Solution Manual for International Financial Management, 10th Edition, By Cheol Eun, Bruce G. Resnick, All Chapters // complete Verified editon //ISBN:9781264413096

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,SOLUTION MANUAL FOR ssss ssss




International Financial Management, 10th Edition EUN ssss ssss ssss ssss ssss




ssss Chapter 1-21 ssss




CHAPTER 1 ssss




GLOBALIZATION AND THE MULTINATIONAL FIRM ssss ssss ssss ssss




ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS
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QUESTIONS

1. Why is it important to study international financial management?
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Answer: s s s s We are now living in a world where all the major economic functions, such
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ssss as consumption, production, investment, and financing, are highly globalized.
ssss ssss ssss ssss ssss ssss ssss ssss s s s s It is ssss




ssss thus ssss essential s s s s for ssss financial ssss managers ssss to ssss fully ssss understand ssss vital ssss international
ssss dimensions of financial management. ssss ssss ssss s s s s This global shift is in marked contrast to a
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ssss situation that existed when the authors of this book were learning finance a few
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ssss decades ago. ssss s s s s At that time, most professors customarily (and safely, to some extent)
ssss ssss ssss ssss ssss ssss ssss ssss ssss ssss




ssss ignored international aspects of finance.
ssss ssss ssss ssss s s s s This mode of operation has become
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ssss untenable since then. ssss ssss




2. How is international financial management different from domestic financial management?
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Answer: s s s s There are three major dimensions that set apart international finance from
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ssss domestic finance. They are: ssss ssss ssss




1. foreign exchange and political risks, ssss ssss ssss ssss




2. market imperfections, and ssss ssss




3. expanded opportunity set. ssss ssss




3. Discuss the major trends that have prevailed in international business during the
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last two decades.
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Answer: s s s s The 2000s brought a rapid integration of international capital and financial
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ssss markets. Impetus for globalized financial markets initially came from the governments
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ssss of major countries that had begun to deregulate their foreign exchange and capital
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ssss markets. s s s s The economic ssss




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,integration and globalization that began in the eighties and nineties are picking up
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ssss speed in the 2000s. Trade liberalization and economic integration continued to
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ssss proceed at both the regional and global levels. Despite sovereign debt crisis in
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ssss Europe, more EU member countries have adopted the common currency, the euro,
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ssss that effectively became the second global currency after the U.S. dollar. In the last
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ssss few years, however, economic nationalism has been gaining some popularity, as
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exemplified by the Brexit decision of the United Kingdom and the so-called
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―America First‖ policies of the Trump Administration. To the extent that economic
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nationalism is a populist response to the global financial crisis and Great Recession,
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ssss it may subside as the world economy continues to recover.
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4. How is a country‘s economic well-being enhanced through free international trade
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ssss in goods and services?
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Answer: s s s s According to David Ricardo, with free international trade, it is mutually
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ssss beneficial for two countries to each specialize in the production of the goods that it
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ssss can produce relatively most efficiently and then trade those goods.
ssss ssss ssss ssss ssss ssss ssss ssss ssss s s s s By doing so,
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ssss the two countries can increase their combined production, which allows both
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ssss countries to consume more of both goods. This argument remains valid even if a
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ssss country can produce both goods more efficiently in absolute terms than the other
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ssss country. s s s s International trade is not a ‗zero-sum‘ game in which one country benefits
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ssss at the expense of another country. Rather, international trade could be an
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ssss ‗increasing- sum‘ game from which all players become winners.
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5. What considerations might limit the extent to which the theory of comparative
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ssss advantage is realistic? ssss ssss




Answer: s s s s The theory of comparative advantage was originally advanced by the
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ssss nineteenth century economist David Ricardo as an explanation for why nations trade
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ssss with one another. The theory claims that economic well-being is enhanced if each
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ssss country produces what it has a comparative advantage in producing relative to other
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ssss countries, and then trade products. ssss ssss ssss ssss




Underlying the theory are the assumptions of free trade between nations and that the
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ssss factors of production (labor, technological know-how, and capital) are relatively
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ssss immobile. s s s s To the extent that these assumptions do not hold, the theory of
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ssss comparative advantage may not realistically describe international trade.
ssss ssss ssss ssss ssss ssss ssss s s s s In addition,ssss




ssss free trade produces winners and losers and if the losers are not compensated, free
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ssss trade may faces political opposition from them.
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, 6. What are multinational corporations (MNCs) and what economic roles do they play?
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