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978-1259717789 Chapter 1
CHAPTER 1 GLOBALIZATION AND THE MULTINATIONAL FIRM ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Why is it important to study international financial management? Answer: We are now living in a world where all the major economic functions, […]
978-1259717789 Chapter 10
CHAPTER 10 MANAGEMENT OF TRANSLATION EXPOSURE SUGGESTED ANSWERS TO END–OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Explain the difference in the translation process between the monetary/nonmonetary method and the temporal method. Answer: Under the monetary/nonmonetary method, all monetary balance sheet accounts […]
978-1259717789 Chapter 11
CHAPTER 11 INTERNATIONAL BANKING AND MONEY MARKET ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Briefly discuss some of the services that international banks provide their customers and the market place. Answer: International banks can be characterized by […]
978-1259717789 Chapter 12
CHAPTER 12 INTERNATIONAL BOND MARKETS ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Describe the differences between foreign bonds and Eurobonds. Also discuss why Eurobonds make up the lion’s share of the international bond market. Answer: The two […]
978-1259717789 Chapter 13
CHAPTER 13 INTERNATIONAL EQUITY MARKETS ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Exhibit 13.8 presents a listing of major national stock market indexes as displayed daily in the print edition of the Financial Times. At www.ft.com you […]
978-1259717789 Chapter 14
CHAPTER 14 INTEREST RATE AND CURRENCY SWAPS ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Describe the difference between a swap broker and a swap dealer. Answer: A swap broker arranges a swap between two counterparties for a […]
978-1259717789 Chapter 15
CHAPTER 15 INTERNATIONAL PORTFOLIO INVESTMENT ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. What factors are responsible for the recent surge in international portfolio investment (IPI)? Answer: The recent surge in international portfolio investments reflects the globalization of […]
978-1259717789 Chapter 16
CHAPTER 16 FOREIGN DIRECT INVESTMENT AND CROSS-BORDER ACQUISITIONS ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Recently, many foreign firms from both developed and developing countries acquired high– tech U.S. firms. What might have motivated these firms to […]
978-1259717789 Chapter 17
CHAPTER 17 INTERNATIONAL CAPITAL STRUCTURE AND THE COST OF CAPITAL ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Suppose that your firm is operating in a segmented capital market. What actions would you recommend to mitigate the negative […]
978-1259717789 Chapter 18
CHAPTER 18 INTERNATIONAL CAPITAL BUDGETING ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Why is capital budgeting analysis so important to the firm? Answer: The fundamental goal of the financial manager is to maximize shareholder wealth. Capital investments […]
978-1259717789 Chapter 19
CHAPTER 19 MULTINATIONAL CASH MANAGEMENT ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Describe the key factors contributing to effective cash management within a firm. Why is the cash management process more difficult in a MNC? Answer: An […]
978-1259717789 Chapter 2
CHAPTER 2 INTERNATIONAL MONETARY SYSTEM ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Explain Gresham’s Law. Answer: Gresham’s law refers to the phenomenon that bad (abundant) money drives good (scarce) money out of circulation. This kind of phenomenon […]
978-1259717789 Chapter 20
CHAPTER 20 INTERNATIONAL TRADE FINANCE ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Discuss some of the reasons why international trade is more difficult and risky from the exporter’s perspective than is domestic trade. Answer: International trade is […]
978-1259717789 Chapter 21
CHAPTER 21 INTERNATIONAL TAX ENVIRONMENT AND TRANSFER PRICING ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Discuss the twin objectives of taxation. Be sure to define the key words. Answer: There are two basic objectives of taxation that […]
