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consumption, production, investment, and financing, are highly globalized. It is thus essential for financial managers to fully understand vital international dimensions of financial management. This global shift is in marked contrast to a situation that existed when the authors of […]

Version 1 1 Student name:__________ 1) International banks are different from domestic banks in what way(s)? A) International banks can arrange trade financing. B) International banks can arrange for foreign exchange transactions. C) International banks can assist their clients in […]

Version 1 1 Student name:__________ 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 options 2) An example(s) of a political […]

Version 1 1 Student name:__________ 1) Translation exposure refers to A) accounting exposure. B) the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. C) the change in the value of […]

and denominated in that nation’s currency. A Eurobond issue is one denominated in a particular currency, but sold to investors in national capital markets other than the country which issues the denominating currency. Eurobonds make up over 80 percent of […]

Version 1 1 Student name:__________ 1) Domestic bonds account for the largest share of outstanding bonds, equaling approximately what percent of the total? A) 78 percent B) 45 percent C) 25 percent D) 15 percent 2) A “foreign bond” issue […]

Version 1 1 Student name:__________ 1) The sale of new common stock by corporations to initial investors occurs in A) the primary market. B) the secondary market. C) the OTC market. D) the dealer market. 2) The sale of previously […]

Version 1 1 Student name:__________ 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 exchange cash flows at periodic intervals. C) […]

Version 1 1 Student name:__________ 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 U.K. B) U.K. residents had […]

Version 1 1 Student name:__________ 1) Under a 1981 Voluntary Restraint Agreement Japanese automobile manufacturers were not allowed to increase their exports to the U.S. market. As a result A) they exited the market. B) Honda was motivated to circumvent […]

Answer: If a stock becomes internationally tradable upon overseas listing, the required return on the stock is likely to go down because the shareholder base tends to be expanded across countries and the stock will be priced according to the […]

Version 1 1 Student name:__________ 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) the minimum rate of return an investment project must generate […]

Version 1 1 Student name:__________ 1) Capital budgeting analysis is very important, because it A) involves, usually expensive, investments in capital assets. B) has to do with the productive capacity of a firm. C) will determine how competitive and profitable […]

Version 1 1 Student name:__________ 1) Efficient cash management techniques can A) reduce the investment in cash balances and foreign exchange transaction expenses. B) provide for maximum return from the investment of excess cash. C) result in borrowing at lowest […]

Version 1 1 Student name:__________ 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 are determined. D) all of […]

© 2021 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole […]

Answer: The three basic documents necessary to conduct a typical foreign commerce trade are: letter of credit, time draft, and a bill of lading. A letter of credit (L/C) is a guarantee from the importer’s bank that it will act […]

Version 1 1 Student name:__________ 1) International trade is more difficult and riskier than domestic trade from the exporter’s perspective because A) the exporter may not be familiar with the buyer, and thus not know if the importer is a […]

International Financial Management neutrality is determined by three criteria. Capital-export neutrality is the criterion that an ideal tax should be effective in raising revenue for the government and not have any negative effects on the economic decision making process of […]

Version 1 1 Student name:__________ 1) The two main objectives of taxation are A) tax neutrality and tax equity. B) complexity and revenue. C) social engineering and tax equity. D) progressive taxation and tax neutrality. 2) The three basic types […]

Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. provides detailed information about the supply and demand of the country’s currency. Second, BOP data can be used to evaluate […]

Version 1 1 Student name:__________ 1) The current account balance, which is the difference between a country’s exports and imports, is a component of the country’s GNP. Other components of GNP include A) consumption and investment and government expenditure. B) […]

© 2021 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole […]

Version 1 1 Student name:__________ 1) Corporate governance can be defined as A) the economic, legal, and institutional framework in which corporate control and cash flow rights are distributed among shareholders, managers and other stakeholders of the company. B) the […]

Version 1 1 Student name:__________ 1) The world’s largest foreign exchange trading center is A) New York. B) Tokyo. C) London. D) Hong Kong. 2) On average, worldwide daily trading of foreign exchange is closest to A) $100 million. B) […]

Answer: The forward exchange rate will be an unbiased predictor of the future spot rate if (i) the forward risk premium is insignificant and (ii) foreign exchange markets are informationally efficient. Copyright © 2021 McGraw-Hill Education. All rights reserved. No […]

Version 1 1 Student name:__________ 1) The law of one price (LOP) is referring to A) a legal condition imposed by the U.S. Commodity Futures Trading Commission. B) the same or equivalent things trading at the same price across different […]

Version 1 1 Student name:__________ 1) A CME contract on €125,000 with September delivery A) is an example of a forward contract. B) is an example of a futures contract. C) is an example of a put option. D) is […]

Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand, money market hedge is achieved by borrowing or lending the present value of foreign currency receivables […]

Version 1 1 Student name:__________ 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. B) the extent to which the […]

Answer: Exposure to currency risk can be appropriately measured by the sensitivity of the firm’s future cash flows and the market value to random changes in exchange rates. Statistically, this sensitivity can be estimated by the regression coefficient. Thus, exposure […]

Version 1 1 Student name:__________ 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. firmsonly. B) can have significant economic consequences for Japanese firmsonly. C) […]