TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
TEST BANK for International Financial Management
m m m m m m
9th Edition by Cheol Eun, Bruce Resnick and Tuugi C
m m m m m m m m m
huluun. ISBN-13: 9781260013870
m m
TestmBank Pagem1
,TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
MULTIPLEmCHOICEm-
m Choosemthemonemalternativemthatmbestmcompletesmthemstatementmormanswersmthemquestion.
1) What mmajormdimensionmsetsmapart minternationalmfinancemfrommdomesticmfinance?
A)mForeignmexchangemand mpoliticalmrisks
B)mMarket mimperfections
C)mExpanded mopportunitymset
D)mallmof mthemoptions
2) Anmexample(s)mof mampoliticalmriskmis
A)mexpropriationmof massets.
B)madversemchangeminmtaxmrules.
C)mthemoppositionmpartymbeingmelected.
D)mbothmthemexpropriationmof massetsmand madversemchangesminmtaxmrulesmaremcorrect.
3) Productionmof mgoodsmand mservicesmhasmbecomemglobalized mtomamlargemextent masmamresult mof
A)mnaturalmresourcesmbeingmdepleted minmonemcountrymaftermanother.
B)mskilled mlabormbeingmhighlymmobile.
C)mmultinationalmcorporations'meffortsmtomsourceminputsmand mlocatemproductionmanywherem
wheremcostsmaremlowermand mprofitsmhigher.
D)mcommonmtastesmworldwidemformthemsamemgoodsmand mservices.
4) Recently,mfinancialmmarketsmhavembecomemhighlymintegrated.mThismdevelopment
TestmBank Pagem2
,TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
A)mallowsminvestorsmtomdiversifymtheirmportfoliosminternationally.
B)mallowsmminorityminvestorsmtombuymand msellmstocks.
C)mhasmincreased mthemcost mof mcapitalmformfirms.
D)mnonemof mthemoptions
5)
Japanmhasmexperienced mlargemtrademsurpluses.mJapaneseminvestorsmhavem responded mtomthism
by
A)mliquidatingmtheirmpositionsminmstocksmtombuymdollar-denominated mbonds.
B)minvestingmheavilyminmU.S.mand mothermforeignmfinancialmmarkets.
C)mlobbyingmthemU.S.mgovernment mtomdepreciatemitsmcurrency.
D)mlobbyingmthemJapanesemgovernment mtomallow mthemyenmtomappreciate.
6)
Supposemyourmfirmminvestsm$100,000minmamproject minmItaly.mAt mthemtimemthemexchangemrate
ism$1.25m=m€1.00.mOnemyearmlatermthemexchangemratemismthemsame,mbut mthemItalianmgovernment mhas
m
expropriated myourmfirm'smassetsmpayingmonlym€80,000minmcompensation. mThism ismanmexamplemof
m
A)mexchangemratemrisk.
B)mpoliticalmrisk.
C)mmarket mimperfections.
D)mnonemof mthemoptions,msincem$100,000m=m€80,000m×m$1.25/€1.00.
TestmBank Pagem3
, TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
7)
Supposemyoumstart mwithm$100mand mbuymstockmform£50mwhenmthemexchangemratemism£1m=m$2.
Onemyearmlater,mthemstockmrisesmtom£60.mYoumaremhappymwithmyourm20mpercent mreturnmonmthemstock
m
,mbut mwhenmyoumsellmthemstockmand mexchangemyourm£60mformdollars,myoumonlymget m$45msincemthemp
ound mhasmfallenmtom£1m=m$0.75.mThismlossmof mvaluemismanmexamplemof
A)mexchangemratemrisk.
B)mpoliticalmrisk.
C)mmarket mimperfections.
D)mweaknessminmthemdollar.
8) Supposemthat mGreat mBritainmismammajormexport mmarket mformyourmfirm,mamU.S.-
based mMNC.mIf mthemBritishmpound mdepreciatesmagainst mthemU.S.mdollar,
A)myourmfirmmwillmbemablemtomchargemmorem inmdollarmtermsmwhilemkeeping mpound mpricesm st
able.
B)myourmfirmmmaymbempriced mout mof mthemU.K.mmarket,mtomthemextent mthat myourmdollarmcostsm
staymconstant mand myourmpound mpricesmwillmrise.
C)mtomprotect mU.K.mmarket mshare,myourmfirmmmaymhavemtomcut mthemdollarmpricemof myourmgo
odsmtomkeepmthempound mpricemthemsame.
D)myourmfirmmmaymbempriced mout mof mthemU.K.mmarket,mtomthemextent mthat myourmdollarmcosts
staymconstant mand myourmpound mpricesmwillmrise,mand mtomprotect mU.K.mmarket mshare,myourmfirmmma
m
ymhavemtomcut mthemdollarmpricemof myourmgoodsmtomkeepmthempound mpricemthemsame.
9) SupposemMexicomismammajormexport mmarket mformyourmU.S.-
based mcompanymand mthemMexicanmpesomappreciatesmdrasticallymagainst mthemU.S.mdollar.mThism mea
ns
TestmBank Pagem4
ugimChuluun.