978-1259717789 Chapter 3
CHAPTER 3 BALANCE OF PAYMENTS ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Define balance of payments. Answer: The balance of payments (BOP) can be defined as the statistical record of a country’s international transactions over a certain […]
978-1259717789 Chapter 4
CHAPTER 4 CORPORATE GOVERNANCE AROUND THE WORLD SUGGESTED ANSWERS TO END–OF-CHAPTERQUESTIONS AND PROBLEMS Questions 1. The majority of major corporations are franchised as public corporations. Discuss the key strength and weakness of the ‘public corporation’. When do you think the […]
978-1259717789 Chapter 5
CHAPTER 5 THE MARKET FOR FOREIGN EXCHANGE ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Give a full definition of the market for foreign exchange. Answer: Broadly defined, the foreign exchange (FX) market encompasses the conversion of purchasing […]
978-1259717789 Chapter 6
CHAPTER 6 INTERNATIONAL PARITY RELATIONSHIPS AND FORECASTING FOREIGN EXCHANGE RATES ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Give a full definition of arbitrage. Answer: Arbitrage can be defined as the act of simultaneously buying and selling the […]
978-1259717789 Chapter 7
CHAPTER 7 FUTURES AND OPTIONS ON FOREIGN EXCHANGE ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Explain the basic differences between the operation of a currency forward market and a futures market. Answer: The forward market is an […]
978-1259717789 Chapter 8
CHAPTER 8 MANAGEMENT OF TRANSACTION EXPOSURE ANSWERS & SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. How would you define transaction exposure? How is it different from economic exposure? Answer: Transaction exposure is the sensitivity of realized domestic currency values […]
978-1259717789 Chapter 9
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. CHAPTER 9 MANAGEMENT OF ECONOMIC EXPOSURE ANSWERS & SOLUTIONS TO END OF CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. How would […]
978-1259717789 Test Bank Chapter 1 Part 1
International Financial Management, 8e (Eun) Chapter 1 Globalization and the Multinational Firm 1) What major dimension sets apart international finance from domestic finance? A) Foreign exchange and political risks B) Market imperfections C) Expanded opportunity set D) all of the […]
978-1259717789 Test Bank Chapter 1 Part 2
20 Copyright © 2018 McGraw-Hill Answer: B Explanation: To produce one additional pound of food, it costs Country A 2 yards of textiles (1200/600). Given it only costs Country B 1 yard of textiles (500/500), then Country B has a […]
978-1259717789 Test Bank Chapter 10 Part 1
International Financial Management, 8e (Eun) Chapter 10 Management of Translation Exposure 1) Under the monetary/nonmonetary method, revenue and expense items associated with nonmonetary accounts, such as cost of goods sold and depreciation, are translated at the historical rate associated with […]
978-1259717789 Test Bank Chapter 10 Part 2
47) Financial Accounting Standards Board (FASB) Statements 8 and 52 relate to the translation methods. The following outlines the objectives and descriptions of the two statements. (i) Measure in dollars an enterprise’s assets, liabilities, revenues, or expenses that are denominated […]
978-1259717789 Test Bank Chapter 11 Part 1
International Financial Management, 8e (Eun) Chapter 11 International Banking and Money Market 1) Edge Act banks are not prohibited from owning equity in business corporations, unlike domestic commercial banks. Answer: TRUE Topic: Edge Act Banks Accessibility: Keyboard Navigation 2) An […]
978-1259717789 Test Bank Chapter 11 Part 2
54) In reference to capital requirements, A) bank capital adequacy refers to the amount of equity capital a bank holds as reserves against impaired loans. B) bank capital adequacy refers to the amount of debt capital a bank holds as […]
978-1259717789 Test Bank Chapter 12 Part 1
