Question 1

The center of the Euro-equity market, which deals in international equity issues is

Accepted Answer

A)  New York. 
B)  Geneva. 
C)  Tokyo. 
D)  London. 
A)  New York. 
B)  Geneva. 
C)  Tokyo. 
D)  London.

Question 2

Countries that experience high inflation rates will see their currencies decline in value relative to the currencies of countries with lower inflation rates.

Accepted Answer

A) True 
 B)False

Question 3

All of the following are positive approaches of coping with political risk EXCEPT

Accepted Answer

A)  use of locals in management. 
B)  joint venture with local banks. 
C)  license or patent restrictions under international agreement. 
D)  local sourcing. 
A)  use of locals in management. 
B)  joint venture with local banks. 
C)  license or patent restrictions under international agreement. 
D)  local sourcing.

Question 4

Offshore Centers are cities or states that have achieved prominence as major centers for Euromarket business.

Accepted Answer

A) True 
 B)False

Question 5

A short-term financial decision based on an MNC management's expectation that the local foreign currency will appreciate may be

Accepted Answer

A)  increasing local customers' accounts receivable and increasing local notes payable. 
B)  decreasing local notes receivable and decreasing accruals. 
C)  increasing local inventories and increasing local notes payable. 
D)  increasing local accounts receivable and decreasing local accounts payable. 
A)  increasing local customers' accounts receivable and increasing local notes payable. 
B)  decreasing local notes receivable and decreasing accruals. 
C)  increasing local inventories and increasing local notes payable. 
D)  increasing local accounts receivable and decreasing local accounts payable.

Question 6

All of the following are considered to be major or "hard" currencies EXCEPT

Accepted Answer

A)  the Japanese yen. 
B)  the British pound. 
C)  the Mexican peso. 
D)  the U.S. dollar. 
A)  the Japanese yen. 
B)  the British pound. 
C)  the Mexican peso. 
D)  the U.S. dollar.

Question 7

A U.S-based MNC has a subsidiary in China where the local currency is the Renminbi (RMB). The balance sheets and income statements of the subsidiary are presented in the table below. On December 31, 2005, the exchange rate was 8.27 RMB/US$. Assume the local currency figures in the statement below remain the same on December 31, 2006. Calculate the U.S. dollar translated figures for the two ending time periods assuming that between December 31, 2005 and December 31, 2006, the Chinese government revalues (appreciates) the RMB by 20 percent.
Translation of Income Statement   Translation of Balance Sheet

Accepted Answer

This shows that an appreciation of the f

Question 8

In the international context, the ________ interest rate involves only the MNC parent's currency, while the ________ interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.

Accepted Answer

A)  effective; nominal 
B)  macro; nominal 
C)  nominal; effective 
D)  nominal; micro 
A)  effective; nominal 
B)  macro; nominal 
C)  nominal; effective 
D)  nominal; micro

Question 9

The risk resulting from the effects of changes in foreign exchange rates on the translated value of a firm's accounts denominated in a given foreign currency is

Accepted Answer

A)  economic exposure. 
B)  macro political risk. 
C)  accounting exposure. 
D)  micro political risk. 
A)  economic exposure. 
B)  macro political risk. 
C)  accounting exposure. 
D)  micro political risk.

Question 10

Foreign bonds are sold primarily in

Accepted Answer

A)  countries other than the country in which the issue is denominated. 
B)  Western Europe. 
C)  Japan. 
D)  the country of the currency of issue. 
A)  countries other than the country in which the issue is denominated. 
B)  Western Europe. 
C)  Japan. 
D)  the country of the currency of issue.

Question 11

In the most emerging/developing countries (including China) over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form or mergers and acquisitions rather than through establishments.

Accepted Answer

A) True 
 B)False

Question 12

A partnership under which the participants have contractually agreed to contribute specified amounts of money and expertise in exchange for stated proportions of ownership and profit is called

Accepted Answer

A)  limited partnership. 
B)  GmbH. 
C)  S.A.R.L. 
D)  joint venture. 
A)  limited partnership. 
B)  GmbH. 
C)  S.A.R.L. 
D)  joint venture.

Question 13

In terms of inventory management multinational firms

Accepted Answer

A)  must deal mainly with exchange rate fluctuations and tariffs. 
B)  must deal with a wide number of factors, including exchange rate fluctuations, tariffs, non-tariff barriers, integration schemes such as the EEC, and other rules and regulations. 
C)  have only economic factors to consider, since this is a current asset and is minimally affected by political factors. 
D)  have only political factors to consider, since inventory is minimally affected by foreign economic factors. 
A)  must deal mainly with exchange rate fluctuations and tariffs. 
B)  must deal with a wide number of factors, including exchange rate fluctuations, tariffs, non-tariff barriers, integration schemes such as the EEC, and other rules and regulations. 
C)  have only economic factors to consider, since this is a current asset and is minimally affected by political factors. 
D)  have only political factors to consider, since inventory is minimally affected by foreign economic factors.

Question 14

The Euromarket is dominated by the

Accepted Answer

A)  French franc. 
B)  Japanese yen. 
C)  Deutsche mark. 
D)  U.S. dollar. 
A)  French franc. 
B)  Japanese yen. 
C)  Deutsche mark. 
D)  U.S. dollar.

Question 15

The risk attached to international cash flows are all of the following EXCEPT

Accepted Answer

A)  business and financial risks. 
B)  inflation and foreign exchange risks. 
C)  political risks. 
D)  risk of local management. 
A)  business and financial risks. 
B)  inflation and foreign exchange risks. 
C)  political risks. 
D)  risk of local management.

