Question 1

Eurobond issues are sold simultaneously in several national capital markets, but denominated in a currency different from that of the nation in which the bonds are issued.

Accepted Answer

A) True 
 B)False

Question 2

A firm exposed to exchange rate risk can hedge its risk by all of the following except:

Accepted Answer

A)   using the forward exchange market.
B)   borrowing in international money markets.
C)   utilizing foreign currency futures markets.
D)   speculating in foreign currency.E) All of the above
F) C) and D)

Question 3

A loan arrangement in which a parent company reduces its political risk over a direct transfer of funds is called a(an) :

Accepted Answer

A)   parallel loan.
B)   EDC direct loan.
C)   fronting loan.
D)   it depends on the host countryE) A) and D)
F) None of the above

Question 4

A foreign affiliate may be an exporter, a joint venture, or a fully owned foreign subsidiary.

Accepted Answer

A) True 
 B)False

Question 5

A firm that might suffer a loss as a result of a decline in the value of the Japanese yen could offset part of that risk by selling Japanese yen futures.

Accepted Answer

A) True 
 B)False

Question 6

The purchasing power parity theory of exchange rates suggests that exchange rates will adjust until the cost of equivalent goods is approximately equal in each country.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following kinds of risk are NOT uniquely associated with multinational corporations?

Accepted Answer

A)   Exchange rate risk
B)   Business risk
C)   Political risk
D)   Translation riskE) B) and D)
F) None of the above

Question 8

A forward exchange rate is used to help determine the value of a currency at a future point in time.

Accepted Answer

A) True 
 B)False

Question 9

Multinational firms tend to have a lower level of portfolio risk than comparable Canadian firms.

Accepted Answer

A) True 
 B)False

Question 10

If the Brazilian real is equal to $0.46, a Canadian dollar is equal to how many Brazilian reals?

Accepted Answer

A)   1.36
B)   1.96
C)   2.17
D)   0.38E) A) and D)
F) A) and B)

Question 11

The value of a country's currency may increase by:

Accepted Answer

A)   continuous excessive government spending.
B)   a stock market rally in that country.
C)   an increase in that country's money supply.
D)   an increase in another countries interest rate.E) A) and C)
F) B) and D)

Question 12

The Daily Planet has a wholly owned foreign subsidiary in Malaysia. The subsidiary earns 25 million ringgits per year before taxes in Malaysia. The foreign income tax rate is 30%. The subsidiary repatriates the entire aftertax profits in the form of dividends to the Daily Planet. The Canadian corporate tax rate is 40% of foreign earnings before taxes.
A) Compute aftertax cash flow to the Daily Planet from this investment (in ringgits).
  B) If the exchange rate is.40 ($/ringgits), what is the after tax cash flow in dollars?
C) CCA related cash flow is 3 million ringgits per year for five years for another Daily Planet investment in Malaysia. The cash flow will earn 10% per year. After five years, it will then be translated back to dollars at an exchange rate of .47 ($/ringgit). The Daily Planet applies a 15% discount rate to foreign cash flows. What is the present value (in dollars) of the CCA related cash flow?

Accepted Answer

A

B)

C)

3,000,000 ringgits *FV

Question 13

When a country has a weak currency relative to other countries, visiting that country is much more expensive for residents of other countries.

Accepted Answer

A) True 
 B)False

Question 14

An exporter is able to satisfy foreign demand for a product while avoiding long-term investment although this method is riskier than other alternatives.

Accepted Answer

A) True 
 B)False

Question 15

Selling common stock to residents of foreign countries is illegal in most countries, although it minimizes risk for any multinational corporation.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true about international equity (stock)  markets?

Accepted Answer

A)   Japanese households are large investors in common stock.
B)   Commercial banks are generally not involved in the international securities business.
C)   Some foreign investors are more risk-averse than their counterparts in Canada and prefer dividend income over less certain capital gains.
D)   Foreign exchanges never include the listing of Canadian firms.E) All of the above
F) C) and D)

Question 17

The International Finance Corporation (IFC)  is:

Accepted Answer

A)   a unit of the world bank charged with the responsibility of providing capital to multinational corporations and others in international trade.
B)   a regulatory agency for international trade.
C)   a private firm that provides accounts receivable financing to international firms.
D)   a foreign affiliate of 10 major banks.E) B) and C)
F) A) and D)

Question 18

What has motivated Canadian firms to move their operations to foreign countries?

Accepted Answer

A)   Trade barriers, lower production costs, access to skilled workers, Canadian tax deferral.
B)   Political stability, large market size, access to advanced technology.
C)   Import tariffs, foreign unions, foreign technology, expropriation.
D)   Lower production costs, tax deferral, access to natural resources and manufacturing, expropriation.E) A) and D)
F) B) and D)

Question 19

The lower borrowing costs in the Eurocurrency market as compared to Canada are often attributed to:

Accepted Answer

A)   lower inflation abroad.
B)   higher inflation in the Canada.
C)   slower money growth in Canada.
D)   smaller overhead costs and the absence of reserve requirements abroad.E) B) and C)
F) All of the above

Question 20

Considerations in a global cash management system include all of the following except:

Accepted Answer

A)   Obtain insurance in advance against such risks when the perceived political risk level is high.
B)   deciding how to reallocate cash once it has been centralized.
C)   creating the ability to withdraw cash from the subsidiary and centralize it.
D)   estimating the levels of local and corporate cash needs at given times.E) All of the above
F) A) and B)

Exam 21: International Financial Management

The purchasing power parity theory of exchange rates suggests that exchange rates will adjust until the cost of equivalent goods is approximately equal in each country.