International Financial Management, 8e (Eun) 1) Eurobonds sold in the United States may not be sold to U.S. citizens. Answer: TRUE Topic: National Security Regulation Accessibility: Keyboard Navigation 2) Domestic bonds account for the largest share of outstanding bonds, equaling […]
978-1259717789 Test Bank Chapter 12 Part 2
54) The floor value of a convertible bond A) is the “straight bond” value. B) is the conversion value. C) is the minimum of the “straight bond” value and the conversion value. D) is the maximum of the “straight bond” […]
978-1259717789 Test Bank Chapter 13 Part 1
International Financial Management, 8e (Eun) Chapter 13 International Equity Markets 1) In a dealer market, the broker takes the trade through the dealer, who participates in trades as a principal by buying and selling the security for his own account. […]
978-1259717789 Test Bank Chapter 13 Part 2
57) A type of non-continuous exchange trading system is crowd trading. A) Unlike a call market in which there is a common price for all trades, several bilateral trades may take place at different prices in crowd trading. B) Unlike […]
978-1259717789 Test Bank Chapter 14 Part 1
International Financial Management, 8e (Eun) Chapter 14 Interest Rate and Currency Swaps 1) The term interest rate swap A) refers to a “single-currency interest rate swap” shortened to “interest rate swap.” B) involves “counterparties” who make a contractual agreement to […]
978-1259717789 Test Bank Chapter 14 Part 2
32) Company X wants to borrow $10,000,000 floating for 5 years; company Y wants to borrow £5,000,000 fixed for 5 years. The exchange rate is $2 = £1 and is not expected to change over the next 5 years. Their […]
978-1259717789 Test Bank Chapter 14 Part 3
76) Consider the situation of firm A and firm B. The current exchange rate is $1.50/€. Firm A is a U.S. MNC and wants to borrow €40 million for 2 years. Firm B is a French MNC and wants to […]
978-1259717789 Test Bank Chapter 15 Part 1
International Financial Management, 8e (Eun) Chapter 15 International Portfolio Investment 1) Under the investment dollar premium system, A) U.K. residents received a premium over the prevailing commercial exchange rate when they sold foreign securities and repatriated the funds to the […]
978-1259717789 Test Bank Chapter 15 Part 2
60) Hedge fund advisors typically receive a “2-plus-twenty” management fee A) meaning 2 percent per year of the assets under management, plus performance fee 20 percent of any capital appreciation. B) meaning 2 percent per year of the assets under […]
978-1259717789 Test Bank Chapter 16 Part 1
1 Copyright © 2018 McGraw-Hill International Financial Management, 8e (Eun) Chapter 16 Foreign Direct Investment and Cross-Border Acquisitions 1) In the early 1980s, Honda, the Japanese automobile company, built an assembly plant in Marysville, Ohio, and began to produce cars […]
978-1259717789 Test Bank Chapter 16 Part 2
57) Which of the following statements is true about product life cycle theory? A) In the early stages of the product life cycle, the demand for the new product is relatively insensitive to the price and thus a pioneering firm […]
978-1259717789 Test Bank Chapter 17 Part 1
International Financial Management, 8e (Eun) Chapter 17 International Capital Structure and the Cost of Capital 1) The cost of capital is A) the minimum rate of return an investment project must generate in order to pay its financing costs. B) […]
978-1259717789 Test Bank Chapter 17 Part 2
56) Compute the debt-to-equity ratio for a firm that has a debt-to-value ratio of 60 percent. A) 1/3 B) 2/5 C) 3/2 D) none of the options Answer: C Explanation: Solve for equity = 3/(3 + X) = 3/5; X […]
978-1259717789 Test Bank Chapter 18 Part 1
International Financial Management, 8e (Eun) Chapter 18 International Capital Budgeting 1) The financial manager’s responsibility involves A) increasing the per share price of the company’s stock at any cost and by any means, ways and fashion that is possible. B) […]
978-1259717789 Test Bank Chapter 18 Part 2
