International Finance – Exam 1 (Chapters 1–3), 2026 – Study Material
and Practice Questions
The commonly accepted goal of an MNC is to: - ANS✔✔ Maximize shareholder wealth.
For an MNC, agency costs are typically: - ANS✔✔ Larger than agency costs of a small purely
domestic firm.
The least risky method by which firms conduct international business is: - ANS✔✔ International
trade.
The valuation of an MNC should rise when an event causes the expected cash flows from
foreign subsidiaries to ___ and when the foreign currencies denominating these cash flows are
expected to ___ - ANS✔✔ Increase, Appreciate.
The Sarbanes- Oxley Act improved corporate governance of MNC's because it: - ANS✔✔ Made
executives more accountable for verifying financial statements.
Four MNC's generate the same level of sales. The MNC that ______ would likely have the most
direct foreign investment. - ANS✔✔ Acquires a foreign firm that produces most of its products
to be sold in that foreign country.
Which of the following is an example of direct foreign investment? - ANS✔✔ Purchasing existing
companies in a country.
Which of the following theories identifies specialization as a reason for international business? -
ANS✔✔ Theory of competitive advantage.
, Which if the following theories suggests that firms seek to penetrate new markets over time? -
ANS✔✔ Product cycle theory.
Which of the following theories identifies the non transferability of resources as a reason for
international business? - ANS✔✔ Imperfect markets theory.
____ purchases more US exports than the other countries listed here. - ANS✔✔ Italy, Spain,
Mexico, Canada. Canada.!.
The World Bank was established to reduce poverty and promote economic development: -
ANS✔✔ By providing non subsidized loans (at market interest rates) to governments and their
agencies.
An increase in the use of quotas is expected to: - ANS✔✔ Increase the country's current
account balance, if other governments do not retaliate.
A weak home currency may not be a perfect solution to correct a balance of trade deficit
because: - ANS✔✔ Foreign companies may reduce the prices of their products to stay
competitive.
The ____ is the difference between exports and imports. - ANS✔✔ Balance of Trade.
The demand for US exports tends to increase when: - ANS✔✔ The currencies of foreign
countries strengthen against the dollar.
Over the last several years, international trade has generally: - ANS✔✔ Increased for most
major countries.
and Practice Questions
The commonly accepted goal of an MNC is to: - ANS✔✔ Maximize shareholder wealth.
For an MNC, agency costs are typically: - ANS✔✔ Larger than agency costs of a small purely
domestic firm.
The least risky method by which firms conduct international business is: - ANS✔✔ International
trade.
The valuation of an MNC should rise when an event causes the expected cash flows from
foreign subsidiaries to ___ and when the foreign currencies denominating these cash flows are
expected to ___ - ANS✔✔ Increase, Appreciate.
The Sarbanes- Oxley Act improved corporate governance of MNC's because it: - ANS✔✔ Made
executives more accountable for verifying financial statements.
Four MNC's generate the same level of sales. The MNC that ______ would likely have the most
direct foreign investment. - ANS✔✔ Acquires a foreign firm that produces most of its products
to be sold in that foreign country.
Which of the following is an example of direct foreign investment? - ANS✔✔ Purchasing existing
companies in a country.
Which of the following theories identifies specialization as a reason for international business? -
ANS✔✔ Theory of competitive advantage.
, Which if the following theories suggests that firms seek to penetrate new markets over time? -
ANS✔✔ Product cycle theory.
Which of the following theories identifies the non transferability of resources as a reason for
international business? - ANS✔✔ Imperfect markets theory.
____ purchases more US exports than the other countries listed here. - ANS✔✔ Italy, Spain,
Mexico, Canada. Canada.!.
The World Bank was established to reduce poverty and promote economic development: -
ANS✔✔ By providing non subsidized loans (at market interest rates) to governments and their
agencies.
An increase in the use of quotas is expected to: - ANS✔✔ Increase the country's current
account balance, if other governments do not retaliate.
A weak home currency may not be a perfect solution to correct a balance of trade deficit
because: - ANS✔✔ Foreign companies may reduce the prices of their products to stay
competitive.
The ____ is the difference between exports and imports. - ANS✔✔ Balance of Trade.
The demand for US exports tends to increase when: - ANS✔✔ The currencies of foreign
countries strengthen against the dollar.
Over the last several years, international trade has generally: - ANS✔✔ Increased for most
major countries.