TEST BANK for International Financial Management
m m m m m m
9th Edition by Cheol Eun, Bruce Resnick and Tuugi C
m m m m m m m m m
huluun. ISBN-13: 9781260013870
m m
TestmBank Pagem1
,TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
MULTIPLEmCHOICEm-
m Choosemthemonemalternativemthatmbestmcompletesmthemstatementmormanswersmthemquestion.
1) What mmajormdimensionmsetsmapart minternationalmfinancemfrommdomesticmfinance?
A)mForeignmexchangemand mpoliticalmrisks
B)mMarket mimperfections
C)mExpanded mopportunitymset
D)mallmof mthemoptions
2) Anmexample(s)mof mampoliticalmriskmis
A)mexpropriationmof massets.
B)madversemchangeminmtaxmrules.
C)mthemoppositionmpartymbeingmelected.
D)mbothmthemexpropriationmof massetsmand madversemchangesminmtaxmrulesmaremcorrect.
3) Productionmof mgoodsmand mservicesmhasmbecomemglobalized mtomamlargemextent masmamresult mof
A)mnaturalmresourcesmbeingmdepleted minmonemcountrymaftermanother.
B)mskilled mlabormbeingmhighlymmobile.
C)mmultinationalmcorporations'meffortsmtomsourceminputsmand mlocatemproductionmanywherem
wheremcostsmaremlowermand mprofitsmhigher.
D)mcommonmtastesmworldwidemformthemsamemgoodsmand mservices.
4) Recently,mfinancialmmarketsmhavembecomemhighlymintegrated.mThismdevelopment
TestmBank Pagem2
,TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
A)mallowsminvestorsmtomdiversifymtheirmportfoliosminternationally.
B)mallowsmminorityminvestorsmtombuymand msellmstocks.
C)mhasmincreased mthemcost mof mcapitalmformfirms.
D)mnonemof mthemoptions
5)
Japanmhasmexperienced mlargemtrademsurpluses.mJapaneseminvestorsmhavem responded mtomthism
by
A)mliquidatingmtheirmpositionsminmstocksmtombuymdollar-denominated mbonds.
B)minvestingmheavilyminmU.S.mand mothermforeignmfinancialmmarkets.
C)mlobbyingmthemU.S.mgovernment mtomdepreciatemitsmcurrency.
D)mlobbyingmthemJapanesemgovernment mtomallow mthemyenmtomappreciate.
6)
Supposemyourmfirmminvestsm$100,000minmamproject minmItaly.mAt mthemtimemthemexchangemrate
ism$1.25m=m€1.00.mOnemyearmlatermthemexchangemratemismthemsame,mbut mthemItalianmgovernment mhas
m
expropriated myourmfirm'smassetsmpayingmonlym€80,000minmcompensation. mThism ismanmexamplemof
m
A)mexchangemratemrisk.
B)mpoliticalmrisk.
C)mmarket mimperfections.
D)mnonemof mthemoptions,msincem$100,000m=m€80,000m×m$1.25/€1.00.
TestmBank Pagem3
, TESTmBANKmformInternationalmFinancialmManagementm9thmEditionmbymCheolmEun,mBruce mResnickmandmTu
ugimChuluun.
7)
Supposemyoumstart mwithm$100mand mbuymstockmform£50mwhenmthemexchangemratemism£1m=m$2.
Onemyearmlater,mthemstockmrisesmtom£60.mYoumaremhappymwithmyourm20mpercent mreturnmonmthemstock
m
,mbut mwhenmyoumsellmthemstockmand mexchangemyourm£60mformdollars,myoumonlymget m$45msincemthemp
ound mhasmfallenmtom£1m=m$0.75.mThismlossmof mvaluemismanmexamplemof
A)mexchangemratemrisk.
B)mpoliticalmrisk.
C)mmarket mimperfections.
D)mweaknessminmthemdollar.
8) Supposemthat mGreat mBritainmismammajormexport mmarket mformyourmfirm,mamU.S.-
based mMNC.mIf mthemBritishmpound mdepreciatesmagainst mthemU.S.mdollar,
A)myourmfirmmwillmbemablemtomchargemmorem inmdollarmtermsmwhilemkeeping mpound mpricesm st
able.
B)myourmfirmmmaymbempriced mout mof mthemU.K.mmarket,mtomthemextent mthat myourmdollarmcostsm
staymconstant mand myourmpound mpricesmwillmrise.
C)mtomprotect mU.K.mmarket mshare,myourmfirmmmaymhavemtomcut mthemdollarmpricemof myourmgo
odsmtomkeepmthempound mpricemthemsame.
D)myourmfirmmmaymbempriced mout mof mthemU.K.mmarket,mtomthemextent mthat myourmdollarmcosts
staymconstant mand myourmpound mpricesmwillmrise,mand mtomprotect mU.K.mmarket mshare,myourmfirmmma
m
ymhavemtomcut mthemdollarmpricemof myourmgoodsmtomkeepmthempound mpricemthemsame.
9) SupposemMexicomismammajormexport mmarket mformyourmU.S.-
based mcompanymand mthemMexicanmpesomappreciatesmdrasticallymagainst mthemU.S.mdollar.mThism mea
ns
TestmBank Pagem4
