InternationalnFinancialnManagementnTestnBank
,InternationalnFinancialnManagementnTestnBank
ch1
Student:nn
ThenfirstntwoncolumnsngiventhenmaximumndailynamountsnofnbeernandnwhiskeynthatnSouthernnIrelandnandnN
orthernnIrelandncannproducenwhenntheyncompletelynspecializeninnonenornothernproduct.nThenlastntwoncolu
mnsngiveneachncountry'snconsumptionnwithoutntrade.
1. IsnNorthernnIrelandnbetternoffnwhennitntradesnwithnSouthernnIreland?n
True False
2. NownsupposenthatnSouthernnworkersnreceivenanraisenton€2npernday.nWillntradenbenpossiblenatnthenexchangenra
tenyounfoundninnthenlastnquestion?
True False
3. NownsupposenthatnSouthernnworkersnarenpaidn€1nperndaynbutnthenNorthernnworkersnreceivenanraisenton£2np
ernday.nWillntradenbenpossiblenatnthenexchangenratenyounfoundninnthenquestionnbeforenthenlastnquestion?
True False
4. Whatnmajorndimensionnsetsnapartninternationalnfinancenfromndomesticnfinance?
A. Foreignnexchangenandnpoliticalnrisks
B. Marketnimperfections
C. Expandednopportunitynset
D. Allnofnthenabove
5. Annexamplenofnanpoliticalnrisknis
A. expropriationnofnassets.
B. adversenchangeninntaxnrules.
C. thenoppositionnpartynbeingnelected.
D. bothnanswersna)nandnb)narencorrect.
6. Productionnofngoodsnandnservicesnhasnbecomenglobalizedntonanlargenextentnasnanresultnof
A. naturalnresourcesnbeingndepletedninnonencountrynafternanother.
B. skillednlabornbeingnhighlynmobile.
C. multinationalncorporations'neffortsntonsourceninputsnandnlocatenproductionnanywherenwherencostsnarenl
owernandnprofitsnhigher.
D. commonntastesnworldwidenfornthensamengoodsnandnservices.
7. Recently,nfinancialnmarketsnhavenbecomenhighlynintegrated.nThisndevelopment
A. allowsninvestorsntondiversifyntheirnportfoliosninternationally.
B. allowsnminorityninvestorsntonbuynandnsellnstocks.
C. hasnincreasednthencostnofncapitalnfornfirms.
D. answersna)nandnc)narenbothncorrect.
,InternationalnFinancialnManagementnTestnBank
8. Japannhasnexperiencednlargentradensurpluses.nJapaneseninvestorsnhavenrespondedntonthisnby
A. liquidatingntheirnpositionsninnstocksntonbuyndollarndenominatednbonds.
B. investingnheavilyninnU.S.nandnothernforeignnfinancialnmarkets.
C. lobbyingnthenU.S.ngovernmentntondepreciatenitsncurrency.
D. lobbyingnthenJapanesengovernmentntonallownthen yenntonappreciate.
9. Supposenyournfirmninvestsn$100,000ninnanprojectninnItaly.nAtnthentimenthenexchangenratenisn$1.25n=n€1.00.nO
nenyearnlaternthenexchangenratenisnthensame,nbutnthenItalianngovernmentnhasnexpropriatednyournfirm's
assetsnpayingnonlyn€80,000ninncompensation.nThisnisnannexamplenof
A. exchangenratenrisk.
B. politicalnrisk.
C. marketnimperfections.
D.n nonenofnthenabove,nsincen$100,000n=n€80,000n×n$1.25/€1.00
10. Supposenyounstartnwithn$100nandnbuynstocknforn£50nwhennthenexchangenratenisn£1n=n$2.nOnenyearnlater,nthenst
ocknrisesnton£60.nYounarenhappynwithnyourn20npercentnreturnnonnthenstock,nbutnwhennyounsellnthenstocknandne
xchangenyourn£60nforndollars,nyounonlyngetn$45nsincenthenpoundnhasnfallennton£1n=n$0.75.nThisnlossnofnvalueni
snannexamplenof
A. exchangenratenrisk.
B. politicalnrisk.
C. marketnimperfections.
D. weaknessninnthendollar.
11. SupposenthatnGreatnBritainnisnanmajornexportnmarketnfornyournfirm,nanU.S.-
basednMNC.nIfnthenBritishnpoundndepreciatesnagainstnthenU.S.ndollar,
A. yournfirmnwillnbenablentonchargenmoreninndollarntermsnwhilenkeepingnpoundnpricesnstable.
B. yournfirmnmaynbenpricednoutnofnthenU.K.nmarket,ntonthenextentnthatnyourndollarncostsnstaynconstantnandny
ournpoundnpricesnwillnrise.
