Question 1

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

Accepted Answer

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

Question 2

If a $1 Canadian costs $0.80 U.S., then $1 U.S. must cost $1.25 Canadian.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

The forward exchange rate is the rate of exchange between two currencies on any given day.

Accepted Answer

A) True 
 B)False

Question 5

In general, an international bond is one that is initially sold in the country of the borrower and,then, often distributed in several countries.

Accepted Answer

A) True 
 B)False

Question 6

In the international context, the effective interest rate is equal 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 7

Which of the following nations has the greatest amount of political risk?

Accepted Answer

A)  United States 
B)  South Africa 
C)  Germany 
D)  Canada

Question 8

Theory and empirical evidence indicate that the capital structures of multinational companies

Accepted Answer

A)  not only differ from domestic firms, but differ also based upon the country in which they are domiciled. 
B)  are basically the same as those of domestic firms. 
C)  differ, but all multinationals are similar no matter the domicile country. 
D)  differ only because of their operating structure.

Question 9

Hedging strategies are techniques used to offset or protect against risk; in the international context these include borrowing or lending in different currencies, undertaking contracts in the forward, futures, and/or options markets, and also swapping assets/liabilities with other parties.

Accepted Answer

A) True 
 B)False

Question 10

With a total population estimated at more than 365 million (compared to a Canada and U.S. population of 320 million) and an overall gross national income parallelling the United States, the EU is a significant global force.

Accepted Answer

A) True 
 B)False

Question 11

If a $1 Canadian costs $0.667 U.S., then $1 U.S. must cost $1.60 Canadian.

Accepted Answer

A) True 
 B)False

Question 12

Canada is a signatory to the most recent version of the GATT treaty, which has governed world trade throughout most of the postwar era.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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

Question 14

As a foreign exchange hedge, currency swaps have all of the following characteristics EXCEPT

Accepted Answer

A)  each party pays the other's interest payment. 
B)  principal amounts are reversed at the spot rate at maturity. 
C)  an initial exchange by two parties of two principal amounts in two different currencies. 
D)  principal amounts are reversed at a pre-agreed rate at maturity.

Question 15

The__________ method takes all transactions that were measured in a foreign currency and translates them into Canadian dollars using the exchanged rate in effect on the date of the originaltransaction.

Accepted Answer

A)  current rate 
B)  cash 
C)  temporal 
D)  foreign exchange

Question 16

Foreign exchange risk refers to the risk created by

Accepted Answer

A)  the varying exchange rate between two currencies. 
B)  the fixed exchange rate between two currencies. 
C)  the potential seizure of an MNC's operations in a host country. 
D)  the potential nationalization of the MNC's operations by a host government.

Question 17

In 1998, Canada and the United States negotiated essentially unrestricted trade between their countries. The free trade zone was extended to include Chile in late 1992.

Accepted Answer

A) True 
 B)False

Question 18

A 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

Question 19

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

Accepted Answer

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

Question 20

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

Accepted Answer

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

Exam 19: International Corporate Finance

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

If a $1 Canadian costs $0.80 U.S., then $1 U.S. must cost $1.25 Canadian.

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

The forward exchange rate is the rate of exchange between two currencies on any given day.

In general, an international bond is one that is initially sold in the country of the borrower and,then, often distributed in several countries.

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

Which of the following nations has the greatest amount of political risk?

Theory and empirical evidence indicate that the capital structures of multinational companies

Hedging strategies are techniques used to offset or protect against risk; in the international context these include borrowing or lending in different currencies, undertaking contracts in the forward, futures, and/or options markets, and also swapping assets/liabilities with other parties.

With a total population estimated at more than 365 million (compared to a Canada and U.S. population of 320 million) and an overall gross national income parallelling the United States, the EU is a significant global force.

If a $1 Canadian costs $0.667 U.S., then $1 U.S. must cost $1.60 Canadian.

Canada is a signatory to the most recent version of the GATT treaty, which has governed world trade throughout most of the postwar era.

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

As a foreign exchange hedge, currency swaps have all of the following characteristics EXCEPT

The__________ method takes all transactions that were measured in a foreign currency and translates them into Canadian dollars using the exchanged rate in effect on the date of the originaltransaction.

Foreign exchange risk refers to the risk created by

In 1998, Canada and the United States negotiated essentially unrestricted trade between their countries. The free trade zone was extended to include Chile in late 1992.

A 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.

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

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