Question 1

Which of the following is NOT a contributing factor to the segmentation of capital markets?

Accepted Answer

A) excessive regulatory control 
B) perceived political risk 
C) anticipated foreign exchange risk 
D) All of the above are contributing factors. 
A) excessive regulatory control 
B) perceived political risk 
C) anticipated foreign exchange risk 
D) All of the above are contributing factors.

Question 2

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 8.78%, 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 8.78%, respectively. 
B) 9.30% and 7.89%, respectively. 
C) 9.30% and 7.03%, respectively. 
D) 9.30% and 6.37%, respectively.

Question 3

Which of the following is NOT a contributing factor to the segmentation of capital markets?

Accepted Answer

A) lack of transparency 
B) asymmetric availability of information 
C) lack of proper reporting of insider trading 
D) All of the above are contributing factors. 
A) lack of transparency 
B) asymmetric availability of information 
C) lack of proper reporting of insider trading 
D) All of the above are contributing factors.

Question 4

LipTea Incorporated purchases raw materials and has processing plants around the world. The standard deviation of the firm's equity returns is 1.2 times as great as the market's standard deviation of returns. If the correlation of LipTea's returns with the market's is 0.80,what is the systematic risk of the firm?

Accepted Answer

A) 1.50 
B) 1.20 
C) 0.96 
D) There is not enough information to answer this question. 
A) 1.50 
B) 1.20 
C) 0.96 
D) There is not enough information to answer this question.

Question 5

The WACC is usually used as the risk-adjusted required rate of return for new projects that are of the same average risk as the firm's existing projects.

Accepted Answer

A) True 
 B)False

Question 6

The capital asset pricing model (CAPM)is an approach

Accepted Answer

A) to determine the price of equity capital. 
B) used by marketers to determine the price of saleable product. 
C) can be applied only to domestic markets. 
D) none of the above. 
A) to determine the price of equity capital. 
B) used by marketers to determine the price of saleable product. 
C) can be applied only to domestic markets. 
D) none of the above.

Question 7

Which of the following is NOT a portfolio diversification technique used by portfolio managers?

Accepted Answer

A) diversify by type of security 
B) diversify by the size of capitalization of the securities held 
C) diversify by country 
D) All of the above are diversification techniques. 
A) diversify by type of security 
B) diversify by the size of capitalization of the securities held 
C) diversify by country 
D) All of the above are diversification techniques.

Question 8

Theoretically,most MNEs should be in a position to support higher ________ than their domestic counterparts because their cash flows are diversified internationally.

Accepted Answer

A) equity ratios 
B) debt ratios 
C) temperatures 
D) none of the above 
A) equity ratios 
B) debt ratios 
C) temperatures 
D) none of the above

Question 9

Until 1981 Danish equity securities were taxed at a capital gains rate of 50% for securities held for over two years,and at a speculative gains rate of 75% for securities held for under two years.This led to market segmentation caused by ________.

Accepted Answer

A) taxation 
B) political risk 
C) asymmetric information 
D) financial risk 
A) taxation 
B) political risk 
C) asymmetric information 
D) financial risk

Question 10

Your authors identify three firm and market characteristics that,in part,determine differences in a firm's cost of capital in a purely domestic market versus a global capital market.What are these three market characteristics and how do they help differentiate a firm's cost of capital?

Accepted Answer

The three characteristics are 1)firm-spe

Question 11

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 12

Empirical studies show that neither mature domestic firms nor MNEs are typically willing to assume the higher agency costs or bankruptcy risk associated with higher MCCs and capital budgets.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following does NOT constitute a benefit to the investor of diversifying internationally?

Accepted Answer

A) the relatively low degree of correlation between the world's stock markets 
B) the increase in the expected return from an internationally diversified investment 
C) a lower total level of nondiversifiable risk 
D) All of the above are benefits of international diversification. 
A) the relatively low degree of correlation between the world's stock markets 
B) the increase in the expected return from an internationally diversified investment 
C) a lower total level of nondiversifiable risk 
D) All of the above are benefits of international diversification.

Question 14

The opportunity set of projects is typically smaller for MNEs than for purely domestic firms because international markets are typically specialized niches.

Accepted Answer

A) True 
 B)False

Question 15

A MNEs marginal cost of capital is constant for considerable ranges in its capital budget,but this statement cannot be made for most domestic firms.

Accepted Answer

A) True 
 B)False

Question 16

The difference between the expected (or required)return for the market portfolio and the risk-free rate of return is referred to as ________.