Question 16

In the international context, the effective interest rate equals to the nominal rate plus (or minus) any forecast appreciation (or depreciation) of a foreign currency relative to the currency of the MNC parent.

Accepted Answer

A) True 
 B)False

Question 17

A multinational company has two subsidiaries, one in Ireland (local currency, Irish pound) and the other in West Germany (local currency, Deutsche mark). Pro forma statements of operations indicate the following short-term financial needs for each subsidiary (in equivalent U.S. dollars): Ireland: $25 million excess cash to be invested (lent); West Germany: $10 million funds to be raised (borrowed)
The following financial data is also available:   (a) Determine the effective rates of interest for Irish pound and Deutsche mark in both the Euromarket and the domestic market.
(b) Where should the funds be invested?
(c) Where should the funds be raised?

Accepted Answer

(a) @#IMG-DLM& (b) $25 million should be

Question 18

FASB No. 52 requires U.S. multinationals first to convert the financial statement accounts of foreign subsidiaries into their functional currency and then to translate the accounts into the parent firm's currency using the all-current-rate method.

Accepted Answer

A) True 
 B)False

Question 19

In capital budgeting for a multinational, the starting discount rate to which risks stemming from foreign exchange and political factors can be added, and from which benefits reflecting the parent's lower capital costs may be subtracted is

Accepted Answer

A)  the cost of capital of the parent (multinational) company. 
B)  the risk-free rate of the parent company, adjusted for risk relevant to the foreign subsidiary. 
C)  the local cost of equity capital applicable to the local business and financial environments within which a subsidiary operates. 
D)  the weighted average cost of capital applicable to all foreign subsidiaries combined. 
A)  the cost of capital of the parent (multinational) company. 
B)  the risk-free rate of the parent company, adjusted for risk relevant to the foreign subsidiary. 
C)  the local cost of equity capital applicable to the local business and financial environments within which a subsidiary operates. 
D)  the weighted average cost of capital applicable to all foreign subsidiaries combined.

Question 20

Foreign bond is an international bond that is sold primarily in countries other than the country of the currency in which the issue is denominated.

Accepted Answer

A) True 
 B)False

The center of the Euro-equity market, which deals in international equity issues is

Countries that experience high inflation rates will see their currencies decline in value relative to the currencies of countries with lower inflation rates.

All of the following are positive approaches of coping with political risk EXCEPT

Offshore Centers are cities or states that have achieved prominence as major centers for Euromarket business.

A short-term financial decision based on an MNC management's expectation that the local foreign currency will appreciate may be

All of the following are considered to be major or "hard" currencies EXCEPT

In the international context, the interest rate involves only the MNC parent's currency, while the interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.

The risk resulting from the effects of changes in foreign exchange rates on the translated value of a firm's accounts denominated in a given foreign currency is

Foreign bonds are sold primarily in

In the most emerging/developing countries (including China) over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form or mergers and acquisitions rather than through establishments.

A partnership under which the participants have contractually agreed to contribute specified amounts of money and expertise in exchange for stated proportions of ownership and profit is called

In terms of inventory management multinational firms

The Euromarket is dominated by the

The risk attached to international cash flows are all of the following EXCEPT

In the international context, the effective interest rate equals to the nominal rate plus (or minus) any forecast appreciation (or depreciation) of a foreign currency relative to the currency of the MNC parent.

FASB No. 52 requires U.S. multinationals first to convert the financial statement accounts of foreign subsidiaries into their functional currency and then to translate the accounts into the parent firm's currency using the all-current-rate method.

In capital budgeting for a multinational, the starting discount rate to which risks stemming from foreign exchange and political factors can be added, and from which benefits reflecting the parent's lower capital costs may be subtracted is

Foreign bond is an international bond that is sold primarily in countries other than the country of the currency in which the issue is denominated.

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

Filters

Exam 19: International Managerial Finance

The center of the Euro-equity market, which deals in international equity issues is

Countries that experience high inflation rates will see their currencies decline in value relative to the currencies of countries with lower inflation rates.

All of the following are positive approaches of coping with political risk EXCEPT

Offshore Centers are cities or states that have achieved prominence as major centers for Euromarket business.

A short-term financial decision based on an MNC management's expectation that the local foreign currency will appreciate may be

All of the following are considered to be major or "hard" currencies EXCEPT

In the international context, the ________ interest rate involves only the MNC parent's currency, while the ________ interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.

The risk resulting from the effects of changes in foreign exchange rates on the translated value of a firm's accounts denominated in a given foreign currency is

Foreign bonds are sold primarily in

In the most emerging/developing countries (including China) over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form or mergers and acquisitions rather than through establishments.

A partnership under which the participants have contractually agreed to contribute specified amounts of money and expertise in exchange for stated proportions of ownership and profit is called

In terms of inventory management multinational firms

The Euromarket is dominated by the

The risk attached to international cash flows are all of the following EXCEPT

In the international context, the effective interest rate equals to the nominal rate plus (or minus) any forecast appreciation (or depreciation) of a foreign currency relative to the currency of the MNC parent.

FASB No. 52 requires U.S. multinationals first to convert the financial statement accounts of foreign subsidiaries into their functional currency and then to translate the accounts into the parent firm's currency using the all-current-rate method.

In capital budgeting for a multinational, the starting discount rate to which risks stemming from foreign exchange and political factors can be added, and from which benefits reflecting the parent's lower capital costs may be subtracted is

Foreign bond is an international bond that is sold primarily in countries other than the country of the currency in which the issue is denominated.

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Time Value of Money

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows

Risk and Refinements in Capital Budgeting

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Hybrid and Derivative Securities

Mergers, Lbos, Divestitures, and Business Failure

Filters

In the international context, the interest rate involves only the MNC parent's currency, while the interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.