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1. Examples of opportunities for multin...

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1. Examples of opportunities for multinationals in Europe include: a. the Single European Act. b. the removal of the Berlin Wall. c. privatization. d. All of the answers are correct. --- 2. Which of the following may affect international trade flows? a.inflation b. national income c. government restrictions d. All of the answers are correct. --- 3.Most exchange rates are quoted in direct terms from the U.S. perspective. True or flase --- 4. The demand curve for foreign currency is upward sloping, because when the foreign currency is worth more, more people will want to buy it. True or flase --- 5. Because exchange rates are always in equilibrium, companies cannot be negatively affected by exchange rate movements. True or false --- 6. A conditional option is an option that cancels the premium if a certain trigger is reached. True or false --- 7. If a currency is fixed, then governments: a. can indefinitely ignore the market value of the currency. b. must intervene in the foreign exchange markets so that the currency does not get too out of line with value determined by supply and demand. c. can use interest rates as a tool of monetary policy. d. None of the answers are correct. --- 8. Locational arbitrage refers to: a. making a riskless profit off of mispricing in spot exchange rates between two banks. b. making a riskless profit off of exploiting mispricing between the forward and spot markets. c. making a riskless profit off of mispricing of crossrates. d. None of the answers are correct. --- 9. If U.S. nominal interest rates are lower than Canadian nominal interest rates, and the dollar does not rise as compared to the Canadian dollar enough for the International Fisher Effect to hold, who has benefited? a. people who borrowed in the U.S. b. people who invested in Canada c. people who both borrowed in the U.S. and invested in Canada d.All of the answers are correct. --- 10. The evidence from empirical tests suggest that both the International Fisher Effect and purchasing power parity hold. True or false --- 11.Volatility forecasting, combined with technical analysis, was not able to forecast the decline in currencies during the southeast Asian currency crisis. True or false --- 12. The primary purpose of hedging is to reduce uncertainty. True or false --- 13. Futures contracts are private deals between you and the bank establishing a price for future delivery of foreign currency. True or false --- 14. Which of the following must the firm address when making a restructuring decision? a. Whether the firm should increase or reduce its dependency on foreign suppliers. b.Whether the firm should increase or reduce sales in new or existing foreign markets. c.Whether the firm should increase or decrease its level of debt denominated in foreign currency. d.All of the answers are correct. --- 15. A firm has sales in foreign currency. If the foreign currency has a greater impact on cash inflows than on cash outflows, the firm should: a. reduce foreign supply orders. b. reduce foreign sales. c. restructure debt to reduce debt payments in foreign currency. d. All of the answers are correct. --- 16. Which of the following are cost-related motives for direct foreign investment? a. entering profitable markets b. using foreign technology and raw materials c. reacting to trade restrictions d. All of the answers are correct. --- 17. Which of the following statements are true? a. If a parent finances an international project with its own retained earnings, it will be less exposed to exchange rate changes than if a foreign subsidiary finances the project. b. If a subsidiary finances a foreign project with retained earnings, the parent will be less exposed to exchange rate changes than if the parent financed the project. c. If a subsidiary finances a foreign project with retained earnings, the parent will be more exposed to exchange rate changes than if the parent financed the project. d.None of the answers are correct. --- 18. Firms use the NPV model to value foreign acquisition targets. True or false --- 19. Which country had the best country risk rating as of 2000? a. the United States b. Canada c. Portugal d. Netherlands --- 20. the use of debt involves a tradeoff between the tax deductibility of interest payments and the risk of bankruptcy. True or false --- 21. Which of the following is true? a. A firm could reduce its cost of capital by increasing the amount of foreign sales, which could reduce its stock beta. b. If projects of an MNC exhibit lower betas than projects of purely domestic firms, the required rate of return on domestic projects will be lower than foreign projects. c. MNCs never consider unsystematic project risk to be relevant. d. All of the answers are correct. --- 22. Parallel loans are transactions where a firm and its counterparty make simultaneous loans that are later reversed. True or false --- 23. Countertrade is: a. the purchase of financial obligations without recourse to the exporter. b. an arrangement where sale is linked to the purchase or exchange of goods from the importer's country. c.limited to transactions where currency is not used as a medium of exchange. d. None of the answers are correct. --- 24. If the cost of borrowing in a foreign market is lower than predicted by the international parity conditions, the firm should borrow in a foreign country. True or false --- 25. Accelerating cash flows allows the firm to get money where it is needed faster. True or false

 

Paper#2864 | Written in 18-Jul-2015

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