International Financial Management 9th Edition
x x x x
,MULTIPLE xCHOICE x- xChoose xthe xone xalternative xthat xbest xcompletes xthe
x statement xorxanswers xthe xquestion.
1) What xmajor xdimension xsets xapart xinternational xfinance xfrom xdomestic xfinance?
A) Foreign xexchange xand xpolitical xrisks
B) Market ximperfections
C) Expanded xopportunity xset
D) all xof xthe xoptions
2) An xexample(s) xof xa xpolitical xrisk xis
A) expropriation xof xassets.
B) adverse xchange xin xtax xrules.
C) the xopposition xparty xbeing xelected.
D) both xthe xexpropriation xof xassets xand xadverse xchanges xin xtax xrules xare xcorrect.
3) Production xof xgoods xand xservices xhas xbecome xglobalized xto xa xlarge xextent xas xa
xresult xof
A) natural xresources xbeing xdepleted xin xone xcountry xafter xanother.
B) skilled xlabor xbeing xhighly xmobile.
C) multinational xcorporations' xefforts xto xsource xinputs xand xlocate xproduction
x anywherexwhere xcosts xare xlower xand xprofits xhigher.
D) common xtastes xworldwide xfor xthe xsame xgoods xand xservices.
International Financial Management 9th Edition
x x x x
,4) Recently, xfinancial xmarkets xhave xbecome xhighly xintegrated. xThis xdevelopment
International Financial Management 9th Edition
x x x x
, A) allows xinvestors xto xdiversify xtheir xportfolios xinternationally.
B) allows xminority xinvestors xto xbuy xand xsell xstocks.
C) has xincreased xthe xcost xof xcapital xfor xfirms.
D) none xof xthe xoptions
5) Japan xhas xexperienced xlarge xtrade xsurpluses. xJapanese xinvestors xhave xresponded xto
xthis xby
A) liquidating xtheir xpositions xin xstocks xto xbuy xdollar-denominated xbonds.
B) investing xheavily xin xU.S. xand xother xforeign xfinancial xmarkets.
C) lobbying xthe xU.S. xgovernment xto xdepreciate xits xcurrency.
D) lobbying xthe xJapanese xgovernment xto xallow xthe xyen xto xappreciate.
6) Suppose xyour xfirm xinvests x$100,000 xin xa xproject xin xItaly. xAt xthe xtime xthe
xexchange xrate xis
$1.25 x= x€1.00. xOne xyear xlater xthe xexchange xrate xis xthe xsame, xbut xthe xItalian
x government xhas xexpropriated xyour xfirm's xassets xpaying xonly x€80,000 xin
x compensation. xThis xis xan xexample xof
A) exchange xrate xrisk.
B) political xrisk.
C) market ximperfections.
D) xnone xof xthe xoptions, xsince x$100,000 x= x€80,000 x× x$1.25/€1.00.
International Financial Management 9th Edition
x x x x
x x x x
,MULTIPLE xCHOICE x- xChoose xthe xone xalternative xthat xbest xcompletes xthe
x statement xorxanswers xthe xquestion.
1) What xmajor xdimension xsets xapart xinternational xfinance xfrom xdomestic xfinance?
A) Foreign xexchange xand xpolitical xrisks
B) Market ximperfections
C) Expanded xopportunity xset
D) all xof xthe xoptions
2) An xexample(s) xof xa xpolitical xrisk xis
A) expropriation xof xassets.
B) adverse xchange xin xtax xrules.
C) the xopposition xparty xbeing xelected.
D) both xthe xexpropriation xof xassets xand xadverse xchanges xin xtax xrules xare xcorrect.
3) Production xof xgoods xand xservices xhas xbecome xglobalized xto xa xlarge xextent xas xa
xresult xof
A) natural xresources xbeing xdepleted xin xone xcountry xafter xanother.
B) skilled xlabor xbeing xhighly xmobile.
C) multinational xcorporations' xefforts xto xsource xinputs xand xlocate xproduction
x anywherexwhere xcosts xare xlower xand xprofits xhigher.
D) common xtastes xworldwide xfor xthe xsame xgoods xand xservices.
International Financial Management 9th Edition
x x x x
,4) Recently, xfinancial xmarkets xhave xbecome xhighly xintegrated. xThis xdevelopment
International Financial Management 9th Edition
x x x x
, A) allows xinvestors xto xdiversify xtheir xportfolios xinternationally.
B) allows xminority xinvestors xto xbuy xand xsell xstocks.
C) has xincreased xthe xcost xof xcapital xfor xfirms.
D) none xof xthe xoptions
5) Japan xhas xexperienced xlarge xtrade xsurpluses. xJapanese xinvestors xhave xresponded xto
xthis xby
A) liquidating xtheir xpositions xin xstocks xto xbuy xdollar-denominated xbonds.
B) investing xheavily xin xU.S. xand xother xforeign xfinancial xmarkets.
C) lobbying xthe xU.S. xgovernment xto xdepreciate xits xcurrency.
D) lobbying xthe xJapanese xgovernment xto xallow xthe xyen xto xappreciate.
6) Suppose xyour xfirm xinvests x$100,000 xin xa xproject xin xItaly. xAt xthe xtime xthe
xexchange xrate xis
$1.25 x= x€1.00. xOne xyear xlater xthe xexchange xrate xis xthe xsame, xbut xthe xItalian
x government xhas xexpropriated xyour xfirm's xassets xpaying xonly x€80,000 xin
x compensation. xThis xis xan xexample xof
A) exchange xrate xrisk.
B) political xrisk.
C) market ximperfections.
D) xnone xof xthe xoptions, xsince x$100,000 x= x€80,000 x× x$1.25/€1.00.
International Financial Management 9th Edition
x x x x