Accepted Answer

A) beta 
B) the geometric mean 
C) the market risk premium 
D) the arithmetic mean 
A) beta 
B) the geometric mean 
C) the market risk premium 
D) the arithmetic mean

Question 17

Market imperfections do not necessarily imply that national securities markets are inefficient.

Accepted Answer

A) True 
 B)False

Question 18

What do theory and empirical evidence say about capital structure and the cost of capital for MNEs versus their domestic counterparts?

Accepted Answer

In theory,MNEs should be able to support

Question 19

What motivates portfolio investors to purchase and hold foreign securities in their portfolio?

Accepted Answer

Both domestic and international portfoli

Question 20

Capital market segmentation is a financial market imperfection caused mainly by ________.

Accepted Answer

A) government constraints 
B) institutional practices 
C) investor perceptions 
D) all of the above 
A) government constraints 
B) institutional practices 
C) investor perceptions 
D) all of the above

Which of the following is NOT a contributing factor to the segmentation of capital markets?

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

Which of the following is NOT a contributing factor to the segmentation of capital markets?

The WACC is usually used as the risk-adjusted required rate of return for new projects that are of the same average risk as the firm's existing projects.

The capital asset pricing model (CAPM)is an approach

Which of the following is NOT a portfolio diversification technique used by portfolio managers?

Theoretically,most MNEs should be in a position to support higher ________ than their domestic counterparts because their cash flows are diversified internationally.

Until 1981 Danish equity securities were taxed at a capital gains rate of 50% for securities held for over two years,and at a speculative gains rate of 75% for securities held for under two years.This led to market segmentation caused by ________.

Your authors identify three firm and market characteristics that,in part,determine differences in a firm's cost of capital in a purely domestic market versus a global capital market.What are these three market characteristics and how do they help differentiate a firm's cost of capital?

A firm whose equity has a beta of 1.0

Empirical studies show that neither mature domestic firms nor MNEs are typically willing to assume the higher agency costs or bankruptcy risk associated with higher MCCs and capital budgets.

Which of the following does NOT constitute a benefit to the investor of diversifying internationally?

The opportunity set of projects is typically smaller for MNEs than for purely domestic firms because international markets are typically specialized niches.

A MNEs marginal cost of capital is constant for considerable ranges in its capital budget,but this statement cannot be made for most domestic firms.

The difference between the expected (or required)return for the market portfolio and the risk-free rate of return is referred to as ________.

Market imperfections do not necessarily imply that national securities markets are inefficient.

What do theory and empirical evidence say about capital structure and the cost of capital for MNEs versus their domestic counterparts?

What motivates portfolio investors to purchase and hold foreign securities in their portfolio?

Capital market segmentation is a financial market imperfection caused mainly by ________.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Exam 12: The Global Cost and Availability of Capital

Which of the following is NOT a contributing factor to the segmentation of capital markets?

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

Which of the following is NOT a contributing factor to the segmentation of capital markets?

The WACC is usually used as the risk-adjusted required rate of return for new projects that are of the same average risk as the firm's existing projects.

The capital asset pricing model (CAPM)is an approach

Which of the following is NOT a portfolio diversification technique used by portfolio managers?

Theoretically,most MNEs should be in a position to support higher ________ than their domestic counterparts because their cash flows are diversified internationally.

Until 1981 Danish equity securities were taxed at a capital gains rate of 50% for securities held for over two years,and at a speculative gains rate of 75% for securities held for under two years.This led to market segmentation caused by ________.

Your authors identify three firm and market characteristics that,in part,determine differences in a firm's cost of capital in a purely domestic market versus a global capital market.What are these three market characteristics and how do they help differentiate a firm's cost of capital?

A firm whose equity has a beta of 1.0

Empirical studies show that neither mature domestic firms nor MNEs are typically willing to assume the higher agency costs or bankruptcy risk associated with higher MCCs and capital budgets.

Which of the following does NOT constitute a benefit to the investor of diversifying internationally?

The opportunity set of projects is typically smaller for MNEs than for purely domestic firms because international markets are typically specialized niches.

A MNEs marginal cost of capital is constant for considerable ranges in its capital budget,but this statement cannot be made for most domestic firms.

The difference between the expected (or required)return for the market portfolio and the risk-free rate of return is referred to as ________.

Market imperfections do not necessarily imply that national securities markets are inefficient.

What do theory and empirical evidence say about capital structure and the cost of capital for MNEs versus their domestic counterparts?

What motivates portfolio investors to purchase and hold foreign securities in their portfolio?

Capital market segmentation is a financial market imperfection caused mainly by ________.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters