InternationalmFinancialmManagementmTestmBan
k
,InternationalmFinancialmManagementmTestmBan
k
ch1
Student:m
Themfirst mtwomcolumnsmgivemthemmaximummdailymamountsmof mbeermand mwhiskeymthat mSouthernmIreland mand m
NorthernmIreland mcanmproducemwhenmtheymcompletelymspecializeminmonemormothermproduct.mThemlast mtwomcol
umnsmgivemeachmcountry'smconsumptionmwithout mtrade.
1. IsmNorthernmIreland mbettermoff mwhenmit mtradesmwithmSouthernmIrelan
d?mTrue False
2. Now msupposemthat mSouthernmworkersmreceivemamraisemtom€2mpermday.mWillmtradembempossiblemat mthemexcha
ngemratemyoumfound minmthemlast mquestion?
True False
3. Now msupposemthat mSouthernmworkersmarempaid m€1mpermdaymbut mthemNorthernmworkersmreceivemamraisemto
m£2mpermday.mWillmtradembempossiblemat mthemexchangemratemyoumfound minmthemquestionmbeforemthemlast mqu
estion?
True False
4. What mmajormdimensionmsetsmapart minternationalmfinancemfrommdomesticmfinance?
A. Foreignmexchangemand mpoliticalmrisks
B. Market mimperfections
C. Expanded mopportunitymset
D. Allmof mthemabove
5. Anmexamplemof mampoliticalmriskmis
A. expropriationmof massets.
B. adversemchangeminmtaxmrules.
C. themoppositionmpartymbeingmelected.
D. bothmanswersma)mand mb)maremcorrect.
6. Productionmof mgoodsmand mservicesmhasmbecomemglobalized mtomamlargemextent masmamresult mof
A. naturalmresourcesmbeingmdepleted minmonemcountrymaftermanother.
B. skilled mlabormbeingmhighlymmobile.
C. multinationalmcorporations'meffortsmtomsourceminputsmand mlocatemproductionmanywheremwheremcostsma
remlowermand mprofitsmhigher.
D. commonmtastesmworldwidemformthemsamemgoodsmand mservices.
7. Recently,mfinancialmmarketsmhavembecomemhighlymintegrated.mThismdevelopment
A. allowsminvestorsmtomdiversifymtheirmportfoliosminternationally.
B. allowsmminorityminvestorsmtombuymand msellmstocks.
C. hasmincreased mthemcost mof mcapitalmformfirms.
D. answersma)mand mc)marembothmcorrect.
,InternationalmFinancialmManagementmTestmBan
k
8. Japanmhasmexperienced mlargemtrademsurpluses.mJapaneseminvestorsmhavem responded mtomthismby
A. liquidatingmtheirmpositionsminmstocksmtombuymdollarmdenominated mbonds.
B. investingmheavilyminmU.S.mand mothermforeignmfinancialmmarkets.
C. lobbyingmthemU.S.mgovernment mtomdepreciatemitsmcurrency.
D. lobbyingmthemJapanesemgovernment mtomallow mthemyenmtomappreciate.
9. Supposemyourmfirmminvestsm$100,000minmamproject minmItaly.mAt mthemtimemthemexchangemratemism$1.25m=m€1.
00.mOnemyearmlatermthemexchangemratemismthemsame,mbut mthemItalianmgovernment mhasmexpropriated myourmfir
m's
assetsmpayingmonlym€80,000minmcompensation.mThismis manmexamplemof
A. exchangemratemrisk.
B. politicalmrisk.
C. market mimperfections.
D. nonemof mthemabove,msincem$100,000m=m€80,000m×m$1.25/€1.00
10. Supposemyoumstart mwithm$100mand mbuymstockmform£50mwhenmthemexchangemratemism£1m=m$2.mOnemyearmlater,
mthemstockmrisesmtom£60.mYoumaremhappymwithmyourm20mpercent mreturnmonmthemstock,mbut mwhenmyoumsellmthem
stockmand mexchangemyourm£60mformdollars,myoumonlymget m$45msincemthempound mhasmfallenmtom£1m=m$0.75.mT
hismlossmof mvaluemismanmexamplemof
A. exchangemratemrisk.
B. politicalmrisk.
C. market mimperfections.
D. weaknessminmthemdollar.
11. Supposemthat mGreat mBritainmismammajormexport mmarket mformyourmfirm,mamU.S.-
based mMNC.mIf mthemBritishmpound mdepreciatesmagainst mthemU.S.mdollar,
A. yourmfirmmwillmbemablemtomchargemmoreminmdollarmterms mwhilemkeepingmpound mpricesm stable.
B. yourmfirmmmaymbempriced mout mof mthemU.K.mmarket,mtomthemextent mthat myourmdollarmcostsmstaymconstant m
and myourmpound mpricesmwillmrise.
C. tomprotect mU.K.mmarket mshare,myourmfirmmmaymhavemtomcut mthemdollarmpricemof myourmgoodsmtomkeepm
thempound mpricemthemsame.
D. bothmb)mand mc)maremcorrect
12. SupposemMexicomismammajormexport mmarket mformyourmU.S.-
based mcompanymand mthemMexicanmpesomappreciatesmdrasticallymagainst mthemU.S.mdollar.mThismm
eans
Amyourmcompany'smproductsmcanmbempriced mout mof mthemMexicanmmarket,masmthempesompricemof mAmerican
.m importsmwillmrisemfollowingmthempeso'smfall.
B.m yourmfirmmwillmbemablemtomchargemmoreminmdollarmterms mwhilemkeepingmpesomprices mstable.
C.myourmdomesticmcompetitorsmwillmenjoymamperiod mof mfacingmlessened mpricemcompetitionmfrommMexican
mimports.
D.m bothmb)mand mc)maremcorrect
13. SupposemMexicomismammajormexport mmarket mformyourmU.S.-
based mcompanymand mthemMexicanmpesomdepreciatesmdrasticallymagainst mthemU.S.mdollar,masmit mdi
d minmDecemberm1994.mThismmeans
Amyourmcompany'smproductsmcanmbempriced mout mof mthemMexicanmmarket,masmthempesompricemof mAmerican
.m importsmwillmrisemfollowingmthempeso'smfall.
B.m yourmfirmmwillmbemablemtomchargemmoreminmdollarmterms mwhilemkeepingmpesomprices mstable.
C.myourmdomesticmcompetitorsmwillmenjoymamperiod mof mfacingmlittlempricemcompetitionmfrommMexicanmimport
s.
D.m bothmb)mand mc)maremcorrect
14. Supposemthat myoumaremamU.S.mproducermof mamcommoditymgood mcompetingmwithmforeignmproducers.mY
ourminputsmof mproductionmarempriced minmdollarsmand myoumsellmyourmoutput minmdollars.mIf mthemU.S.mcurr
encymdepreciatesmagainst mthemcurrenciesmof mourmtradingmpartners,
A. yourmcompetitivempositionmismlikelymimproved.
, InternationalmFinancialmManagementmTestmBan
k B. yourmcompetitivempositionmismlikelymworsened.
C. yourmcompetitivempositionmismunchanged.
k
,InternationalmFinancialmManagementmTestmBan
k
ch1
Student:m
Themfirst mtwomcolumnsmgivemthemmaximummdailymamountsmof mbeermand mwhiskeymthat mSouthernmIreland mand m
NorthernmIreland mcanmproducemwhenmtheymcompletelymspecializeminmonemormothermproduct.mThemlast mtwomcol
umnsmgivemeachmcountry'smconsumptionmwithout mtrade.
1. IsmNorthernmIreland mbettermoff mwhenmit mtradesmwithmSouthernmIrelan
d?mTrue False
2. Now msupposemthat mSouthernmworkersmreceivemamraisemtom€2mpermday.mWillmtradembempossiblemat mthemexcha
ngemratemyoumfound minmthemlast mquestion?
True False
3. Now msupposemthat mSouthernmworkersmarempaid m€1mpermdaymbut mthemNorthernmworkersmreceivemamraisemto
m£2mpermday.mWillmtradembempossiblemat mthemexchangemratemyoumfound minmthemquestionmbeforemthemlast mqu
estion?
True False
4. What mmajormdimensionmsetsmapart minternationalmfinancemfrommdomesticmfinance?
A. Foreignmexchangemand mpoliticalmrisks
B. Market mimperfections
C. Expanded mopportunitymset
D. Allmof mthemabove
5. Anmexamplemof mampoliticalmriskmis
A. expropriationmof massets.
B. adversemchangeminmtaxmrules.
C. themoppositionmpartymbeingmelected.
D. bothmanswersma)mand mb)maremcorrect.
6. Productionmof mgoodsmand mservicesmhasmbecomemglobalized mtomamlargemextent masmamresult mof
A. naturalmresourcesmbeingmdepleted minmonemcountrymaftermanother.
B. skilled mlabormbeingmhighlymmobile.
C. multinationalmcorporations'meffortsmtomsourceminputsmand mlocatemproductionmanywheremwheremcostsma
remlowermand mprofitsmhigher.