33) Consider a project of the Cornell Haul Moving Company, the timing and size of the incremental after-tax cash flows (for an all-equity firm) are shown below in millions: The firm’s tax rate is 34 percent; the firm’s bonds trade […]
978-1259717789 Test Bank Chapter 18 Part 3
69) Consider the following international investment opportunity. It involves a gold mine that can be opened at a cost, then produces a positive cash flow, but then requires environmental clean-up. The current exchange rate is $1.60 = €1.00. The inflation […]
978-1259717789 Test Bank Chapter 18 Part 4
83) A French firm is considering a one-year investment in the United Kingdom with a pound-denominated rate of return of i£ = 15%. The firm’s local cost of capital is i€ = 10%. The project costs £1,000 and will return […]
978-1259717789 Test Bank Chapter 19 Part 1
International Financial Management, 8e (Eun) Chapter 19 Multinational Cash Management 1) Many of the skills necessary for effective cash management are the same regardless of whether the firm has only domestic operations or if it operates internationally. Answer: FALSE Topic: […]
978-1259717789 Test Bank Chapter 19 Part 2
21 37) For a recent month, the following payments matrix of inter-affiliate cash flows was forecasted: Disbursement From: Receipts by: France Britain U.S. France € 500 € 800 Britain £ 300 £ 400 U.S. $ 1,000 $ 500 The spot […]
978-1259717789 Test Bank Chapter 19 Part 3
60) When engaged in bilateral netting A) total inter-affiliate receipts will always equal total inter-affiliate disbursements. B) we can reduce the number of foreign exchange transactions among an MNC with N affiliates to or less. C) each affiliate nets all […]
978-1259717789 Test Bank Chapter 2 Part 1
International Financial Management, 8e (Eun) Chapter 2 International Monetary System 1) The international monetary system can be defined as the institutional framework within which A) international payments are made. B) movement of capital is accommodated. C) exchange rates among currencies […]
978-1259717789 Test Bank Chapter 2 Part 2
16 Copyright © 2018 McGraw-Hill 53) Gold was officially abandoned as an international reserve asset A) in the January 1976 Jamaica Agreement. B) in the 1971 Smithsonian Agreement. C) in the 1944 Bretton Woods Agreement. D) none of the options […]
978-1259717789 Test Bank Chapter 20 Part 1
International Financial Management, 8e (Eun) Chapter 20 International Trade Finance 1) Forfaiting (forfeiting) meets Islamic finance practices. Answer: TRUE Topic: International Finance in Practice: First Islamic Forfaiting Fund Set Up Accessibility: Keyboard Navigation 2) International trade is more difficult and […]
978-1259717789 Test Bank Chapter 20 Part 2
63) The time from acceptance to maturity on a $2,000,000 banker’s acceptance is 90 days. The importing bank’s acceptance commission is 1.25 percent and the market rate for 90-day B/As is 6 percent. Determine the bond equivalent yield the importer’s […]
978-1259717789 Test Bank Chapter 21 Part 1
International Financial Management, 8e (Eun) Chapter 21 International Tax Environment and Transfer Pricing 1) An income tax is a direct tax. Answer: TRUE Topic: Income Tax Accessibility: Keyboard Navigation 2) The two main objectives of taxation are A) tax neutrality […]
978-1259717789 Test Bank Chapter 21 Part 2
49) Fundamentally, there are two types of tax jurisdiction. A) The worldwide and the territorial B) The residential and the visiting C) The passive and the active income D) The earned and the unearned Answer: A Topic: National Tax Environments […]
978-1259717789 Test Bank Chapter 3 Part 1
International Financial Management, 8e (Eun) Chapter 3 Balance of Payments 1) Over half of all dollar bills in circulation are held outside American’s borders. Answer: TRUE Topic: Balance of Payments Trends in Major Countries Accessibility: Keyboard Navigation 2) The current […]
978-1259717789 Test Bank Chapter 3 Part 2
58) The central bank of the United States is A) the New York Fed. B) the Federal Reserve System. C) the EXIM bank. D) none of the options—the U.S. does not have a central bank. Answer: B Topic: Official Reserve […]
