Solution Manual For
International Financial Management
Author: Cheol Eun , Bruce G. Resnick , Tuugi Chuluun
10th Edition
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
,Solution Manual For
International Financial Management, 10th Edition Eun
Chapter 1-21
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?
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
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
,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?
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.
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
, 6. What Are Multinational Corporations (Mncs) And What Economic Roles Do They Play?
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
International Financial Management
Author: Cheol Eun , Bruce G. Resnick , Tuugi Chuluun
10th Edition
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
,Solution Manual For
International Financial Management, 10th Edition Eun
Chapter 1-21
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?
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
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
,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?
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.
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
, 6. What Are Multinational Corporations (Mncs) And What Economic Roles Do They Play?
©MCGRAW HILL LLC. ALL RIGHTS RESERVED. NO REPRODUCTION OR DISTRIBUTION WITHOUT THE PRIOR WRITTEN CONSENT OF MCGRAW HILL LLC