D. commonmtastesmworldwidemformthemsamemgoodsmand mservices.
7. Recently,mfinancialmmarketsmhavembecomemhighlymintegrated.mThismdevelopment
A. allowsminvestorsmtomdiversifymtheirmportfoliosminternationally.
B. allowsmminorityminvestorsmtombuymand msellmstocks.
C. hasmincreased mthemcost mof mcapitalmformfirms.
D. answersma)mand mc)marembothmcorrect.
,InternationalmFinancialmManagementmTestmBan
k
8. Japanmhasmexperienced mlargemtrademsurpluses.mJapaneseminvestorsmhavem responded mtomthismby
A. liquidatingmtheirmpositionsminmstocksmtombuymdollarmdenominated mbonds.
B. investingmheavilyminmU.S.mand mothermforeignmfinancialmmarkets.
C. lobbyingmthemU.S.mgovernment mtomdepreciatemitsmcurrency.
D. lobbyingmthemJapanesemgovernment mtomallow mthemyenmtomappreciate.
9. Supposemyourmfirmminvestsm$100,000minmamproject minmItaly.mAt mthemtimemthemexchangemratemism$1.25m=m€1.
00.mOnemyearmlatermthemexchangemratemismthemsame,mbut mthemItalianmgovernment mhasmexpropriated myourmfir
m's
assetsmpayingmonlym€80,000minmcompensation.mThismis manmexamplemof
A. exchangemratemrisk.
B. politicalmrisk.
C. market mimperfections.
D. nonemof mthemabove,msincem$100,000m=m€80,000m×m$1.25/€1.00
10. Supposemyoumstart mwithm$100mand mbuymstockmform£50mwhenmthemexchangemratemism£1m=m$2.mOnemyearmlater,
mthemstockmrisesmtom£60.mYoumaremhappymwithmyourm20mpercent mreturnmonmthemstock,mbut mwhenmyoumsellmthem
stockmand mexchangemyourm£60mformdollars,myoumonlymget m$45msincemthempound mhasmfallenmtom£1m=m$0.75.mT
hismlossmof mvaluemismanmexamplemof
A. exchangemratemrisk.
B. politicalmrisk.
C. market mimperfections.
D. weaknessminmthemdollar.
11. Supposemthat mGreat mBritainmismammajormexport mmarket mformyourmfirm,mamU.S.-
based mMNC.mIf mthemBritishmpound mdepreciatesmagainst mthemU.S.mdollar,
A. yourmfirmmwillmbemablemtomchargemmoreminmdollarmterms mwhilemkeepingmpound mpricesm stable.
B. yourmfirmmmaymbempriced mout mof mthemU.K.mmarket,mtomthemextent mthat myourmdollarmcostsmstaymconstant m
and myourmpound mpricesmwillmrise.
C. tomprotect mU.K.mmarket mshare,myourmfirmmmaymhavemtomcut mthemdollarmpricemof myourmgoodsmtomkeepm
thempound mpricemthemsame.
D. bothmb)mand mc)maremcorrect
12. SupposemMexicomismammajormexport mmarket mformyourmU.S.-
based mcompanymand mthemMexicanmpesomappreciatesmdrasticallymagainst mthemU.S.mdollar.mThismm
eans
Amyourmcompany'smproductsmcanmbempriced mout mof mthemMexicanmmarket,masmthempesompricemof mAmerican
.m importsmwillmrisemfollowingmthempeso'smfall.
B.m yourmfirmmwillmbemablemtomchargemmoreminmdollarmterms mwhilemkeepingmpesomprices mstable.
C.myourmdomesticmcompetitorsmwillmenjoymamperiod mof mfacingmlessened mpricemcompetitionmfrommMexican
mimports.
D.m bothmb)mand mc)maremcorrect
13. SupposemMexicomismammajormexport mmarket mformyourmU.S.-
based mcompanymand mthemMexicanmpesomdepreciatesmdrasticallymagainst mthemU.S.mdollar,masmit mdi
d minmDecemberm1994.mThismmeans
Amyourmcompany'smproductsmcanmbempriced mout mof mthemMexicanmmarket,masmthempesompricemof mAmerican
.m importsmwillmrisemfollowingmthempeso'smfall.
B.m yourmfirmmwillmbemablemtomchargemmoreminmdollarmterms mwhilemkeepingmpesomprices mstable.
C.myourmdomesticmcompetitorsmwillmenjoymamperiod mof mfacingmlittlempricemcompetitionmfrommMexicanmimport
s.
D.m bothmb)mand mc)maremcorrect
14. Supposemthat myoumaremamU.S.mproducermof mamcommoditymgood mcompetingmwithmforeignmproducers.mY
ourminputsmof mproductionmarempriced minmdollarsmand myoumsellmyourmoutput minmdollars.mIf mthemU.S.mcurr
encymdepreciatesmagainst mthemcurrenciesmof mourmtradingmpartners,
A. yourmcompetitivempositionmismlikelymimproved.
, InternationalmFinancialmManagementmTestmBan
k B. yourmcompetitivempositionmismlikelymworsened.
C. yourmcompetitivempositionmismunchanged.
