[FIN202] chap 17

d

31. Evidence of globalization include A) Consumers in many countries buy goods that are purchased from a number of countries, other than just their own. B) Goods and services are produced around the world. C) The financial system has also become highly integrated. D) All of the above.

b

32. Which one of the following statements about multinational firms is NOT true? A) A multinational corporation is a business firm that operates in more than one country but is headquartered or based in its home country. B) Multinational corporations are owned by domestic stockholders only. C) Multinational corporations may purchase raw materials from one country, obtain financing from a capital market in another country, and produce finished goods with labor and capital equipment from a third country. D) All of the above

c

33. Factors that can cause international business transactions to differ from domestic deals include all EXCEPT: A) Exchange rate risk, legal systems, and country risk. B) Legal systems, cultural factors, and economic systems. C) Exchange rate risk, country risk, and size of market. D) Economic systems, cultural factors, and country risk

d

34. Which ONE of the following statements about the goal of the firm is true? A) Stockholder value maximization is the accepted goal for firms in India. B) Firms in Germany focus on maximizing corporate wealth. C) The goal of the Japanese business manager is to increase the wealth and growth of the keiretsu. D) All of the above

c

35. Which ONE of the following statements about the goal of the firm is true? A) Corporate wealth maximization is the accepted goal for firms in India. B) Firms in Australia focus on maximizing corporate wealth. C) The goal of the Japanese business manager is to increase the wealth and growth of the keiretsu. D) Private-sector firms in China focus on providing full employment in the economy.

d

36. Economic benefits provided by the foreign exchange markets include: A) A mechanism to transfer purchasing power from individuals who deal in one currency to people who deal in a different currency. B) A way for corporations to pass the risk associated with foreign exchange price fluctuations to professional risk-takers. C) A channel for importers and exporters to acquire credit for international business transactions. D) All of the above

a

37. The three largest foreign exchange markets based on daily volume are A) London, New York, and Tokyo. B) New York, Tokyo, and Zurich. C) London, Tokyo, and Zurich. D) London, New York, and Singapore.

c

38. The major participants in the foreign exchange markets are A) multinational commercial banks, large investment banking firms, and domestic firms. B) multinational commercial banks, local banks and domestic firms. C) multinational commercial banks, large investment banking firms, and small currency boutiques that specialize in foreign exchange transactions. D) None of the above

d

39. Which ONE of the following statements is true? A) Equilibrium occurs at the price at which the quantity of the currency demanded exactly equals the quantity supplied. B) Whatever causes U.S. residents to buy more or fewer foreign goods shifts the demand curve for the foreign currency. C) Whatever causes foreigners to buy more or fewer U.S. goods shifts the supply curve for the foreign currency. D) All of the above

b

40. If the foreign exchange rate is the price in foreign currency for a dollar, then the exchange rate quote is called A) an American quote. B) an indirect quote. C) a direct quote. D) a cross quote.

b

41. A European quote is the same as A) an American quote. B) an indirect quote. C) a direct quote. D) a cross quote.

a

43. The bid quote represents the rate at which A) the dealer will buy foreign currency from you. B) the dealer will sell foreign currency to you. C) you can buy the foreign currency from the dealer. D) None of the above.

b

44. The ask quote represents the rate at which A) the dealer will buy foreign currency from you. B) the dealer will sell foreign currency to you. C) you can sell the foreign currency to the dealer. D) None of the above.

b

45. The difference between the forward rate and the spot rate is called the A) cross exchange rate. B) forward premium or forward discount. C) indirect quote. D) None of the above.

d

46. When performing capital budgeting analysis on international projects, managers A) find it more difficult to estimate the incremental cash flows for foreign projects B) have to deal with foreign exchange rate risk on international capital investments. C) must incorporate a country risk premium when evaluating foreign business activities. D) All of the above.

d

47. The ways that a foreign government can affect the risk of a foreign project include: A) Change tax laws in a way that adversely impacts the firm. B) Impose laws related to labor, wages, and prices that are more restrictive than those applicable for domestic firms. C) Disallow any remittance of funds from the subsidiary to the parent firm for either a limited period of time or the duration of the project. D) All of the above.

c

48. The ways that a foreign government can adversely affect the risk of a foreign project include all EXCEPT: A) Change tax laws in a way that adversely impacts the firm. B) Impose laws related to labor, wages, and prices that are more restrictive than those applicable for domestic firms. C) Remove tariffs and quotas on any imports. D) Disallow any remittance of funds from the subsidiary to the parent firm for either a limited period of time or the duration of the project.

a

49. Country risk should be incorporated into the international capital budgeting analysis by A) adjusting the firm's discount rate for the additional risk. B) increasing cash flow estimates from the project. C) doing nothing. D) None of the above.

a

50. The Euromarkets are A) vast, largely unregulated money and capital markets existing in Tokyo, Hong Kong, and Singapore. B) vast, regulated money and capital markets with major financial centers in the United Kingdom. C) vast, regulated money and capital markets with major financial centers in the euro zone. D) None of the above.a

b

51. The Eurocurrency market is the A) medium-term portion of the Euromarket. B) short-term portion of the Euromarket. C) long-term portion of the Euromarket. D) None of the above.

d

52. Which ONE of the following statements about Eurocredits is true? A) The international banking system gathers funds from businesses and governments in the Eurocurrency market and then allocates funds to banks that have the most profitable lending opportunities. B) Eurocredits are denominated in all major Eurocurrencies, although the dollar is the overwhelming favorite. C) Eurocredits are short- to medium-term loans made to multinational corporations and governments of medium to high credit quality. D) All of the above.

c

53. Long-term debt sold by a foreign firm to investors in a foreign country and denominated in that country's currency is called a A) Eurobond. B) municipal bond. C) foreign bond. D) currency bond.

b

54. Long-term debt instruments sold by firms to investors in countries other than the country in whose currency the bonds are denominated A) Samurai bonds. B) Eurobonds. C) foreign bonds. D) currency bonds.

c

55. Which one of the following statements about Eurobonds is NOT true? A) Multinational firms can use Eurobonds to finance international or domestic projects. B) Eurobonds are bearer bonds and do not have to be registered. C) Eurobonds are bonds that have to be registered. D) Eurobonds also pay interest annually.