FIN 4331 EXAM 1 REVIEW QUESTIONS
Shareholder wealth; shareholder wealth - Answers - With regard to corporate goals, an
MNC is mostly concerned with maximizing _____, and a purely domestic firm is mostly
concerned with maximizing ______.
increase; appreciate - Answers - 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 _______.
Theory of comparative advantage - Answers - Theory that identifies specialization as a
reason for international business
The valuation of an MNC is reduced if the required rate of return on its investments in
foreign countries is reduced - Answers - False
its technology; a specialized sales or service - Answers - licensing obligates a firm to
provide _______, while franchising obligates a firm to provide _______.
acquisition of a foreign subsidiary - Answers - not a way in which agency problems can
be reduced through corporate control
purchase a 90-day forward contract on Canadian dollars - Answers - If a U.S. firm will
need C$200,000 in 90 days to pay for imports from Canada and it wishes to avoid the
risk from exchange rate fluctuations, it could:
Quote competitiveness
Speed of execution
Forecasting advice
Advice about current market conditions - Answers - ____ is not a bank characteristic
important to customers in need of foreign exchange.
ADRs are denominated in the currency of the stock's home country. - Answers - Which
of the following is NOT true regarding ADRs?
international money; international credit - Answers - An MNC's short-term financing
decisions are satisfied in the ____ market, while its medium-term debt financing
decisions are satisfied in the ____ market.
True - Answers - Shareholders have more voting power in some countries than in
others.
illiquid; highly sensitive - Answers - If a currency's spot rate market is ____, its
exchange rate is likely to be ____ to a single large purchase or sale transaction.
Shareholder wealth; shareholder wealth - Answers - With regard to corporate goals, an
MNC is mostly concerned with maximizing _____, and a purely domestic firm is mostly
concerned with maximizing ______.
increase; appreciate - Answers - 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 _______.
Theory of comparative advantage - Answers - Theory that identifies specialization as a
reason for international business
The valuation of an MNC is reduced if the required rate of return on its investments in
foreign countries is reduced - Answers - False
its technology; a specialized sales or service - Answers - licensing obligates a firm to
provide _______, while franchising obligates a firm to provide _______.
acquisition of a foreign subsidiary - Answers - not a way in which agency problems can
be reduced through corporate control
purchase a 90-day forward contract on Canadian dollars - Answers - If a U.S. firm will
need C$200,000 in 90 days to pay for imports from Canada and it wishes to avoid the
risk from exchange rate fluctuations, it could:
Quote competitiveness
Speed of execution
Forecasting advice
Advice about current market conditions - Answers - ____ is not a bank characteristic
important to customers in need of foreign exchange.
ADRs are denominated in the currency of the stock's home country. - Answers - Which
of the following is NOT true regarding ADRs?
international money; international credit - Answers - An MNC's short-term financing
decisions are satisfied in the ____ market, while its medium-term debt financing
decisions are satisfied in the ____ market.
True - Answers - Shareholders have more voting power in some countries than in
others.
illiquid; highly sensitive - Answers - If a currency's spot rate market is ____, its
exchange rate is likely to be ____ to a single large purchase or sale transaction.
