International Financial Management 13th Edition

Chapter 1 Multinational Financial Management: An Overview Lecture Outline Managing the MNC How Business Disciplines Are Used to Manage the MNC Agency Problems Management Structure of an MNC Why Firms Pursue International Business Theory of Comparative Advantage Imperfect Markets Theory Product Cycle Theory Methods to Conduct International Business International Trade Licensing Franchising Joint Ventures Acquisitions of Existing Operations Establishing New Foreign Subsidiaries Summary of Methods Valuation Model for an

POINT/COUNTER-POINT: Should an MNC Reduce Its Ethical Standards to Compete Internationally? POINT: Yes. When a U.S.-based MNC competes in some countries, it may encounter some business norms there that are not allowed in the U.S. For example, when competing for a government contract, firms might provide payoffs to the government officials who

23. Valuation of an MNC. Yahoo! has expanded its business by establishing portals in numerous countries, including Argentina, Australia, China, Germany, Ireland, Japan, and the U.K. It has cash outflows associated with the creation and administration of each portal. It also generates cash inflows from selling advertising space on its

Chapter 10 Measuring Exposure to Exchange Rate Fluctuations Lecture Outline Relevance of Exchange Rate Risk Transaction Exposure Estimating Net Cash Flows in Each Currency Transaction Exposure of an MNCs Portfolio Transaction Exposure Based on Vale-at-Risk Economic Exposure Economic Exposure to Local Currency Appreciation Economic Exposure to Local Currency Depreciation Measuring Economic Exposure Translation Exposure Determinants of Translation Exposure Exposure of an MNC's Stock Price

POINT/COUNTER-POINT: Should Investors Care about an MNCs Translation Exposure? POINT: No. The present value of an MNCs cash flows is based on the cash flows that the parent receives. Any impact of the exchange rates on the financial statements is not important unless cash flows are affected. MNCs should focus

Chapter 11 managing Transaction Exposure Lecture Outline Policies for Hedging Transaction Exposure Hedging Most of the Exposure Selective Hedging Hedging Exposure to Payables Forward or Futures Hedge on Payables Money Market Hedge on Payables Call Option Hedge on Payables Comparison of Techniques for Hedging Payables Hedging Receivables Forward or Futures Hedge Money Market Hedge Put Option Hedge Comparison of Techniques for Hedging

POINT/COUNTER-POINT: Should an MNC Risk Overhedging? POINT: Yes. MNCs have some unanticipated transactions that occur without any advance notice. They should attempt to forecast the net cash flows in each currency due to unanticipated transactions based on the previous net cash flows for that currency in a previous period. Even though

29. The Long-term Hedge Dilemma. St. Louis Inc., which relies on exporting, denominates its exports in pesos and receives pesos every month. It expects the peso to weaken over time. St. Louis recognizes the limitation of monthly hedging. It also recognizes that it could remove its transaction exposure by denominating the

Your firm in the U.S. expects to need 1 million pounds in one year to pay for imports. You can use any one of the following strategies to deal with the exchange rate risk: a. unhedged strategy b. money market hedge c. call option hedge Estimate the dollar cash flows you will

Strategy (2) - It can establish a hedge TODAY for ALL future receivables (a one-year forward hedge for receivables in one year, a two-year forward hedge for receivables in two years, and so on). a. Assume that the euro depreciates consistently over the next 10 years. Will strategy 1 result

Chapter 12 Managing Economic Exposure and Translation Exposure Lecture Outline Managing Economic Exposure Assessing Economic Exposure Restructuring to Reduce Economic Exposure Limitations of Restructuring Intended to Reduce Economic Exposure A Case Study on Hedging Economic Exposure Savor Co.s Assessment of Economic Exposure Assessment of Each Units Exposure Identifying the Source of the Units Exposure Possible Strategies to Hedge Economic Exposure Savors Hedging

POINT/COUNTER-POINT: Can an MNC Reduce the Impact of Translation Exposure by Communicating? POINT: Yes. Investors commonly use earnings to derive an MNCs expected future cash flows. Investors do not necessarily recognize how an MNCs translation exposure could distort their estimates of the MNCs future cash flows. Therefore, the MNC could

Solution to Supplemental Case: Madison Co. a. While economic exposure adversely affected the firm's performance in a recent period, it should favorably affect the firm's performance in the future. A weak Canadian dollar (which has been forecasted) would favorably affect Madison, Inc. under the prevailing operational structure. If the structure is

