TEST BANK for International Financial Management 9th Edition by Cheol Eun, Bruce Resnick and Tuugi Chuluun. ISBN-13: 9781260013870

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TEST BANK for International Financial Management

9th Edition by Cheol Eun, Bruce Resnick and Tuugi

Chuluun. ISBN-13: 9781260013870




Test Bank
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MULTIPLE CHOICE - h h




Choose the one alternative that best completes the statement or answers the question.
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1) What major dimension sets apart international finance from domestic finance?
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A) Foreign exchange and political risks
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B) Market imperfections h




C) Expanded opportunity set h h




D) all of the options
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2) An example(s) of a political risk is
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A) expropriation of assets. h h




B) adverse change in tax rules. h h h h




C) the opposition party being elected.
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D) both the expropriation of assets and adverse changes in tax rules are correct.
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3) Production of goods and services has become globalized to a large extent as a result of
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A) natural resources being depleted in one country after another.
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B) skilled labor being highly mobile.
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C) multinational corporations' efforts to source inputs and locate production any
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where where costs are lower and profits higher.
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D) common tastes worldwide for the same goods and services.
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4) Recently, financial markets have become highly integrated. This development
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A) allows investors to diversify their portfolios internationally.
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B) allows minority investors to buy and sell stocks.
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C) has increased the cost of capital for firms.
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D) none of the options
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5) Japan has experienced large trade surpluses. Japanese investors have responded to this
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by



A) liquidating their positions in stocks to buy dollar-denominated bonds.
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B) investing heavily in U.S. and other foreign financial markets.
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C) lobbying the U.S. government to depreciate its currency.
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D) lobbying the Japanese government to allow the yen to appreciate.
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6) Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate is
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$1.25 = €1.00. One year later the exchange rate is the same, but the Italian government has expro
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priated your firm's assets paying only €80,000 in compensation. This is an example of
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A) exchange rate risk. h h




B) political risk. h




C) market imperfections. h




D) none of the options, since $100,000 = €80,000 × $1.25/€1.00.
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