INTERNATIONAL FINANCIAL MANAGEMENT EUN & RESNICK 8TH
EDITION – TEST BANK (CHAPTERS 1–24) | MCQS WITH CORRECT
ANSWERS & DETAILED RATIONALES
,TABLE OF CONTENTS
• Globalization and the Multinational Firm
• International Monetary System
• Balance of Payments
• Corporate Governance around the World
• The Market for Foreign Exchange
• International Parity Relationships and Forecasting Foreign Exchange Rates
• Futures and Options on Foreign Exchange
• Currency and Interest Rate Swaps
• International Bond Market
• International Equity Markets and Portfolio Diversification
• International Banking and Money Market
• The Determination of Exchange Rates
• Exchange Rate Behavior
• Transaction Exposure
• Operating Exposure
• Translation Exposure
• Management of Economic Exposure
• International Tax Environment
• International Trade Finance
• International Capital Budgeting
• Multinational Capital Structure and Cost of Capital
• International Cash Management
• Political Risk and Corporate Strategy
• Corporate Governance and Ethics in Multinational Corporations
,International Financial Management, 8e (Eun)
Chapter 1 Globalization and the Multinational Firm
1) What major dimension sets apart international finance from domestic finance?
A) Foreign exchange and political risks
B) Market imperfections
C) Expanded opportunity set
D) all of the options
Answer: D
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
2) An example of a political risk is
A) expropriation of assets.
B) adverse change in tax rules.
C) the opposition party being elected.
D) both the expropriation of assets and adverse changes in tax rules are correct.
Answer: D
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
3) Production of goods and services has become globalized to a large extent as a result of
A) natural resources being depleted in one country after another.
B) skilled labor being highly mobile.
C) multinational corporations' efforts to source inputs and locate production anywhere where
costs are lower and profits higher.
D) common tastes worldwide for the same goods and services.
Answer: C
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
4) Recently, financial markets have become highly integrated. This development
A) allows investors to diversify their portfolios internationally.
B) allows minority investors to buy and sell stocks.
C) has increased the cost of capital for firms.
D) none of the options
Answer: A
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
, 5. What key feature distinguishes international finance from domestic finance?
A. Foreign exchange and political risks only
B. Market imperfections only
C. Expanded opportunity set only
D. All of the above
Correct Answer: D. All of the above
Rationale: International finance introduces unique complexities—exposure to foreign
exchange fluctuations, political instability, market imperfections like legal restrictions, and
broader opportunities across borders
6. Which of the following exemplifies political risk?
A. Expropriation of foreign assets
B. A sudden change in taxation policy
C. An opposition party winning an election
D. Both A and B
Correct Answer: D. Both A and B
Rationale: Political risk includes government actions like expropriating assets or altering tax
rules that can adversely affect foreign investors
7. Which scenario best illustrates the globalization of production?
A. A company facing natural resource depletion domestically
B. Highly mobile skilled labor globally
C. MNCs locating production and sourcing anywhere for cost efficiency
D. Worldwide convergence in consumer preferences
Correct Answer: C. MNCs sourcing inputs and locating production for efficiency
Rationale: MNCs globalize production to minimize costs and maximize profits, tapping into
favorable locations for resources, labor, or tax regimes
7. Financial market integration in recent years has:
A. Enabled international portfolio diversification
B. Facilitated trading by minority investors
C. Increased firms’ cost of capital
D. Both A and C
EDITION – TEST BANK (CHAPTERS 1–24) | MCQS WITH CORRECT
ANSWERS & DETAILED RATIONALES
,TABLE OF CONTENTS
• Globalization and the Multinational Firm
• International Monetary System
• Balance of Payments
• Corporate Governance around the World
• The Market for Foreign Exchange
• International Parity Relationships and Forecasting Foreign Exchange Rates
• Futures and Options on Foreign Exchange
• Currency and Interest Rate Swaps
• International Bond Market
• International Equity Markets and Portfolio Diversification
• International Banking and Money Market
• The Determination of Exchange Rates
• Exchange Rate Behavior
• Transaction Exposure
• Operating Exposure
• Translation Exposure
• Management of Economic Exposure
• International Tax Environment
• International Trade Finance
• International Capital Budgeting
• Multinational Capital Structure and Cost of Capital
• International Cash Management
• Political Risk and Corporate Strategy
• Corporate Governance and Ethics in Multinational Corporations
,International Financial Management, 8e (Eun)
Chapter 1 Globalization and the Multinational Firm
1) What major dimension sets apart international finance from domestic finance?
A) Foreign exchange and political risks
B) Market imperfections
C) Expanded opportunity set
D) all of the options
Answer: D
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
2) An example of a political risk is
A) expropriation of assets.
B) adverse change in tax rules.
C) the opposition party being elected.
D) both the expropriation of assets and adverse changes in tax rules are correct.
Answer: D
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
3) Production of goods and services has become globalized to a large extent as a result of
A) natural resources being depleted in one country after another.
B) skilled labor being highly mobile.
C) multinational corporations' efforts to source inputs and locate production anywhere where
costs are lower and profits higher.
D) common tastes worldwide for the same goods and services.
Answer: C
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
4) Recently, financial markets have become highly integrated. This development
A) allows investors to diversify their portfolios internationally.
B) allows minority investors to buy and sell stocks.
C) has increased the cost of capital for firms.
D) none of the options
Answer: A
Topic: What's Special about "International" Finance?
Accessibility: Keyboard Navigation
, 5. What key feature distinguishes international finance from domestic finance?
A. Foreign exchange and political risks only
B. Market imperfections only
C. Expanded opportunity set only
D. All of the above
Correct Answer: D. All of the above
Rationale: International finance introduces unique complexities—exposure to foreign
exchange fluctuations, political instability, market imperfections like legal restrictions, and
broader opportunities across borders
6. Which of the following exemplifies political risk?
A. Expropriation of foreign assets
B. A sudden change in taxation policy
C. An opposition party winning an election
D. Both A and B
Correct Answer: D. Both A and B
Rationale: Political risk includes government actions like expropriating assets or altering tax
rules that can adversely affect foreign investors
7. Which scenario best illustrates the globalization of production?
A. A company facing natural resource depletion domestically
B. Highly mobile skilled labor globally
C. MNCs locating production and sourcing anywhere for cost efficiency
D. Worldwide convergence in consumer preferences
Correct Answer: C. MNCs sourcing inputs and locating production for efficiency
Rationale: MNCs globalize production to minimize costs and maximize profits, tapping into
favorable locations for resources, labor, or tax regimes
7. Financial market integration in recent years has:
A. Enabled international portfolio diversification
B. Facilitated trading by minority investors
C. Increased firms’ cost of capital
D. Both A and C