Chapter 13 Direct Foreign Investment Lecture Outline Motives for Direct Foreign Investment (DFI) Revenue-Related Motives Cost-Related Motives Comparing Benefits of DFI Among Countries Measuring an MNC's Benefits of DFI Benefits of International Diversification Diversification Analysis of International Projects Diversification Among Countries Host Government Impact on DFI Incentives to Encourage DFI Barriers to DFI Government-Imposed Conditions to Engage in DFI Assessing Potential DFI A Case Study of

POINT/COUNTER-POINT: Should MNCs Avoid DFI in Countries without Child Labor Laws? POINT: Yes. An MNC should maintain its hiring standards, regardless of what country it is in. Even if a foreign country allows children to work, an MNC should not lower its standards. Although the MNC forgoes the use of

Chapter 14 Multinational Capital Budgeting Lecture Outline Subsidiary versus Parent Perspective Tax Differentials Restrictions on Remitted Earnings Exchange Rate Movements Summary of Factors That Distinguish the Parent Perspective Input for Multinational Capital Budgeting Multinational Capital Budgeting Example Background Analysis Other Factors to Consider Exchange Rate Fluctuations Inflation Financing Arrangement Blocked Funds Uncertain Salvage Value Impact of Project on Prevailing Cash Flows Host Government Incentives Real Options Adjusting Project Assessment for

POINT/COUNTER-POINT Should MNCs Use Forward Rates to Estimate Dollar Cash Flows of Foreign Projects? POINT: Yes. An MNCs parent should use the forward rate for each year in which it will receive net cash flows in a foreign currency. The forward rate is market-determined and serves as a useful forecast for

ANSWER: It should hedge the minimum amount of revenue. If it hedges the minimum, the NPV for either scenario is higher than if it had hedged the maximum amount of revenue. f. Blustream recognizes that it is exposed to exchange rate risk whether it hedges the minimum amount or the

Multinational Capital Budgeting 1 ANSWER: (See spreadsheet attached.) The spreadsheet shows that an annual depreciation of 5 percent of the Thai baht will result in a positive NPV of $5,620,315. Since this is a worst case scenario, Blades should still establish a subsidiary in Thailand (without renewing its agreement

Chapter 15 International Corporate Governance and Control Lecture Outline International Corporate Governance Governance by Board Members Governance by Institutional Investors Governance by Shareholder Activists International Corporate Control Motives for International Acquisitions Trends in International Acquisitions Barriers to International Corporate Control Model for Valuing a Foreign Target Factors Affecting a Target Valuation Target-Specific Factors Country-Specific Factors Example of the Valuation Process International Screening

International Corporate Governance and Control 1 POINT/COUNTER-POINT: Can a Foreign Target Be Assessed Like Any Other Asset? POINT: Yes. The value of a foreign target to an MNC is the present value of the future cash flows to the MNC. The process of estimating a foreign targets value is the same as

23. Impact of Country Perspective on Target Valuation. Targ Co. of the U.S. has been targeted by 3 firms that consider acquiring it: (1) Americo (from the U.S.), Japino (of Japan), and Canzo (of Canada). These 3 firms do not have any other international business, have similar risk levels, and

Chapter 16 Country Risk Analysis Lecture Outline Country Risk Characteristics Political Risk Characteristics Financial Risk Characterisitcs Measuring Country Risk Techniques to Assess Country Risk Deriving a Country Risk Rating Incorporating Country Risk in Capital Budgeting Adjustment of the Discount Rate Adjustment of the Estimated Cash Flows Analysis of Existing Projects Preventing Host Government Takeovers Use a Short-term Horizon Rely on Unique Supplies

Topics to Stimulate Class Discussion 1. How would you rate the country risk of the U.S.? Would your rating change if you lived in a foreign country? Why? 2. Some people say that you cannot separate the political and financial risk of a country. What does this mean? 3. If you use a

20. How Country Risk Affects NPV. In the previous question, assume that instead of adjusting the estimated cash flows of the project, Monk had decided to adjust the discount rate from 12 percent to 17 percent. Reevaluate the NPV of the projects expected scenario using this adjusted discount rate. ANSWER: Year 0 Year

Chapter 17 Multinational Cost of Capital and Capital Structure Lecture Outline Components of Capital Retained Earnings Sources of Debt External Sources of Equity The MNC's Capital Structure Decision Influence of Corporate Characteristics Influence of Host Country Characteristics Response to Changing Country Characteristics Subsidiary Versus Parent Capital Structure Decisions Impact of Increased Subsidiary Debt Financing Impact of Reduced Subsidiary Debt

POINT/COUNTER-POINT: Should the Reduced Tax Rate on Dividends Affect an MNCs Capital Structure? POINT: No. The change in the tax law reduces the taxes that investors pay on dividends. It does not change the taxes paid by the MNC. Thus, it should not affect the capital structure of the MNC.

