Question 1

The authors refer to companies that have access to a ________ as MNEs, and firms without such access are identified as ________.

Accepted Answer

A)  global cost and availability of capital; domestic firms 
B)  large domestic capital market; geographically challenged 
C)  world financial markets; antiquated 
D)  none of the above 
A)  global cost and availability of capital; domestic firms 
B)  large domestic capital market; geographically challenged 
C)  world financial markets; antiquated 
D)  none of the above

Question 2

The after-tax cost of debt is found by:

Accepted Answer

A)  dividing the before-tax cost of debt by (1 - the corporate tax rate). 
B)  subtracting (1 - the corporate tax rate) from the before-tax cost of debt. 
C)  multiplying the before-tax cost of debt by (1 - the corporate tax rate). 
D)  subtracting the corporate tax rate from the before-tax cost of debt. 
A)  dividing the before-tax cost of debt by (1 - the corporate tax rate). 
B)  subtracting (1 - the corporate tax rate) from the before-tax cost of debt. 
C)  multiplying the before-tax cost of debt by (1 - the corporate tax rate). 
D)  subtracting the corporate tax rate from the before-tax cost of debt.

Question 3

Empirical studies indicate that MNEs have a lower debt/capital ratio than domestic counterparts, indicating that MNEs have a lower cost of capital.

Accepted Answer

A) True 
 B)False

Question 4

A fully diversified domestic portfolio has a beta of:

Accepted Answer

A)  0.0. 
B)  1.0. 
C)  -1.0. 
D)  There is not enough information to answer this question. 
A)  0.0. 
B)  1.0. 
C)  -1.0. 
D)  There is not enough information to answer this question.

Question 5

Unsystematic risk:

Accepted Answer

A)  is the remaining risk in a well-diversified portfolio. 
B)  is measured with beta. 
C)  can be diversified away. 
D)  all of the above 
A)  is the remaining risk in a well-diversified portfolio. 
B)  is measured with beta. 
C)  can be diversified away. 
D)  all of the above

Question 6

Internationally diversified portfolios often have a lower rate of return and almost always have a higher level of portfolio risk than their domestic counterparts.

Accepted Answer

A) True 
 B)False

Question 7

The MNE can ________ its ________ by gaining access to markets that are more liquid and/or less segmented than its own.

Accepted Answer

A)  increase; MCC 
B)  decrease; MCC 
C)  maintain; MRR 
D)  none of the above 
A)  increase; MCC 
B)  decrease; MCC 
C)  maintain; MRR 
D)  none of the above

Question 8

Capital market segmentation is a financial market imperfection caused mainly by government constraints, institutional practices, and investor perceptions. List and explain three imperfections.

Accepted Answer

The following are the most important imp

Question 9

If a company fails to accurately predict it's cost of equity, then:

Accepted Answer

A)  the firm's WACC will also be inaccurate. 
B)  the firm may not be using the proper interest rate to estimate NPV. 
C)  the firm may incorrectly accept or reject projects based on decisions made using the cost of capital computed with an incorrect cost of equity. 
D)  All of the above are true. 
A)  the firm's WACC will also be inaccurate. 
B)  the firm may not be using the proper interest rate to estimate NPV. 
C)  the firm may incorrectly accept or reject projects based on decisions made using the cost of capital computed with an incorrect cost of equity. 
D)  All of the above are true.

Question 10

Reasons that firms may find themselves with relatively high costs of capital include:

Accepted Answer

A)  The firms reside in emerging countries with undeveloped capital markets. 
B)  The firms are too small to easily gain access to their own national securities market. 
C)  The firms are family owned and they choose not to access public markets and lose control of the firm. 
D)  all of the above 
A)  The firms reside in emerging countries with undeveloped capital markets. 
B)  The firms are too small to easily gain access to their own national securities market. 
C)  The firms are family owned and they choose not to access public markets and lose control of the firm. 
D)  all of the above

Question 11

If a firm's expected returns are more volatile than the expected return for the market portfolio, it will have a beta less than 1.0.

Accepted Answer

A) True 
 B)False

Question 12

A firm whose equity has a beta of 1.0:

Accepted Answer

A)  has greater systematic risk than the market portfolio. 
B)  stands little chance of surviving in the international financial market place. 
C)  has less systematic risk than the market portfolio. 
D)  None of the above is true. 
A)  has greater systematic risk than the market portfolio. 
B)  stands little chance of surviving in the international financial market place. 
C)  has less systematic risk than the market portfolio. 
D)  None of the above is true.

Question 13

Most observers believe that for better or for worse, we have achieved a global market for securities. Discuss the major changes in the international markets of securities: during the 1980s, during the 1990s and the current conditions.

Accepted Answer

During the 1980s, numerous firms cross-l

Question 14

________ risk is measured with beta.

Accepted Answer

A)  Systematic 
B)  Unsystematic 
C)  International 
D)  Domestic 
A)  Systematic 
B)  Unsystematic 
C)  International 
D)  Domestic

Question 15

In general, the geometric mean will be ________ the arithmetic mean for a series of returns.

Accepted Answer

A)  less than 
B)  greater than 
C)  equal to 
D)  greater than or equal to 
A)  less than 
B)  greater than 
C)  equal to 
D)  greater than or equal to

Question 16

Firms acquire debt in either the form of loans from commercial banks, or by selling new common stock.

