International8Financial8Management89th8Edition
,MULTIPLE8CHOICE8-
8Choose8the8one8alternative8that8best8completes8the8statement8or8answers8the8questi
on.
1) What8major8dimension8sets8apart8international8finance8from8domestic8finance?
A) Foreign8exchange8and8political8risks
B) Market8imperfections
C) Expanded8opportunity8set
D) all8of8the8options
2) An8example(s)8of8a8political8risk8is
A) expropriation8of8assets.
B) adverse8change8in8tax8rules.
C) the8opposition8party8being8elected.
D) both8the8expropriation8of8assets8and8adverse8changes8in8tax8rules8are8correct.
3) Production8of8goods8and8services8has8become8globalized8to8a8large8extent8as8a8result
8of
A) natural8resources8being8depleted8in8one8country8after8another.
B) skilled8labor8being8highly8mobile.
C) multinational8corporations'8efforts8to8source8inputs8and8locate8production8an
ywhere8where8costs8are8lower8and8profits8higher.
D) common8tastes8worldwide8for8the8same8goods8and8services.
International8Financial8Management89th8Edition
,4) Recently,8financial8markets8have8become8highly8integrated.8This8development
International8Financial8Management89th8Edition
, A) allows8investors8to8diversify8their8portfolios8internationally.
B) allows8minority8investors8to8buy8and8sell8stocks.
C) has8increased8the8cost8of8capital8for8firms.
D) none8of8the8options
5) Japan8has8experienced8large8trade8surpluses.8Japanese8investors8have8responded8to8t
his8by
A) liquidating8their8positions8in8stocks8to8buy8dollar-denominated8bonds.
B) investing8heavily8in8U.S.8and8other8foreign8financial8markets.
C) lobbying8the8U.S.8government8to8depreciate8its8currency.
D) lobbying8the8Japanese8government8to8allow8the8yen8to8appreciate.
6) Suppose8your8firm8invests8$100,0008in8a8project8in8Italy.8At8the8time8the8exchange8r
ate8is
$1.258=8€1.00.8One8year8later8the8exchange8rate8is8the8same,8but8the8Italian8governm
ent8has8expropriated8your8firm's8assets8paying8only8€80,0008in8compensation.8This8is
8an8example8of
A) exchange8rate8risk.
B) political8risk.
C) market8imperfections.
D)8none8of8the8options,8since8$100,0008=8€80,0008×8$1.25/€1.00.
International8Financial8Management89th8Edition
,MULTIPLE8CHOICE8-
8Choose8the8one8alternative8that8best8completes8the8statement8or8answers8the8questi
on.
1) What8major8dimension8sets8apart8international8finance8from8domestic8finance?
A) Foreign8exchange8and8political8risks
B) Market8imperfections
C) Expanded8opportunity8set
D) all8of8the8options
2) An8example(s)8of8a8political8risk8is
A) expropriation8of8assets.
B) adverse8change8in8tax8rules.
C) the8opposition8party8being8elected.
D) both8the8expropriation8of8assets8and8adverse8changes8in8tax8rules8are8correct.
3) Production8of8goods8and8services8has8become8globalized8to8a8large8extent8as8a8result
8of
A) natural8resources8being8depleted8in8one8country8after8another.
B) skilled8labor8being8highly8mobile.
C) multinational8corporations'8efforts8to8source8inputs8and8locate8production8an
ywhere8where8costs8are8lower8and8profits8higher.
D) common8tastes8worldwide8for8the8same8goods8and8services.
International8Financial8Management89th8Edition
,4) Recently,8financial8markets8have8become8highly8integrated.8This8development
International8Financial8Management89th8Edition
, A) allows8investors8to8diversify8their8portfolios8internationally.
B) allows8minority8investors8to8buy8and8sell8stocks.
C) has8increased8the8cost8of8capital8for8firms.
D) none8of8the8options
5) Japan8has8experienced8large8trade8surpluses.8Japanese8investors8have8responded8to8t
his8by
A) liquidating8their8positions8in8stocks8to8buy8dollar-denominated8bonds.
B) investing8heavily8in8U.S.8and8other8foreign8financial8markets.
C) lobbying8the8U.S.8government8to8depreciate8its8currency.
D) lobbying8the8Japanese8government8to8allow8the8yen8to8appreciate.
6) Suppose8your8firm8invests8$100,0008in8a8project8in8Italy.8At8the8time8the8exchange8r
ate8is
$1.258=8€1.00.8One8year8later8the8exchange8rate8is8the8same,8but8the8Italian8governm
ent8has8expropriated8your8firm's8assets8paying8only8€80,0008in8compensation.8This8is
8an8example8of
A) exchange8rate8risk.
B) political8risk.
C) market8imperfections.
D)8none8of8the8options,8since8$100,0008=8€80,0008×8$1.25/€1.00.
International8Financial8Management89th8Edition
