Test Bank
Inernational Financial Management 9th Edition by Bruce Resnick
,MULTIPLE CHOICE - bf bf
Choose the one alternative that best completes the statement oranswer
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s the question.
bf bf
1) What major dimension sets apart international finance from domestic finan
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ce?
A) Foreign exchange and political risks bf bf bf bf
B) Market imperfections bf
C) Expanded opportunity set bf bf
D) all of the options
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2) An example(s) of a political risk is
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A) expropriation of assets. bf bf
B) adverse change in tax rules. bf bf bf bf
C) the opposition party being elected.
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D) both the expropriation of assets and adverse changes in tax rules are corr
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ect.
3) Production of goods and services has become globalized to a large extent as
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a result of
bf bf
A) natural resources being depleted in one country after another.
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B) skilled labor being highly mobile.
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C) multinational corporations' efforts to source inputs and locate produ bf bf bf bf bf bf bf bf
ction anywherewhere costs are lower and profits higher.
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, D) common tastes worldwide for the same goods and services. bf bf bf bf bf bf bf bf
4) Recently, financial markets have become highly integrated. This developme
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nt
A) allows investors to diversify their portfolios internationally.
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B) allows minority investors to buy and sell stocks.
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C) has increased the cost of capital for firms.
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D) none of the options bf bf bf
5) Japan has experienced large trade surpluses. Japanese investors have respo
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nded to this by bf bf bf
A) liquidating their positions in stocks to buy dollar-denominated bonds. bf bf bf bf bf bf bf bf
B) investing heavily in U.S. and other foreign financial markets. bf bf bf bf bf bf bf bf
C) lobbying the U.S. government to depreciate its currency. bf bf bf bf bf bf bf
D) lobbying the Japanese government to allow the yen to appreciate.
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6) Suppose your firm invests $100,000 in a project in Italy. At the time the exch
bf bf bf bf bf bf bf bf bf bf bf bf bf bf
ange rate is bf bf
$1.25 = €1.00. One year later the exchange rate is the same, but the Italian go
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vernment has expropriated your firm's assets paying only €80,000 in comp
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ensation. This is an example of
bf bf bf bf bf
, A) exchange rate risk. bf bf
B) political risk. bf
C) market imperfections. bf
D) none of the options, since $100,000 = €80,000 × $1.25/€1.00.
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7) Suppose you start with $100 and buy stock for £50 when the exchange rat
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e is £1 = $2. One year later, the stock rises to £60. You are happy with your 20 per
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cent return on the stock, but when you sell the stock and exchange your £60 for d
bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf
ollars, you only get $45 since the poundhas fallen to £1 = $0.75. This loss of value
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is an example of
bf bf bf
A) exchange rate risk. bf bf
B) political risk. bf
C) market imperfections. bf
D) weakness in the dollar. bf bf bf
8) Suppose that Great Britain is a major export market for your firm, a U.S.-
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based MNC. Ifthe British pound depreciates against the U.S. dollar,
bf bf fb bf bf bf bf bf bf bf
A) your firm will be able to charge more in dollar terms while keeping pound
bf bf bf bf bf bf bf bf bf bf bf bf bf bf
stabl prices
e.
B) your firm may be priced out of the U.K. market, to the extent that your doll
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ar costs bf
Inernational Financial Management 9th Edition by Bruce Resnick
,MULTIPLE CHOICE - bf bf
Choose the one alternative that best completes the statement oranswer
bf bf bf bf bf bf bf bf bf bf fb
s the question.
bf bf
1) What major dimension sets apart international finance from domestic finan
bf bf bf bf bf bf bf bf bf
ce?
A) Foreign exchange and political risks bf bf bf bf
B) Market imperfections bf
C) Expanded opportunity set bf bf
D) all of the options
bf bf bf
2) An example(s) of a political risk is
bf bf bf bf bf bf
A) expropriation of assets. bf bf
B) adverse change in tax rules. bf bf bf bf
C) the opposition party being elected.
bf bf bf bf
D) both the expropriation of assets and adverse changes in tax rules are corr
bf bf bf bf bf bf bf bf bf bf bf bf
ect.
3) Production of goods and services has become globalized to a large extent as
bf bf bf bf bf bf bf bf bf bf bf bf bf
a result of
bf bf
A) natural resources being depleted in one country after another.
bf bf bf bf bf bf bf bf
B) skilled labor being highly mobile.
bf bf bf bf
C) multinational corporations' efforts to source inputs and locate produ bf bf bf bf bf bf bf bf
ction anywherewhere costs are lower and profits higher.
bf fb bf bf bf bf bf bf
, D) common tastes worldwide for the same goods and services. bf bf bf bf bf bf bf bf
4) Recently, financial markets have become highly integrated. This developme
bf bf bf bf bf bf bf bf
nt
A) allows investors to diversify their portfolios internationally.
bf bf bf bf bf bf
B) allows minority investors to buy and sell stocks.
bf bf bf bf bf bf bf
C) has increased the cost of capital for firms.
bf bf bf bf bf bf bf
D) none of the options bf bf bf
5) Japan has experienced large trade surpluses. Japanese investors have respo
bf bf bf bf bf bf bf bf bf
nded to this by bf bf bf
A) liquidating their positions in stocks to buy dollar-denominated bonds. bf bf bf bf bf bf bf bf
B) investing heavily in U.S. and other foreign financial markets. bf bf bf bf bf bf bf bf
C) lobbying the U.S. government to depreciate its currency. bf bf bf bf bf bf bf
D) lobbying the Japanese government to allow the yen to appreciate.
bf bf bf bf bf bf bf bf bf
6) Suppose your firm invests $100,000 in a project in Italy. At the time the exch
bf bf bf bf bf bf bf bf bf bf bf bf bf bf
ange rate is bf bf
$1.25 = €1.00. One year later the exchange rate is the same, but the Italian go
bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf
vernment has expropriated your firm's assets paying only €80,000 in comp
bf bf bf bf bf bf bf bf bf bf
ensation. This is an example of
bf bf bf bf bf
, A) exchange rate risk. bf bf
B) political risk. bf
C) market imperfections. bf
D) none of the options, since $100,000 = €80,000 × $1.25/€1.00.
bf bf bf bf bf bf bf bf bf bf
7) Suppose you start with $100 and buy stock for £50 when the exchange rat
bf bf bf bf bf bf bf bf bf bf bf bf bf
e is £1 = $2. One year later, the stock rises to £60. You are happy with your 20 per
bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf
cent return on the stock, but when you sell the stock and exchange your £60 for d
bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf
ollars, you only get $45 since the poundhas fallen to £1 = $0.75. This loss of value
bf bf bf bf bf bf bf fb bf bf bf bf bf bf bf bf bf bf
is an example of
bf bf bf
A) exchange rate risk. bf bf
B) political risk. bf
C) market imperfections. bf
D) weakness in the dollar. bf bf bf
8) Suppose that Great Britain is a major export market for your firm, a U.S.-
bf bf bf bf bf bf bf bf bf bf bf bf bf
based MNC. Ifthe British pound depreciates against the U.S. dollar,
bf bf fb bf bf bf bf bf bf bf
A) your firm will be able to charge more in dollar terms while keeping pound
bf bf bf bf bf bf bf bf bf bf bf bf bf bf
stabl prices
e.
B) your firm may be priced out of the U.K. market, to the extent that your doll
bf bf bf bf bf bf bf bf bf bf bf bf bf bf bf
ar costs bf
