SOLUTION MANUAL:
For International Financial Management 10th Edition
by Cheol Eun (Author) latest Update.
1
,solution manual for international financial
management, 9th edition eun chapter 1-21 a+
chapter 1
globalization and the multinational firm answers & solutions to end-of-
chapter questions and problems questions
1. why is it important to study international financial management?
answer: we are now living in a world where all the major economic functions, such as
consumption, production, investment, and financing, are highly globalized. it is thus essential for
financial managers to fully understand vital international dimensions of financial management.
this global shift is in marked contrast to a situation that existed when the authors of this book
were learning finance a few decades ago. at that time, most professors customarily (and safely,
to some extent) ignored international aspects of finance. this mode of operation has become
untenable since then.
2. how is international financial management different from domestic financial
management?
2
,answer: there are three major dimensions that set apart international finance from domestic
finance. they are:
1. foreign exchange and political risks,
2. market imperfections, and
3. expanded opportunity set.
3. discuss the major trends that have prevailed in international business during the last two
decades.
answer: the 2000s brought a rapid integration of international capital and financial markets.
impetus for globalized financial markets initially came from the governments of major countries
that had begun to deregulate their foreign exchange and capital markets. the economic
integration and globalization that began in the eighties and nineties are picking up speed in the
2000s. trade liberalization and economic integration continued to proceed at both the regional
and global levels. despite sovereign debt crisis in europe, more eu member countries have
adopted the common currency, the euro, that effectively became the second global currency after
the u.s. dollar. in the last few years, however, economic nationalism has been gaining some
popularity, as exemplified by the brexit decision of the united kingdom and the so-called
―america first‖ policies of the trump administration. to the extent that economic nationalism is a
populist response to the global financial crisis and great recession, it may subside as the world
economy continues to recover.
4. how is a country„s economic well-being enhanced through free international trade in
goods and services?
3
, answer: according to david ricardo, with free international trade, it is mutually beneficial for two
countries to each specialize in the production of the goods that it can produce relatively most
efficiently and then trade those goods. by doing so, the two countries can increase their
combined production, which allows both countries to consume more of both goods. this
argument remains valid even if a country can produce both goods more efficiently in absolute
terms than the other country. international trade is not a ‗zero-sum„ game in which one country
benefits at the expense of another country. rather, international trade could be an ‗increasing-
sum„ game from which all players become winners.
5. what considerations might limit the extent to which the theory of comparative advantage
is realistic?
answer: the theory of comparative advantage was originally advanced by the nineteenth century
economist david ricardo as an explanation for why nations trade with one another. the theory
claims that economic well-being is enhanced if each country produces what it has a comparative
advantage in producing relative to other countries, and then trade products.
underlying the theory are the assumptions of free trade between nations and that the factors of
production (labor, technological know-how, and capital) are relatively immobile. to the extent
that these assumptions do not hold, the theory of comparative advantage may not realistically
describe international trade. in addition, free trade produces winners and losers and if the losers
are not compensated, free trade may faces political opposition from them.
6. what are multinational corporations (mncs) and what economic roles do they play?
answer: a multinational corporation (mnc) can be defined as a business firm incorporated in one
country that has production and sales operations in many other countries. indeed, some
4
For International Financial Management 10th Edition
by Cheol Eun (Author) latest Update.
1
,solution manual for international financial
management, 9th edition eun chapter 1-21 a+
chapter 1
globalization and the multinational firm answers & solutions to end-of-
chapter questions and problems questions
1. why is it important to study international financial management?
answer: we are now living in a world where all the major economic functions, such as
consumption, production, investment, and financing, are highly globalized. it is thus essential for
financial managers to fully understand vital international dimensions of financial management.
this global shift is in marked contrast to a situation that existed when the authors of this book
were learning finance a few decades ago. at that time, most professors customarily (and safely,
to some extent) ignored international aspects of finance. this mode of operation has become
untenable since then.
2. how is international financial management different from domestic financial
management?
2
,answer: there are three major dimensions that set apart international finance from domestic
finance. they are:
1. foreign exchange and political risks,
2. market imperfections, and
3. expanded opportunity set.
3. discuss the major trends that have prevailed in international business during the last two
decades.
answer: the 2000s brought a rapid integration of international capital and financial markets.
impetus for globalized financial markets initially came from the governments of major countries
that had begun to deregulate their foreign exchange and capital markets. the economic
integration and globalization that began in the eighties and nineties are picking up speed in the
2000s. trade liberalization and economic integration continued to proceed at both the regional
and global levels. despite sovereign debt crisis in europe, more eu member countries have
adopted the common currency, the euro, that effectively became the second global currency after
the u.s. dollar. in the last few years, however, economic nationalism has been gaining some
popularity, as exemplified by the brexit decision of the united kingdom and the so-called
―america first‖ policies of the trump administration. to the extent that economic nationalism is a
populist response to the global financial crisis and great recession, it may subside as the world
economy continues to recover.
4. how is a country„s economic well-being enhanced through free international trade in
goods and services?
3
, answer: according to david ricardo, with free international trade, it is mutually beneficial for two
countries to each specialize in the production of the goods that it can produce relatively most
efficiently and then trade those goods. by doing so, the two countries can increase their
combined production, which allows both countries to consume more of both goods. this
argument remains valid even if a country can produce both goods more efficiently in absolute
terms than the other country. international trade is not a ‗zero-sum„ game in which one country
benefits at the expense of another country. rather, international trade could be an ‗increasing-
sum„ game from which all players become winners.
5. what considerations might limit the extent to which the theory of comparative advantage
is realistic?
answer: the theory of comparative advantage was originally advanced by the nineteenth century
economist david ricardo as an explanation for why nations trade with one another. the theory
claims that economic well-being is enhanced if each country produces what it has a comparative
advantage in producing relative to other countries, and then trade products.
underlying the theory are the assumptions of free trade between nations and that the factors of
production (labor, technological know-how, and capital) are relatively immobile. to the extent
that these assumptions do not hold, the theory of comparative advantage may not realistically
describe international trade. in addition, free trade produces winners and losers and if the losers
are not compensated, free trade may faces political opposition from them.
6. what are multinational corporations (mncs) and what economic roles do they play?
answer: a multinational corporation (mnc) can be defined as a business firm incorporated in one
country that has production and sales operations in many other countries. indeed, some
4