Correct Answer
verified

Which of the following kinds of risk are NOT uniquely associated with multinational corporations?

Correct Answer
verified

Which of the following statements is true about international equity (stock) markets?

Correct Answer
verified

A foreign affiliate may be an exporter, a joint venture, or a fully owned foreign subsidiary.

Correct Answer
verified

If the Brazilian real is equal to $0.46, a Canadian dollar is equal to how many Brazilian reals?

Correct Answer
verified

Eurobond issues are sold simultaneously in several national capital markets, but denominated in a currency different from that of the nation in which the bonds are issued.

Correct Answer
verified

Multinational firms tend to have a lower level of portfolio risk than comparable Canadian firms.

Correct Answer
verified

A loan arrangement in which a parent company reduces its political risk over a direct transfer of funds is called a(an) :

Correct Answer
verified

A forward exchange rate is used to help determine the value of a currency at a future point in time.

Correct Answer
verified

A firm that might suffer a loss as a result of a decline in the value of the Japanese yen could offset part of that risk by selling Japanese yen futures.

Correct Answer
verified

The lower borrowing costs in the Eurocurrency market as compared to Canada are often attributed to:

Correct Answer
verified

The value of a country's currency may increase by:

Correct Answer
verified

A firm exposed to exchange rate risk can hedge its risk by all of the following except:

Correct Answer
verified

What has motivated Canadian firms to move their operations to foreign countries?

Correct Answer
verified

An exporter is able to satisfy foreign demand for a product while avoiding long-term investment although this method is riskier than other alternatives.

Correct Answer
verified

Correct Answer
verified
A
B)
C)
3,000,000 ringgits *FV
View Answer

When a country has a weak currency relative to other countries, visiting that country is much more expensive for residents of other countries.

Correct Answer
verified

Considerations in a global cash management system include all of the following except:

Correct Answer
verified

Selling common stock to residents of foreign countries is illegal in most countries, although it minimizes risk for any multinational corporation.

Correct Answer
verified

The International Finance Corporation (IFC) is:

Correct Answer
verified

Exam 21: International Financial Management

The purchasing power parity theory of exchange rates suggests that exchange rates will adjust until the cost of equivalent goods is approximately equal in each country.

Correct AnswerverifiedShow Answer

Which of the following kinds of risk are NOT uniquely associated with multinational corporations?

Correct AnswerverifiedShow Answer

Which of the following statements is true about international equity (stock) markets?

Correct AnswerverifiedShow Answer

A foreign affiliate may be an exporter, a joint venture, or a fully owned foreign subsidiary.

Correct AnswerverifiedShow Answer

If the Brazilian real is equal to $0.46, a Canadian dollar is equal to how many Brazilian reals?

Correct AnswerverifiedShow Answer

Eurobond issues are sold simultaneously in several national capital markets, but denominated in a currency different from that of the nation in which the bonds are issued.

Correct AnswerverifiedShow Answer

Multinational firms tend to have a lower level of portfolio risk than comparable Canadian firms.

Correct AnswerverifiedShow Answer

A loan arrangement in which a parent company reduces its political risk over a direct transfer of funds is called a(an) :

Correct AnswerverifiedShow Answer

A forward exchange rate is used to help determine the value of a currency at a future point in time.

Correct AnswerverifiedShow Answer

A firm that might suffer a loss as a result of a decline in the value of the Japanese yen could offset part of that risk by selling Japanese yen futures.

Correct AnswerverifiedShow Answer

The lower borrowing costs in the Eurocurrency market as compared to Canada are often attributed to:

Correct AnswerverifiedShow Answer

The value of a country's currency may increase by:

Correct AnswerverifiedShow Answer

A firm exposed to exchange rate risk can hedge its risk by all of the following except:

Correct AnswerverifiedShow Answer

What has motivated Canadian firms to move their operations to foreign countries?

Correct AnswerverifiedShow Answer

An exporter is able to satisfy foreign demand for a product while avoiding long-term investment although this method is riskier than other alternatives.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA B) C) 3,000,000 ringgits *FVView AnswerShow Answer

When a country has a weak currency relative to other countries, visiting that country is much more expensive for residents of other countries.

Correct AnswerverifiedShow Answer

Considerations in a global cash management system include all of the following except:

Correct AnswerverifiedShow Answer

Selling common stock to residents of foreign countries is illegal in most countries, although it minimizes risk for any multinational corporation.

Correct AnswerverifiedShow Answer

The International Finance Corporation (IFC) is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
A
B)
C)
3,000,000 ringgits *FV
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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