Accepted Answer

A) True 
 B)False

Question 17

The beginning share price for a security over a three-year period was $50. Subsequent year-end prices were $62, $58 and $64. The arithmetic average annual rate of return and the geometric average annual rate of return for this stock were:

Accepted Answer

A)  9.30% and 8.58% respectively. 
B)  9.30% and 7.89% respectively. 
C)  9.30% and 7.03% respectively. 
D)  9.30% and 6.37% respectively. 
A)  9.30% and 8.58% respectively. 
B)  9.30% and 7.89% respectively. 
C)  9.30% and 7.03% respectively. 
D)  9.30% and 6.37% respectively.

Question 18

Systematic risk:

Accepted Answer

A)  is the standard deviation of a security's return. 
B)  is measured with beta. 
C)  is measured with standard deviation. 
D)  none of the above 
A)  is the standard deviation of a security's return. 
B)  is measured with beta. 
C)  is measured with standard deviation. 
D)  none of the above

Question 19

If a firm lies within a country with ________ or ________ domestic capital markets, it can achieve lower global cost and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets.

Accepted Answer

A)  liquid; segmented 
B)  liquid; large 
C)  illiquid; segmented 
D)  large; illiquid 
A)  liquid; segmented 
B)  liquid; large 
C)  illiquid; segmented 
D)  large; illiquid

Question 20

In some respects, internationally diversified portfolios are different from a domestic portfolio because:

Accepted Answer

A)  investors may also acquire foreign exchange risk. 
B)  international portfolio diversification increases expected return but does not decrease risk. 
C)  investors must leave the country to acquire foreign securities. 
D)  all of the above 
A)  investors may also acquire foreign exchange risk. 
B)  international portfolio diversification increases expected return but does not decrease risk. 
C)  investors must leave the country to acquire foreign securities. 
D)  all of the above

The authors refer to companies that have access to a as MNEs, and firms without such access are identified as .

The after-tax cost of debt is found by:

Empirical studies indicate that MNEs have a lower debt/capital ratio than domestic counterparts, indicating that MNEs have a lower cost of capital.

A fully diversified domestic portfolio has a beta of:

Unsystematic risk:

Internationally diversified portfolios often have a lower rate of return and almost always have a higher level of portfolio risk than their domestic counterparts.

The MNE can its by gaining access to markets that are more liquid and/or less segmented than its own.

Capital market segmentation is a financial market imperfection caused mainly by government constraints, institutional practices, and investor perceptions. List and explain three imperfections.

If a company fails to accurately predict it's cost of equity, then:

Reasons that firms may find themselves with relatively high costs of capital include:

If a firm's expected returns are more volatile than the expected return for the market portfolio, it will have a beta less than 1.0.

A firm whose equity has a beta of 1.0:

Most observers believe that for better or for worse, we have achieved a global market for securities. Discuss the major changes in the international markets of securities: during the 1980s, during the 1990s and the current conditions.

________ risk is measured with beta.

In general, the geometric mean will be ________ the arithmetic mean for a series of returns.

Firms acquire debt in either the form of loans from commercial banks, or by selling new common stock.

The beginning share price for a security over a three-year period was $50. Subsequent year-end prices were $62, $58 and $64. The arithmetic average annual rate of return and the geometric average annual rate of return for this stock were:

Systematic risk:

If a firm lies within a country with or domestic capital markets, it can achieve lower global cost and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets.

In some respects, internationally diversified portfolios are different from a domestic portfolio because:

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 13: Global Cost and Availability of Capital

The authors refer to companies that have access to a ________ as MNEs, and firms without such access are identified as ________.

The after-tax cost of debt is found by:

Empirical studies indicate that MNEs have a lower debt/capital ratio than domestic counterparts, indicating that MNEs have a lower cost of capital.

A fully diversified domestic portfolio has a beta of:

Unsystematic risk:

Internationally diversified portfolios often have a lower rate of return and almost always have a higher level of portfolio risk than their domestic counterparts.

The MNE can ________ its ________ by gaining access to markets that are more liquid and/or less segmented than its own.

Capital market segmentation is a financial market imperfection caused mainly by government constraints, institutional practices, and investor perceptions. List and explain three imperfections.

If a company fails to accurately predict it's cost of equity, then:

Reasons that firms may find themselves with relatively high costs of capital include:

If a firm's expected returns are more volatile than the expected return for the market portfolio, it will have a beta less than 1.0.

A firm whose equity has a beta of 1.0:

Most observers believe that for better or for worse, we have achieved a global market for securities. Discuss the major changes in the international markets of securities: during the 1980s, during the 1990s and the current conditions.

________ risk is measured with beta.

In general, the geometric mean will be ________ the arithmetic mean for a series of returns.

Firms acquire debt in either the form of loans from commercial banks, or by selling new common stock.

The beginning share price for a security over a three-year period was $50. Subsequent year-end prices were $62, $58 and $64. The arithmetic average annual rate of return and the geometric average annual rate of return for this stock were:

Systematic risk:

If a firm lies within a country with ________ or ________ domestic capital markets, it can achieve lower global cost and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets.

In some respects, internationally diversified portfolios are different from a domestic portfolio because:

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

The authors refer to companies that have access to a as MNEs, and firms without such access are identified as .

The MNE can its by gaining access to markets that are more liquid and/or less segmented than its own.

If a firm lies within a country with or domestic capital markets, it can achieve lower global cost and greater availability of capital with a properly designed and implemented strategy to participate in international capital markets.