23. Financing with Foreign Equity. Orlando Co. has its U.S. business funded in dollars with a capital structure of 60% debt and 40% equity. It has its Thailand business funded in Thai baht with a capital structure of 50% debt and 50% equity. The corporate tax rate on U.S. earnings

Chapter 18 Long-Term Debt Financing Lecture Outline Debt Denomination Decision of Foreign Subsidiaries Foreign Subsidiary Borrows Its Local Currency Foreign Subsidiary Borrows Dollars Debt Denomination Analysis: A Case Study Identifying Debt Denomination Alternatives Analyzing Debt Denomination Alternatives Estimating the Cost of Financing How Currency Swaps and Parallel Loans Facilitate Financing Using Currency Swaps Using Parallel Loans Debt Maturity Decision Assessment of

Topics to Stimulate Class Discussion 1. Why would U.S. firms consider issuing bonds denominated in a foreign currency? 2. What are the desirable characteristics related to a currencys interest rate (high or low) and value (strong or weak) that would make the currency attractive from a borrowers perspective? POINT/COUNTER-POINT: Will Currency Swaps Result

Solution to Continuing Case Problem: Blades, Inc. 1. Given that Blades expects to use the cash flows generated by the Thai subsidiary to pay the interest and principal of the notes, would the effective financing cost of the baht-denominated notes be affected by exchange rate movements? Would the effective financing cost of

Chapter 19 Financing International Trade Lecture Outline Payment Methods for International Trade Prepayment Letters of Credit Drafts Consignment Open Account Impact of the Credit Crisis on Payment Methods Trade Finance Methods Accounts Receivable Financing Factoring Letters of Credit Bankers Acceptances Medium-Term Capital Goods Financing (Forfaiting) Countertrade Agencies that Motivate International Trade Export-Import Bank of the U.S. Private Export Funding Corporation (PEFCO) Overseas Private Investment Corporation (OPIC) Chapter Theme This chapter first suggests

Topics to Stimulate Class Discussion 1. Assume that you receive a call from an old friend who has set up a computer parts store. He says that he plans to begin exporting these parts soon. What potential complications should he consider? 2. Why do exporters sometimes sell off their bankers acceptances? Would

Chapter 2 International Flow of Funds Lecture Outline Balance of Payments Current Account Financial Account Capital Account Growth in International Trade Events That Increased Trade Volume Impact of Outsourcing on Trade Trade Volume Among Countries Trend in U.S.Balance of Trade Factors Affecting International Trade Flows Cost of Labor Inflation National Income Credit Conditions Government Policies Exchange Rates Interaction of Factors International Capital Flows Factors Affecting Direct Foreign Investment Factors Affecting International Portfolio

POINT/COUNTER-POINT: Should Trade Restrictions be Used to Influence Human Rights Issues? POINT: Yes. Some countries do not protect human rights in the same manner as the U.S. At times, the U.S. should threaten to restrict U.S. imports from or investment in a country if it does not correct human rights violations. The

Chapter 20 Short-Term Financing Lecture Outline Sources of Foreign Financing Internal Short-term Financing External Short-term Financing Access to Funding During a Credit Crisis Financing with a Foreign Currency Motivation for Financing with a Foreign Currency Potential Cost Savings from Financing with a Foreign Currency Risk of Financing with a Foreign Currency Hedging the Foreign Currency Borrowed Reliance on the Forward Rate for

Topics to Stimulate Class Discussion 1. If a firm consistently exports to a country with low interest rates and needs to consistently borrow funds, explain how it could coordinate its invoicing and financing to reduce its financing costs. 2. What is the risk of borrowing a low interest rate currency? 3. Assume that

Chapter 21 International Cash Management Lecture Outline Multinational Working Capital Management Subsidiary Expenses Subsidiary Revenue Subsidiary Dividend Payments Subsidiary Liquidity Management Centralized Cash Management Accommodating Cash Shortages Optimizing Cash Flows Accelerating Cash Inflows Minimizing Currency Conversion Costs Managing Blocked Funds Managing Intersubsidiary Cash Transfers Complications in Optimizing Cash Flows Investing Excess Cash Benefits from Investing in a Foreign Currency Risk f Investing in a Foreign Currency Hedging

