Question 1

When Country A's currency strengthens against Country B's, citizens of Country A will

Accepted Answer

A)   pay less to buy Country B's products.
B)   pay more to buy Country B's products.
C)   pay more to buy domestically produced products.
D)   not be affected by the change in their currency's value.E) B) and C)
F) A) and B)

Question 2

While shopping in the Mexican market, you find that limes cost 11 pesos each. You remember that back in the U.S., they cost 80 cents each. If the purchasing power parity theory holds, the rate of exchange is

Accepted Answer

A)   13.75 pesos/dollar or 7.3 cents/peso.
B)   80 pesos/dollar or 1.25 cents/peso.
C)   7.3 pesos/dollar or 13.75 cents/peso.
D)   11 pesos/dollar or 0.80 cents/peso.E) B) and D)
F) B) and C)

Question 3

A Multinational corporation can take the form of an exporter, licensing agreement, joint venture and a fully owned foreign subsidiary.

Accepted Answer

A) True 
 B)False

Question 4

"Balance of payments" is a method of keeping the foreign exchange market in equilibrium.

Accepted Answer

A) True 
 B)False

Question 5

A licensing agreement provides a U.S. multinational corporation with a guarantee that it will be able to export the product to the foreign market.

Accepted Answer

A) True 
 B)False

Question 6

An exporter is able to satisfy foreign demand for a product while avoiding long-term investment in that foreign country, although this method is considered riskier than all other alternatives.

Accepted Answer

A) True 
 B)False

Question 7

The Overseas Private Investment Corporation (OPIC)

Accepted Answer

A)   loans money to multinational firms.
B)   does feasibility studies for multinational firms.
C)   sells insurance policies to qualified multinational firms.
D)   sells foreign investments.E) A) and C)
F) B) and D)

Question 8

The purchasing power parity theory states that currency exchange rates tend to vary inversely with their respective purchasing powers in order to provide similar purchasing powers.

Accepted Answer

A) True 
 B)False

Question 9

When a bank issues a "letter of credit," the bank absorbs ALL of the credit risk of the exporter.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is NOT an accusation made against multinational corporations (MNCs)  by foreign countries?

Accepted Answer

A)   MNCs cause instability in their currencies in international money and foreign exchange markets.
B)   MNCs contribute to unemployment and avoid taxes.
C)   MNCs exploit local labor with low wages.
D)   All of these options are accusations made by critics of MNCs.E) A) and C)
F) B) and C) B

Question 11

A loan arrangement in which a parent company reduces its political risk by using an intermediary bank rather than a direct transfer of funds to a subsidiary is called a(n)

Accepted Answer

A)   parallel loan.
B)   Eximbank direct loan.
C)   fronting loan.
D)   Overseas Private Investment Corporation (OPI
C)  .E) A) and B)
F) A) and C)

Question 12

When a multinational corporation's foreign assets and liabilities are exposed to losses and gains due to changing exchange rates, this is called accounting or translation exposure.

Accepted Answer

A) True 
 B)False  True

Question 13

Multinational firms tend to have a lower level of portfolio risk than comparable U.S. firms.

Accepted Answer

A) True 
 B)False

Question 14

When the euro rises and the dollar falls, foreign travel to Europe becomes cheaper for Americans.

Accepted Answer

A) True 
 B)False

Question 15

A portfolio of international stocks in comparison to purely U.S. stocks generally shows

Accepted Answer

A)   a lower percentage risk for a given number of stocks.
B)   higher percentage risk for a given number of stocks.
C)   the same percentage risk for a given number of stocks.
D)   a lower percentage return for a given number of stocks.E) None of the above
F) All of the above

Question 16

The Swiss franc is selling for $0.9412 and the British pound is selling for $1.5119. The cross rate between the franc and the pound (the number of Swiss francs that would buy one British pound)  is approximately:

Accepted Answer

A)   0.161
B)   1.61
C)   0.0322
D)   3.22E) A) and D)
F) All of the above

Question 17

The International Finance Corporation (IFC)  is

Accepted Answer

A)   a unit of the World Bank charged with the responsibility of providing capital to multinational corporations and others involved in international trade.
B)   a regulatory agency for international trade.
C)   a private firm that provides accounts receivable financing to international firms.
D)   a foreign affiliate of 10 major U.S. banks.E) None of the above
F) C) and D)

Question 18

A foreign exchange rate specifies how much a currency is worth in terms of another currency.

Accepted Answer

A) True 
 B)False  True

Question 19

For a U.S. company, foreign business operations are more complex because the

Accepted Answer

A)   host country's economy may be different from the domestic economy.
B)   rules of taxation are different.
C)   structure and operations of financial markets vary.
D)   all of these options are true.E) All of the above
F) None of the above

Question 20

The expected future value of a currency is reflected in its spot rate.

Accepted Answer

A) True 
 B)False

Exam 21: International Financial Management

When Country A's currency strengthens against Country B's, citizens of Country A will

Correct AnswerverifiedShow Answer

While shopping in the Mexican market, you find that limes cost 11 pesos each. You remember that back in the U.S., they cost 80 cents each. If the purchasing power parity theory holds, the rate of exchange is

Correct AnswerverifiedShow Answer

A Multinational corporation can take the form of an exporter, licensing agreement, joint venture and a fully owned foreign subsidiary.

Correct AnswerverifiedShow Answer

"Balance of payments" is a method of keeping the foreign exchange market in equilibrium.

Correct AnswerverifiedShow Answer

A licensing agreement provides a U.S. multinational corporation with a guarantee that it will be able to export the product to the foreign market.

Correct AnswerverifiedShow Answer

An exporter is able to satisfy foreign demand for a product while avoiding long-term investment in that foreign country, although this method is considered riskier than all other alternatives.

Correct AnswerverifiedShow Answer

The Overseas Private Investment Corporation (OPIC)

Correct AnswerverifiedShow Answer

The purchasing power parity theory states that currency exchange rates tend to vary inversely with their respective purchasing powers in order to provide similar purchasing powers.

Correct AnswerverifiedShow Answer

When a bank issues a "letter of credit," the bank absorbs ALL of the credit risk of the exporter.

Correct AnswerverifiedShow Answer

Which of the following is NOT an accusation made against multinational corporations (MNCs) by foreign countries?

Correct AnswerverifiedB

A loan arrangement in which a parent company reduces its political risk by using an intermediary bank rather than a direct transfer of funds to a subsidiary is called a(n)

Correct AnswerverifiedShow Answer

When a multinational corporation's foreign assets and liabilities are exposed to losses and gains due to changing exchange rates, this is called accounting or translation exposure.

Correct AnswerverifiedTrue

Multinational firms tend to have a lower level of portfolio risk than comparable U.S. firms.

Correct AnswerverifiedShow Answer

When the euro rises and the dollar falls, foreign travel to Europe becomes cheaper for Americans.

Correct AnswerverifiedShow Answer

A portfolio of international stocks in comparison to purely U.S. stocks generally shows

Correct AnswerverifiedShow Answer

The Swiss franc is selling for $0.9412 and the British pound is selling for $1.5119. The cross rate between the franc and the pound (the number of Swiss francs that would buy one British pound) is approximately:

Correct AnswerverifiedShow Answer

The International Finance Corporation (IFC) is

Correct AnswerverifiedShow Answer

A foreign exchange rate specifies how much a currency is worth in terms of another currency.

Correct AnswerverifiedTrue

For a U.S. company, foreign business operations are more complex because the

Correct AnswerverifiedShow Answer

The expected future value of a currency is reflected in its spot rate.

Correct AnswerverifiedShow Answer

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B

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True

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