Chapter 17: Multinational Financial Management
Save
Why do companies go global? - (correct Answer) - -To seek production efficiency
-To avoid political, trade, and regulatory hurdles
-To broaden their markets
-To seek raw materials and new technology
-To protect processes and products
-To diversify
-retain customers
Vertically integrated investment - (correct Answer) - Occurs when a firm undertakes an investment to
secure its input supply at stable prices
International monetary policy - (correct Answer) - The framework within which exchange rates are
determined. It is the blueprint for international trade and capital flows
Spot vs. Forward exchange rate - (correct Answer) - Spot: quoted price for a unit of foreign currency to
be determined "on the spot" or within a short period of time
Forward: Quoted price for currency to be delivered at a specified date in the future
Depreciation vs. appreciation - (correct Answer) - Decrease or increase in the foreign exchange value of a
floating currency
Freely-floating - (correct Answer) - When the exchange rate is determined by supply and demand for the
currency
Currency Board Arrangement - (correct Answer) - When a country has its own currency but commits to
exchange it for a specified foreign money unit at a fixed exchange rate and legislates domestic currency
restrictions, unless it has the foreign currency reserves to cover requested exchanges.
Fixed-Peg Arrangement - (correct Answer) - When a country locks its currency to a specific currency or
basket of currencies at a fixed exchange rate
Cross-rate - (correct Answer) - The exchange between any two currencies
American Terms - (correct Answer) - The foreign exchange rate quotation that represents the number of
Save
Why do companies go global? - (correct Answer) - -To seek production efficiency
-To avoid political, trade, and regulatory hurdles
-To broaden their markets
-To seek raw materials and new technology
-To protect processes and products
-To diversify
-retain customers
Vertically integrated investment - (correct Answer) - Occurs when a firm undertakes an investment to
secure its input supply at stable prices
International monetary policy - (correct Answer) - The framework within which exchange rates are
determined. It is the blueprint for international trade and capital flows
Spot vs. Forward exchange rate - (correct Answer) - Spot: quoted price for a unit of foreign currency to
be determined "on the spot" or within a short period of time
Forward: Quoted price for currency to be delivered at a specified date in the future
Depreciation vs. appreciation - (correct Answer) - Decrease or increase in the foreign exchange value of a
floating currency
Freely-floating - (correct Answer) - When the exchange rate is determined by supply and demand for the
currency
Currency Board Arrangement - (correct Answer) - When a country has its own currency but commits to
exchange it for a specified foreign money unit at a fixed exchange rate and legislates domestic currency
restrictions, unless it has the foreign currency reserves to cover requested exchanges.
Fixed-Peg Arrangement - (correct Answer) - When a country locks its currency to a specific currency or
basket of currencies at a fixed exchange rate
Cross-rate - (correct Answer) - The exchange between any two currencies
American Terms - (correct Answer) - The foreign exchange rate quotation that represents the number of