Topics to Stimulate Class Discussion 1. Should international cash management be conducted at the subsidiary level or at the centralized level? Elaborate. 2. What is the use of netting to an MNC? 3. How can a firm deal with blocked funds? 4. Assume that as a treasurer of a U.S. corporation, you believe that

Currency Spot Exchange Rate Forecasted Annual Percentage Change in Exchange Rates Australian dollar $.70 4% Canadian dollar .80 2 New Zealand dollar .60 +3 Japanese yen .008 0 1. Determine the investment portfolio composition for Kents eastern branch that would maximize the expected effective yield, while satisfying the restriction imposed by the parent. When accounting for the interest rate

ANSWER: a. You should be concerned about your exposure, because you can not assume that the inflation rate in Mexico would perfectly offset the depreciation of the Mexican peso. In addition, even if the inflation rate in Mexico perfectly offsets the depreciation of the peso,that does not guarantee that your business

Chapter 3 International Financial Markets Lecture Outline Foreign Exchange Market History of Foreign Exchange Foreign Exchange Transactions Foreign Exchange Quotations Interpreting Foreign Exchange Quotations Currency Derivatives International Money Market European and Asian Markets Money Market Interest Rates Among Currencies Risk Among Money Market Securities International Credit Market Syndicated Loans in the Credit Market Bank Regulations in the Credit Market Impact of

POINT/COUNTER-POINT: Should Firms That Go Public Engage in International Offerings? POINT: Yes. When a U.S. firm issues stock to the public for the first time in an initial public offering (IPO), it is naturally concerned about whether it can place all of its shares at a reasonable price. It will be

Chapter 4 Exchange Rate Determination Lecture Outline Measuring Exchange Rate Movements Exchange Rate Equilibrium Demand for a Currency Supply of a Currency for Sale Equilibrium Exchange Rate Change in the Equilibrium Exchange Rate Factors that Influence Exchange Rates Relative Inflation Rates Relative Interest Rates Relative Income Levels Government Controls Expectations Interaction of Factors Influence of Factors Across Multiple Currency Markets Impact of Liquidity on Exchange Rate Adjustments Movements

POINT/COUNTER-POINT: How Can Persistently Weak Currencies Be Stabilized? POINT: The currencies of some Latin American countries depreciate against the U.S. dollar on a consistent basis. The governments of these countries need to attract more capital flows by raising interest rates and making their currencies more attractive. They also need to insure

22. Relative Importance of Factors Affecting Exchange Rate Risk. Assume that the level of capital flows between the U.S. and the country of Krendo is negligible (close to zero) and will continue to be negligible. There is a substantial amount of trade between the U.S. and the country of Krendo and

Chapter 5 Currency Derivatives Lecture Outline Forward Market How MNCs Use Forward Contracts Bank Quotations on Forward Rates Premium or Discount on Forward Rate Offsetting a Forward Contract Using Forward Contracts for Swap Transactions Non-Deliverable Forward Contracts Currency Futures Market Contract Specifications Trading Currency Futures Credit Risk of Currency Futures Contracts Comparing Currency Futures Contracts to Forward Contracts How MNCs Use Currency Futures Contracts Speculation with

POINT/COUNTER-POINT: Should Speculators Use Currency Futures or Options? POINT: Speculators should use currency futures because they can avoid a substantial premium. To the extent that they are willing to speculate, they must have confidence in their expectations. If they have sufficient confidence in their expectations, they should bet on their expectations

27. Currency Straddles. Reska, Inc., has constructed a long euro straddle. A call option on euros with an exercise price of $1.10 has a premium of $.025 per unit. A euro put option has a premium of $.017 per unit. Some possible euro values at option expiration are shown in the

37. Bullspreads and Bearspreads. Two British pound () put options are available with exercise prices of $1.60 and $1.62. The premiums associated with these options are $.03 and $.04 per unit, respectively. (See Appendix B in this chapter.) a. Describe how a bullspread can be constructed using these put options.

