwillgrisegfollowinggthegpeso'sgfall.
B.g yourgfirmgwillgbegablegtogchargegmoregingdollargtermsgwhilegkeepinggpesogpricesgstable.
C.gyourgdomesticgcompetitorsgwillgenjoygagperiodgofgfacingglittlegpricegcompetitiongfromgMexicangimports.
D.g bothgb)gandgc)garegcorrect
14. SupposegthatgyougaregagU.S.gproducergofgagcommodityggoodgcompetinggwithgforeigngproducers.gYo
urginputsgofgproductiongaregpricedgingdollarsgandgyougsellgyourgoutputgingdollars.gIfgthegU.S.gcurrenc
ygdepreciatesgagainstgthegcurrenciesgofgourgtradinggpartners,
A. yourgcompetitivegpositiongisglikelygimproved.
B. yourgcompetitivegpositiongisglikelygworsened.
, InternationalgFinancialgManagementgTestgBan
k C. yourgcompetitivegpositiongisgunchanged.
