Testbank International Financial Management, 10th Edition, By Cheol Eun,
Bruce G. Resnick.
Part 1: Globalization and the Multinational Firm (Chapters 1-2)
,1. What major dimension sets apart international finance from domestic finance?
A) Foreign exchange and political risks
B) Market imperfections
C) Expanded opportunity set
D) All of the options
Answer: D
Rationale: International finance differs from domestic finance due to foreign
exchange & political risks, market imperfections (like legal restrictions), and an
expanded opportunity set .
2. An example of a political risk is: A)
Expropriation of assets.
B) Adverse change in tax rules.
C) The opposition party being elected.
D) Both the expropriation of assets and adverse changes in tax rules.
Answer: D
Rationale: Political risk includes government actions that harm the firm, such as
expropriation or unfavorable changes in laws/taxes .
,3. Production of goods and services has become globalized largely as a result of:
A) Natural resources being depleted.
B) Skilled labor being highly mobile.
C) MNCs sourcing inputs and locating production where costs are lower.
D) Common tastes worldwide.
Answer: C
Rationale: Multinational corporations (MNCs) drive globalization by seeking
efficiency, lower costs, and higher profits across borders .
4. Recently, financial markets have become highly integrated. This development:
A) Allows investors to diversify their portfolios internationally.
B) Allows minority investors to buy and sell stocks.
C) Has increased the cost of capital for firms.
D) None of the options
Answer: A
Rationale: Integration lets investors diversify globally, reducing risk through
exposure to multiple markets .
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Bruce G. Resnick.
Part 1: Globalization and the Multinational Firm (Chapters 1-2)
,1. What major dimension sets apart international finance from domestic finance?
A) Foreign exchange and political risks
B) Market imperfections
C) Expanded opportunity set
D) All of the options
Answer: D
Rationale: International finance differs from domestic finance due to foreign
exchange & political risks, market imperfections (like legal restrictions), and an
expanded opportunity set .
2. An example of a political risk is: A)
Expropriation of assets.
B) Adverse change in tax rules.
C) The opposition party being elected.
D) Both the expropriation of assets and adverse changes in tax rules.
Answer: D
Rationale: Political risk includes government actions that harm the firm, such as
expropriation or unfavorable changes in laws/taxes .
,3. Production of goods and services has become globalized largely as a result of:
A) Natural resources being depleted.
B) Skilled labor being highly mobile.
C) MNCs sourcing inputs and locating production where costs are lower.
D) Common tastes worldwide.
Answer: C
Rationale: Multinational corporations (MNCs) drive globalization by seeking
efficiency, lower costs, and higher profits across borders .
4. Recently, financial markets have become highly integrated. This development:
A) Allows investors to diversify their portfolios internationally.
B) Allows minority investors to buy and sell stocks.
C) Has increased the cost of capital for firms.
D) None of the options
Answer: A
Rationale: Integration lets investors diversify globally, reducing risk through
exposure to multiple markets .
, 5. You invest
100
,
000
i
n
It
a
l
y
w
he
n
t
he
ra
t
e
i
