Exam 13: The Global Cost and Availability of Capital

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.

The primary goal of both domestic and international portfolio managers is:

Empirical studies indicate that WACC for an MNE is higher than for their domestic competitors.Reasons cited for this increased cost include all of the following EXCEPT:

A firm whose equity has a beta of 1.0:

If all capital markets are fully integrated,securities of comparable expected return and risk should have the same required rate of return in each national market after adjusting for:

According to your authors,diversifying cash flows internationally may help MNEs reduce the variability of cash flows because:

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

Which of the following statements is NOT true regarding beta?

There are potential benefits and risks from raising capital on global markets.Discuss the pros and cons in terms of risk of raising capital on global markets.

One of the elegant beauties of international equity markets is that over the last 100 or so years,the average market risk premium is almost identical across major industrial countries.

Empirical research has found that systematic risk for MNEs is greater than that for their domestic counterparts.This could be due to:

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

International CAPM (ICAPM)assumes that there is a global market in which the firm's equity trades,and estimates of the firm's beta,and the market risk premium,must then reflect this global portfolio.

A fully diversified domestic portfolio has a beta of:

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

Which of the following statements is NOT true?

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

Empirical tests of market efficiency fail to show that most major national markets are reasonably efficient.

A national securities market is segmented if the required rate of return on securities in that market differs from comparable securities traded in other,unsegmented markets.

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