C. tonprotectnU.K.nmarketnshare,nyournfirmnmaynhaventoncutnthendollarnpricenofn yourngoodsntonkeepnthenp
oundnpricenthensame.
D. bothnb)nandnc)narencorrect
12. SupposenMexiconisnanmajornexportnmarketnfornyournU.S.-
basedncompanynandnthenMexicannpesonappreciatesndrasticallynagainstnthenU.S.ndollar.nThisnmean
s
Anyourncompany'snproductsncannbenpricednoutnofnthenMexicannmarket,nasnthenpesonpricenofnAmerican
.n importsnwillnrisenfollowingnthenpeso'snfall.
B. yournfirmnwillnbenablentonchargenmoreninndollarntermsnwhilenkeepingnpesonpricesnstable.
C. yourndomesticncompetitorsnwillnenjoynanperiodnofnfacingnlessenednpricencompetitionnfromnMexicanni
mports.
D. bothnb)nandnc)narencorrect
13. SupposenMexiconisnanmajornexportnmarketnfornyournU.S.-
basedncompanynandnthenMexicannpesondepreciatesndrasticallynagainstnthenU.S.ndollar,nasnitndidninn
Decembern1994.nThisnmeans
Anyourncompany'snproductsncannbenpricednoutnofnthenMexicannmarket,nasnthenpesonpricenofnAmerican
.n importsnwillnrisenfollowingnthenpeso'snfall.
B. yournfirmnwillnbenablentonchargenmoreninndollarntermsnwhilenkeepingnpesonpricesnstable.
C. yourndomesticncompetitorsnwillnenjoynanperiodnofnfacingnlittlenpricencompetitionnfromnMexicannimports.
D. bothnb)nandnc)narencorrect
14. SupposenthatnyounarenanU.S.nproducernofnancommodityngoodncompetingnwithnforeignnproducers.nYourni
nputsnofnproductionnarenpricedninndollarsnandnyounsellnyournoutputninndollars.nIfnthenU.S.ncurrencyndepr
eciatesnagainstnthencurrenciesnofnourntradingnpartners,
A. yourncompetitivenpositionnisnlikelynimproved.
B. yourncompetitivenpositionnisnlikelynworsened.
C. yourncompetitivenpositionnisnunchanged.
, InternationalnFinancialnManagementnTestnBank
15. Undoubtedly,nwenarennownlivingninnanworldnwherenallnthenmajorneconomicnfunctions—
consumption,nproduction,nandninvestment
A. arenstillninherentlynlocal.
B. arenstillnregionalninnnature.
C. arenslowlynbecomingnglobalized.
D. arenhighlynglobalized.
16. Mostngovernmentsnatnleastntryntonmakenitndifficultnfornpeoplentoncrossntheirnbordersnillegally.nThisnbarrierntonth
enfreenmovementnofnlabornisnannexamplenof
A. informationnasymmetry.
B. excessiventransactionsncosts.
C. racialndiscrimination.
D. anmarketnimperfection.
17. Althoughnthenworldneconomynisnmuchnmorenintegratedntodaynthannwasnthencasen10norn20nyearsnago,nanva
rietynofnbarriersnstillnhampernfreenmovementsnofnpeople,ngoods,nservices,nandncapitalnacrossnnationalnbou
ndaries.nThesenbarriersninclude
A. legalnrestrictions.
B. excessiventransportationncosts.
C. informationnasymmetry.
D. allnofnthenabove
18. ThenJapanesenautomobilencompanynHondandecidedntonestablishnproductionnfacilitiesninnOhio,nmainlynt
o
A. circumventntradenbarriers.
B. reducentransportationncosts.
C. reducentransactionsncosts.
D. bothna)nandnb)
19. Whennindividualninvestorsnbecomenawarenofnoverseasninvestmentnopportunitiesnandnarenwillingntond
iversifyntheirnportfoliosninternationally,
A. theyntradenonenmarketnimperfection,ninformationnasymmetry,nfornanother,nexchangenratenrisk.
B. theynbenefitnfromnannexpandednopportunitynset.
C. theynshouldnnotnbotherntonreadnorntonunderstandnthenprospectus,nsincenit'snprobablynwrittenninnanforeignnla
nguage.
