FINA 3500 FINAL REVIEW CHAPTER 14

Foreign bonds sold in the United States are nicknamed "Yankee bonds," foreign bonds sold in Japan are called "Samurai bonds." What are foreign bonds sold in the United Kingdom nicknamed? "Union Jacks" "Bulldogs" "Churchill's" "Royalty"

"Bulldogs"

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro depreciates against the dollar from $1.40/€ at the time the loan was made to $1.35/€ at the end of the first year, how much interest and principle will TropiKana pay at the end of the first year if they repay the entire loan plus interest (rounded)? $1,477,000 $1,055,000 $1,424,250 €1,424,250

$1,424,250

TropiKana Inc., a U.S firm, has just borrowed $1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 6.00% per year, how much interest will they pay in the first year? $6,000 $600,000 €60,000 $60,000

$60,000

TropiKana Inc., a U.S firm, has just borrowed euro 1,000,000 to make improvements to an Italian fruit plantation and processing plant. If the interest rate is 5.50% per year and the Euro appreciates against the dollar from $1.40/€ at the time the loan was made to $1.45/€ at the end of the first year, what is the before tax cost of capital if the firm repays the entire loan plus interest (rounded)? 5.50% 9.27% 10.50% 1.73%

9.27%

________ are negotiable certificates issued by a bank to represent the underlying shares of stock, which are held in trust at a foreign custodian bank. Eurodeposits International mutual funds Depositary receipts Negotiable CDs

Depositary receipts

________ are domestic currencies of one country on deposit in a second country. Eurocurrencies LIBORs Discount window deposits Federal funds

Eurocurrencies

Depositary receipts traded outside the United States are called ________ depositary receipts. Euro American Global none of the above

Global

The public pathway to raise equity capital outside of its home market includes the following EXCEPT: Strategic Partner/Alliance. Euroequity issue. seasoned offering. shares sold to a specific market or exchange.

Strategic Partner/Alliance.

Level II ADRs must meet: home country accounting standards. U.S. GAAP standards. both U.S. GAAP and home country standards. none of the above

U.S. GAAP standards.

Private equity funds (PEF) differ from traditional venture capital (VC) funds in that: VC is almost unavailable to emerging markets while PEF capital is available. VC typically invests in family business whereas PEF do not. VC operates mainly in lesser-developed countries while PEF do not. All of the above are true.

VC is almost unavailable to emerging markets while PEF capital is available.

Your authors note several empirical studies that have found: no share price effect for foreign firms that cross-list on major U.S. exchanges. a negative share price effect for foreign firms that cross-list on major U.S. exchanges. a positive share price effect for foreign firms that cross-list on major U.S. exchanges. none of the above

a positive share price effect for foreign firms that cross-list on major U.S. exchanges.

Another school of thought about the worldwide trend toward fuller and more standardized disclosure rules is that the cost of U.S. level equity capital disclosure: leads to fewer foreign firms cross listing in U.S. equity markets. chases away potential listers of equity. is an onerous costly burden. all of the above

all of the above

Strategic alliances are normally formed by firms that expect to gain synergies from which of the following? economies of scale complementary marketing economies of scope all of the above

all of the above

According to the U.S. school of thought, the worldwide trend toward fuller and more standardized disclosure rules should ________ the cost of equity capital. have no impact on increase decrease none of the above

decrease

A/An ________ is defined as one that is targeted at investors in a single country and underwritten in whole or part by investment institutions from that country. strategic alliance directed public share issue SEC rule 144a placement Euroequity public issue

directed public share issue

For most firms, the cost of capital decreases to a low point as the firm ________ debt financing. At some point beyond this optimal level, the cost of capital increases as the amount of debt ________. increases; increases decreases; decreases decreases; increases increases; decreases

increases; increases

The number of foreign firms traded on the London exchange is ________ than the number traded on the NYSE, and the costs of listing and disclosure in London are ________ those for the NYSE. greater than; greater than less than; greater than greater than; less than less than; less than

less than; less than

Level I ADRs trade primarily: on the American Stock Exchange. over the counter or pink sheets. on the New York Stock Exchange. Level I ADRs typically do not trade at all, but instead are privately issued and held until maturity.

over the counter or pink sheets.

ADRs that are created at the request of a foreign firm wanting its shares traded in the United States are: unsponsored. facilitated. unfacilitated. sponsored.

sponsored.

One of the most important factors in making debt less expensive than equity is: the tax deductibility of dividends. the seniority of debt obligations to equity claims. the seniority of equity obligations to debt claims. the tax deductibility of equity.

the seniority of debt obligations to equity claims.