978-1259717789 Test Bank Chapter 4 Part 1
International Financial Management, 8e (Eun) Chapter 4 Corporate Governance Around the World 1) Countries with strong shareholder protection tend to have more valuable stock markets and more companies listed on stock exchanges per capita than countries with weak protection. Answer: […]
978-1259717789 Test Bank Chapter 4 Part 2
53) Accounting transparency A) can only be achieved when managers commit to serving on their own audit committee. B) occurs when the accounting department has translucent cubicles for their workers. C) promises to reduce the information asymmetry between corporate insiders […]
978-1259717789 Test Bank Chapter 5 Part 1
International Financial Management, 8e (Eun) Chapter 5 The Market for Foreign Exchange 1) The world’s largest foreign exchange trading center is A) New York. B) Tokyo. C) London. D) Hong Kong. Answer: C Topic: Function and Structure of the FX […]
978-1259717789 Test Bank Chapter 5 Part 2
67) Restate the following one-, three-, and six-month outright forward American term bid-ask quotes in forward points: S($/SFr) = 0.8500 − 0.8505 F1($/SFr) = 0.8505 − 0.8505 F3($/SFr) = 0.8510 − 0.8520 F6($/SFr) = 0.8515 − 0.8530 A) Forward Point […]
978-1259717789 Test Bank Chapter 6 Part 1
International Financial Management, 8e (Eun) Chapter 6 International Parity Relationships and Forecasting Foreign Exchange Rates 1) An arbitrage is best defined as A) a legal condition imposed by the CFTC. B) the act of simultaneously buying and selling the same […]
978-1259717789 Test Bank Chapter 6 Part 2
42) Forward parity states that A) any forward premium or discount is equal to the expected change in the exchange rate. B) any forward premium or discount is equal to the actual change in the exchange rate. C) the nominal […]
978-1259717789 Test Bank Chapter 7 Part 1
International Financial Management, 8e (Eun) Chapter 7 Futures and Options on Foreign Exchange 1) A put option on $15,000 with a strike price of €10,000 is the same thing as a call option on €10,000 with a strike price of […]
978-1259717789 Test Bank Chapter 7 Part 2
56) Find the hedge ratio for a call option on £10,000 with a strike price of €12,500. The current exchange rate is €1.50/£1.00 and in the next period the exchange rate can increase to €2.40/£ or decrease to €0.9375/€1.00 (i.e. […]
978-1259717789 Test Bank Chapter 8 Part 1
International Financial Management, 8e (Eun) Chapter 8 Management of Transaction Exposure 1) Transaction exposure is defined as A) the sensitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected exchange rate changes. […]
978-1259717789 Test Bank Chapter 8 Part 2
21 Copyright © 2018 McGraw-Hill Answer: C Explanation: 100 contracts = £1,000,000 / £10,000; $2,000,000 = £1,000,000 × $2; Solve the proportion for X: ($2,000,000 / X) = ($1.60 / €1), where X = €1,250,000. Next, €1,250,000 / €10,000 = […]
978-1259717789 Test Bank Chapter 8 Part 3
44) Your firm is a Swiss exporter of bicycles. You have sold an order to a British firm for £1,000,000 worth of bicycles. Payment from the British firm (in pounds sterling) is due in 12 months. Use a money market […]
978-1259717789 Test Bank Chapter 9 Part 1
International Financial Management, 8e (Eun) Chapter 9 Management of Economic Exposure 1) Suppose the U.S. dollar substantially depreciates against the Japanese yen. The change in exchange rate A) can have significant economic consequences for U.S. firms. B) can have significant […]
978-1259717789 Test Bank Chapter 9 Part 2
46) A U.S. firm holds an asset in Great Britain and faces the following scenario: State 1 State 2 State 3 Probability 25% 50% 25% Spot rate $ 2.50 /£ $ 2.00 /£ $ 1.60 /£ P* £ 1,800 £ […]
978-1259717789 Test Bank Chapter 9 Part 3
62) Consider a U.S.-based MNC with a wholly-owned Italian subsidiary. Following a depreciation of the dollar against the euro, which of the following conclusions are correct? A) The cash flow in euro could be altered due an alteration in the […]