D. theynshouldninvestnonlyninndollarsnorneuros.
20. ThenNestlénCorporation,nanwell-
knownnSwissnMNC,nusedntonissuentwondifferentnclassesnofncommonnstock,nbearernsharesnandnregisterednshar
es,nandnforeignersnwerenallowedntonholdnonly
A. registerednshares.
B. bearernshares.
C. votingnshares.
D. convertiblenshares.
21. Deregulatednfinancialnmarketsnandnheightenedncompetitionninnfinancialnservicesnprovidednannenvironmentnf
ornfinancialninnovationsnthatnresultedninnthenintroductionnofnvariousninstruments.nExamplesnofntheseninnova
tiveninstrumentsninclude
A. currencynfuturesnandnoptions,nforeignnstocknindexnfuturesnandnoptions.
B. multicurrencynbonds.
C. internationalnmutualnfunds,ncountrynfunds,nexchangentradednfunds.
D. allnofnthenabove
22. Nestlé,nanwell-knownnSwissncorporation,
A. hasnbeennanparagonnofnvirtueninnitsnoppositionntonallnformsnofnpoliticalnrisk.
Bnatnonentimenplacednrestrictionsnonnforeignnownershipnofnitsnstock.nWhennitnrelaxednthesenrestrictions,nthe
.n totalnmarketnvaluenofnthenfirmnfell.
Catnonentimenplacednrestrictionsnonnforeignnownershipnofnitsnstock.nWhennitnrelaxednthesenrestrictions,
,InternationalnFinancialnManagementnTestnBank
ch1
Student:nn
ThenfirstntwoncolumnsngiventhenmaximumndailynamountsnofnbeernandnwhiskeynthatnSouthernnIrelandnandnN
orthernnIrelandncannproducenwhenntheyncompletelynspecializeninnonenornothernproduct.nThenlastntwoncolu
mnsngiveneachncountry'snconsumptionnwithoutntrade.
1. IsnNorthernnIrelandnbetternoffnwhennitntradesnwithnSouthernnIreland?n
True False
2. NownsupposenthatnSouthernnworkersnreceivenanraisenton€2npernday.nWillntradenbenpossiblenatnthenexchangenra
tenyounfoundninnthenlastnquestion?
True False
3. NownsupposenthatnSouthernnworkersnarenpaidn€1nperndaynbutnthenNorthernnworkersnreceivenanraisenton£2np
ernday.nWillntradenbenpossiblenatnthenexchangenratenyounfoundninnthenquestionnbeforenthenlastnquestion?
True False
4. Whatnmajorndimensionnsetsnapartninternationalnfinancenfromndomesticnfinance?
A. Foreignnexchangenandnpoliticalnrisks
B. Marketnimperfections
C. Expandednopportunitynset
D. Allnofnthenabove
5. Annexamplenofnanpoliticalnrisknis
A. expropriationnofnassets.
B. adversenchangeninntaxnrules.
C. thenoppositionnpartynbeingnelected.
D. bothnanswersna)nandnb)narencorrect.
6. Productionnofngoodsnandnservicesnhasnbecomenglobalizedntonanlargenextentnasnanresultnof
A. naturalnresourcesnbeingndepletedninnonencountrynafternanother.
B. skillednlabornbeingnhighlynmobile.
C. multinationalncorporations'neffortsntonsourceninputsnandnlocatenproductionnanywherenwherencostsnarenl
owernandnprofitsnhigher.
