FIN 3210 - CH. 10 EXAM QUESTIONS AND
VERIFIED ANSWERS
Generally, MNCs with more foreign costs than foreign revenues will be ___ affected by a
___ foreign currency.
a. favorably; weaker
b. not; stronger
c. not; weaker
d. favorably; stronger - answer favorably; weaker
If an MNC has a net inflow in one currency and a net outflow of about the same amount in
another currency, then the MNCs' transaction exposure is ____ if the two currencies are
____ correlated.
a. high; positively
b. low; negatively
c. high; negatively
d. none of the above - answer high; negatively
When the US dollar strengthens against other currencies,
a. an MNCs US sales will probably decrease
b. an MNC's exports denominated in U.S. dollars will probably increase
c. an MNC's interest owed on foreign funds borrowed will probably increase
d. an MNC's exports denominated in foreign currencies will probably increase
e. all of the above - answer an MNCs US sales will probably decrease
Which of the following is not true regarding economic exposure?
a. the degree of economic exposure will likely be much greater for a firm involved in
international business than for a purely domestic firm
b. in general, depreciation of the firm's local currency causes a decrease in both cash
inflows and outflows
c. even purely domestic firms can be affected by economic exposure
VERIFIED ANSWERS
Generally, MNCs with more foreign costs than foreign revenues will be ___ affected by a
___ foreign currency.
a. favorably; weaker
b. not; stronger
c. not; weaker
d. favorably; stronger - answer favorably; weaker
If an MNC has a net inflow in one currency and a net outflow of about the same amount in
another currency, then the MNCs' transaction exposure is ____ if the two currencies are
____ correlated.
a. high; positively
b. low; negatively
c. high; negatively
d. none of the above - answer high; negatively
When the US dollar strengthens against other currencies,
a. an MNCs US sales will probably decrease
b. an MNC's exports denominated in U.S. dollars will probably increase
c. an MNC's interest owed on foreign funds borrowed will probably increase
d. an MNC's exports denominated in foreign currencies will probably increase
e. all of the above - answer an MNCs US sales will probably decrease
Which of the following is not true regarding economic exposure?
a. the degree of economic exposure will likely be much greater for a firm involved in
international business than for a purely domestic firm
b. in general, depreciation of the firm's local currency causes a decrease in both cash
inflows and outflows
c. even purely domestic firms can be affected by economic exposure
