Question 1

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 2

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

Question 3

Which of the following is NOT a key variable in the equation for the capital asset pricing model?

Accepted Answer

A)  the risk-free rate of interest 
B)  the expected rate of return on the market portfolio 
C)  the marginal tax rate 
D)  All are important components of the CAPM. 
A)  the risk-free rate of interest 
B)  the expected rate of return on the market portfolio 
C)  the marginal tax rate 
D)  All are important components of the CAPM.

Question 4

________ risk is measured with beta.

Accepted Answer

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

Question 5

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 6

A U.S.investor makes an investment in Britain and earns 14% on the investment while the British pound appreciates against the U.S.dollar by 8%.What is the investor's total return?

Accepted Answer

A)  22.00% 
B)  23.12% 
C)  6.00% 
D)  4.88% 
A)  22.00% 
B)  23.12% 
C)  6.00% 
D)  4.88%

Question 7

The CAPM has now become very widely accepted in global business as the preferred method of calculating the cost of equity for a firm.As a result of this,there is now little debate over what numerical values should be used in its application.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

International diversification benefits may induce investors to demand foreign securities.

Accepted Answer

A) True 
 B)False

Question 11

If the addition of a foreign security to the portfolio of the investor aids in the reduction of risk for a given level of return,then the security adds value to the portfolio.

Accepted Answer

A) True 
 B)False

Question 12

Portfolio diversification can eliminate 100% of risk.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Beta may be defined as:

Accepted Answer

A)  the measure of systematic risk. 
B)  a risk measure of a portfolio. 
C)  the ratio of the variance of the portfolio to the variance of the market. 
D)  all of the above 
A)  the measure of systematic risk. 
B)  a risk measure of a portfolio. 
C)  the ratio of the variance of the portfolio to the variance of the market. 
D)  all of the above

Question 15

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 16

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

Question 17

Market imperfections do not necessarily imply that national securities markets are inefficient.Develop an argument as to why this is possible.

Accepted Answer

A national securities market can be effi

Question 18

Use the information to answer the following question(s).
In September 2009 a U.S. investor chooses to invest $500,000 in German equity securities at a then current spot rate of $1.30/euro. At the end of one year the spot rate is $1.35/euro.
-Refer to Instruction 13.1.At an average price of €60/share,how many shares of stock will the investor be able to purchase?

Accepted Answer

A)  8333 shares 
B)  6410 shares 
C)  6173 shares 
D)  10,833 shares 
A)  8333 shares 
B)  6410 shares 
C)  6173 shares 
D)  10,833 shares

Question 19

Which of the following will NOT affect a firm's beta?

Accepted Answer

A)  the choice of the market portfolio against which to compare the variability of a firm's returns 
B)  the choice of the risk-free security 
C)  the choice of the time period used to calculate the firm's beta 
D)  None of the above, because each of them affects the calculation of a firm's beta. 
A)  the choice of the market portfolio against which to compare the variability of a firm's returns 
B)  the choice of the risk-free security 
C)  the choice of the time period used to calculate the firm's beta 
D)  None of the above, because each of them affects the calculation of a firm's beta.

Question 20

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

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

Capital market segmentation is a financial market imperfection caused mainly by:

Which of the following is NOT a key variable in the equation for the capital asset pricing model?

________ risk is measured with beta.

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

A U.S.investor makes an investment in Britain and earns 14% on the investment while the British pound appreciates against the U.S.dollar by 8%.What is the investor's total return?

The CAPM has now become very widely accepted in global business as the preferred method of calculating the cost of equity for a firm.As a result of this,there is now little debate over what numerical values should be used in its application.

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

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

International diversification benefits may induce investors to demand foreign securities.

If the addition of a foreign security to the portfolio of the investor aids in the reduction of risk for a given level of return,then the security adds value to the portfolio.

Portfolio diversification can eliminate 100% of risk.

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

Beta may be defined as:

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

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

Market imperfections do not necessarily imply that national securities markets are inefficient.Develop an argument as to why this is possible.

Which of the following will NOT affect a firm's beta?

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

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

Transaction Exposure

Translation Exposure

Operating Exposure

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 13: The Global Cost and Availability of Capital

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

Capital market segmentation is a financial market imperfection caused mainly by:

Which of the following is NOT a key variable in the equation for the capital asset pricing model?

________ risk is measured with beta.

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

A U.S.investor makes an investment in Britain and earns 14% on the investment while the British pound appreciates against the U.S.dollar by 8%.What is the investor's total return?

The CAPM has now become very widely accepted in global business as the preferred method of calculating the cost of equity for a firm.As a result of this,there is now little debate over what numerical values should be used in its application.

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

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

International diversification benefits may induce investors to demand foreign securities.

If the addition of a foreign security to the portfolio of the investor aids in the reduction of risk for a given level of return,then the security adds value to the portfolio.

Portfolio diversification can eliminate 100% of risk.

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

Beta may be defined as:

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

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

Market imperfections do not necessarily imply that national securities markets are inefficient.Develop an argument as to why this is possible.

Which of the following will NOT affect a firm's beta?

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

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

Transaction Exposure

Translation Exposure

Operating Exposure

Raising Equity and Debt Globally

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 .