D. commonntastesnworldwidenfornthensamengoodsnandnservices.
7. Recently,nfinancialnmarketsnhavenbecomenhighlynintegrated.nThisndevelopment
A. allowsninvestorsntondiversifyntheirnportfoliosninternationally.
B. allowsnminorityninvestorsntonbuynandnsellnstocks.
C. hasnincreasednthencostnofncapitalnfornfirms.
D. answersna)nandnc)narenbothncorrect.
,InternationalnFinancialnManagementnTestnBank
8. Japannhasnexperiencednlargentradensurpluses.nJapaneseninvestorsnhavenrespondedntonthisnby
A. liquidatingntheirnpositionsninnstocksntonbuyndollarndenominatednbonds.
B. investingnheavilyninnU.S.nandnothernforeignnfinancialnmarkets.
C. lobbyingnthenU.S.ngovernmentntondepreciatenitsncurrency.
D. lobbyingnthenJapanesengovernmentntonallownthen yenntonappreciate.
9. Supposenyournfirmninvestsn$100,000ninnanprojectninnItaly.nAtnthentimenthenexchangenratenisn$1.25n=n€1.00.nO
nenyearnlaternthenexchangenratenisnthensame,nbutnthenItalianngovernmentnhasnexpropriatednyournfirm's
assetsnpayingnonlyn€80,000ninncompensation.nThisnisnannexamplenof
A. exchangenratenrisk.
B. politicalnrisk.
C. marketnimperfections.
D.n nonenofnthenabove,nsincen$100,000n=n€80,000n×n$1.25/€1.00
10. Supposenyounstartnwithn$100nandnbuynstocknforn£50nwhennthenexchangenratenisn£1n=n$2.nOnenyearnlater,nthenst
ocknrisesnton£60.nYounarenhappynwithnyourn20npercentnreturnnonnthenstock,nbutnwhennyounsellnthenstocknandne
xchangenyourn£60nforndollars,nyounonlyngetn$45nsincenthenpoundnhasnfallennton£1n=n$0.75.nThisnlossnofnvalueni
snannexamplenof
A. exchangenratenrisk.
B. politicalnrisk.
C. marketnimperfections.
D. weaknessninnthendollar.
11. SupposenthatnGreatnBritainnisnanmajornexportnmarketnfornyournfirm,nanU.S.-
basednMNC.nIfnthenBritishnpoundndepreciatesnagainstnthenU.S.ndollar,
A. yournfirmnwillnbenablentonchargenmoreninndollarntermsnwhilenkeepingnpoundnpricesnstable.
B. yournfirmnmaynbenpricednoutnofnthenU.K.nmarket,ntonthenextentnthatnyourndollarncostsnstaynconstantnandny
ournpoundnpricesnwillnrise.
C. tonprotectnU.K.nmarketnshare,nyournfirmnmaynhaventoncutnthendollarnpricenofn yourngoodsntonkeepnthenp
oundnpricenthensame.
D. bothnb)nandnc)narencorrect
12. SupposenMexiconisnanmajornexportnmarketnfornyournU.S.-
basedncompanynandnthenMexicannpesonappreciatesndrasticallynagainstnthenU.S.ndollar.nThisnmean
s
Anyourncompany'snproductsncannbenpricednoutnofnthenMexicannmarket,nasnthenpesonpricenofnAmerican
.n importsnwillnrisenfollowingnthenpeso'snfall.
B. yournfirmnwillnbenablentonchargenmoreninndollarntermsnwhilenkeepingnpesonpricesnstable.
C. yourndomesticncompetitorsnwillnenjoynanperiodnofnfacingnlessenednpricencompetitionnfromnMexicanni
mports.
D. bothnb)nandnc)narencorrect
13. SupposenMexiconisnanmajornexportnmarketnfornyournU.S.-
basedncompanynandnthenMexicannpesondepreciatesndrasticallynagainstnthenU.S.ndollar,nasnitndidninn
Decembern1994.nThisnmeans
Anyourncompany'snproductsncannbenpricednoutnofnthenMexicannmarket,nasnthenpesonpricenofnAmerican
.n importsnwillnrisenfollowingnthenpeso'snfall.
B. yournfirmnwillnbenablentonchargenmoreninndollarntermsnwhilenkeepingnpesonpricesnstable.
C. yourndomesticncompetitorsnwillnenjoynanperiodnofnfacingnlittlenpricencompetitionnfromnMexicannimports.
D. bothnb)nandnc)narencorrect
14. SupposenthatnyounarenanU.S.nproducernofnancommodityngoodncompetingnwithnforeignnproducers.nYourni
nputsnofnproductionnarenpricedninndollarsnandnyounsellnyournoutputninndollars.nIfnthenU.S.ncurrencyndepr
eciatesnagainstnthencurrenciesnofnourntradingnpartners,
A. yourncompetitivenpositionnisnlikelynimproved.
B. yourncompetitivenpositionnisnlikelynworsened.
C. yourncompetitivenpositionnisnunchanged.
, InternationalnFinancialnManagementnTestnBank
15. Undoubtedly,nwenarennownlivingninnanworldnwherenallnthenmajorneconomicnfunctions—
consumption,nproduction,nandninvestment
A. arenstillninherentlynlocal.
B. arenstillnregionalninnnature.
C. arenslowlynbecomingnglobalized.
D. arenhighlynglobalized.
16. Mostngovernmentsnatnleastntryntonmakenitndifficultnfornpeoplentoncrossntheirnbordersnillegally.nThisnbarrierntonth
enfreenmovementnofnlabornisnannexamplenof
A. informationnasymmetry.
B. excessiventransactionsncosts.
C. racialndiscrimination.
D. anmarketnimperfection.
17. Althoughnthenworldneconomynisnmuchnmorenintegratedntodaynthannwasnthencasen10norn20nyearsnago,nanva
rietynofnbarriersnstillnhampernfreenmovementsnofnpeople,ngoods,nservices,nandncapitalnacrossnnationalnbou
ndaries.nThesenbarriersninclude
A. legalnrestrictions.
B. excessiventransportationncosts.
C. informationnasymmetry.
D. allnofnthenabove
18. ThenJapanesenautomobilencompanynHondandecidedntonestablishnproductionnfacilitiesninnOhio,nmainlynt
o
A. circumventntradenbarriers.
B. reducentransportationncosts.
C. reducentransactionsncosts.
D. bothna)nandnb)
19. Whennindividualninvestorsnbecomenawarenofnoverseasninvestmentnopportunitiesnandnarenwillingntond
iversifyntheirnportfoliosninternationally,
A. theyntradenonenmarketnimperfection,ninformationnasymmetry,nfornanother,nexchangenratenrisk.
B. theynbenefitnfromnannexpandednopportunitynset.
C. theynshouldnnotnbotherntonreadnorntonunderstandnthenprospectus,nsincenit'snprobablynwrittenninnanforeignnla
nguage.
D. theynshouldninvestnonlyninndollarsnorneuros.
20. ThenNestlénCorporation,nanwell-
knownnSwissnMNC,nusedntonissuentwondifferentnclassesnofncommonnstock,nbearernsharesnandnregisterednshar
es,nandnforeignersnwerenallowedntonholdnonly
A. registerednshares.
B. bearernshares.
C. votingnshares.
D. convertiblenshares.
21. Deregulatednfinancialnmarketsnandnheightenedncompetitionninnfinancialnservicesnprovidednannenvironmentnf
ornfinancialninnovationsnthatnresultedninnthenintroductionnofnvariousninstruments.nExamplesnofntheseninnova
tiveninstrumentsninclude
A. currencynfuturesnandnoptions,nforeignnstocknindexnfuturesnandnoptions.
B. multicurrencynbonds.
C. internationalnmutualnfunds,ncountrynfunds,nexchangentradednfunds.
D. allnofnthenabove
22. Nestlé,nanwell-knownnSwissncorporation,
A. hasnbeennanparagonnofnvirtueninnitsnoppositionntonallnformsnofnpoliticalnrisk.
Bnatnonentimenplacednrestrictionsnonnforeignnownershipnofnitsnstock.nWhennitnrelaxednthesenrestrictions,nthe
.n totalnmarketnvaluenofnthenfirmnfell.
Catnonentimenplacednrestrictionsnonnforeignnownershipnofnitsnstock.nWhennitnrelaxednthesenrestrictions,