Chapter 6 Government Influence on Exchange Rates Lecture Outline Exchange Rate Systems Fixed Exchange Rate System Freely Floating Exchange Rate System Managed Float Exchange Rate System Pegged Exchange Rate System Dollarization Black Market for Currencies A Single European Currency Impact on Eurozone Monetary Policy Impact on Firms in the Eurozone Impact on Financial Flows in the Eurozone Impact f Eurozone Country Crisis on other

POINT/COUNTER-POINT: Should China Be Forced to Alter the Value of Its Currency? POINT: U.S. politicians frequently suggest that China needs to increase the value of the Chinese yuan against the U.S. dollar, even since China has allowed the yuan to float (within boundaries). The U.S. politicians claim that the yuan is

27. Intervention and Pegged Exchange Rates. Interest rate parity exists and will continue to exist. The one-year interest rate in the U.S. and in the eurozone is 6% and will continue to be 6%. Assume that the country of Latvia's currency (called the Lat) is presently pegged to the euro

Chapter 7 International Arbitrage and Interest Rate Parity Lecture Outline Locattional Arbitrage Gains from Locational Arbitrage Realignment Due to Locational Arbitrage Covered Interest Arbitrage Comparison of Arbitrage Effects Triangular Arbitrage Gains from Triangular Arbitrage Realignment due to Triangular Arbitrage Covered Interest Arbitrage Steps Involved in Covered Interest Arbitrage Realignment Due to Covered Interest Arbitrage Arbitrage Example When Accounting for Spreads Covered Interest Arbitrage by Non-U.S.

POINT/COUNTER-POINT: Does Arbitrage Destabilize Foreign Exchange Markets? POINT: Yes. Large financial institutions have the technology to recognize when one participant in the foreign exchange market is trying to sell a currency for a higher price than another participant. They also recognize when the forward rate does not properly reflect the interest

Convert yen to direct exchange rate. Yen = 1/125 = $.008Cross-rate now:Peso =.$25/$.008 = 31.25 yenCross rate last year:Peso = $.30/$.01 = 30 yenChange = (31.25 - 30) / 30 = +4.17% Convert yen to direct exchange rate. Yen = 1/125 = $.008Cross-rate now:Peso =.$25/$.008 = 31.25 yenCross rate last

Chapter 8 Relationships Among Inflation, Interest Rates, and Exchange Rates Lecture Outline Purchasing Power Parity (PPP) Interpretations of PPP Rationale Behind PPP Theory Derivation of PPP Using PPP to Estimate Exchange Rate Effects Graphic Analysis of PPP Testing the PPP Theory Does Purchasing Power Parity Exist? International Fisher Effect (IFE) Deriving a Countrys Inflation Rate Estimating the Expected Exchange Rate Movement Implications of the

POINT/COUNTER-POINT: Does PPP Eliminate Concerns about Long-Term Exchange Rate Risk? POINT: Yes. Studies have shown that exchange rate movements are related to inflation differentials in the long run. Based on PPP, the currency of a high-inflation country will depreciate against the dollar. A subsidiary in that country should generate inflated revenue

. ANSWER: SF spot rate in $ = 1.80 .3 = $.54. Expected % change in SF in one year = (1.01)/(1.05) 1 = 3.8%Expected spot rate of SF in one year = $.54 (1 .038) = $.5194 ANSWER: SF spot rate in $ = 1.80 .3 = $.54. Expected %

Chapter 9 Forecasting Exchange Rates Lecture Outline Why Firms Forecast Exchange Rates Forecasting Techniques Technical Forecasting Fundamental Forecasting Market-Based Forecasting Mixed Forecasting Assessment of Forecast Performance Measurement of Forecast Error Forecast Errors Among Time Horizons Forecast Errors over Time Periods Forecast Errors Among Currencies Comparing Forecast Errors AmongForecast Techniques Graphic Evaluation of Forecast Bias Statistical Test of Forecast Bias Shifts in Forecast Bias Over

POINT/COUNTER-POINT: Which Exchange Rate Forecast Technique Should MNCs Use? POINT: Use the spot rate to forecast. When a U.S.-based MNC firm conducts financial budgeting, it must estimate the values of its foreign currency cash flows that will be received by the parent. Since it is well documented that firms can not

23. Forecasting Latin American Currencies. The value of each Latin American currency relative to the dollar is dictated by supply and demand conditions between that currency and the dollar. The values of Latin American currencies have generally declined substantially against the dollar over time. Most of these countries have high

Chapter 01: Multinational Financial Management: An Overview Copyright Cengage Learning. Powered by Cognero. Page 12 Copyright Cengage Learning. Powered by Cognero. Page 12 Copyright Cengage Learning. Powered by Cognero. Page 12 ANSWER: d DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.01.03 NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03 STATE STANDARDS: United

Chapter 01: Multinational Financial Management: An Overview Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. The commonly accepted goal of an MNC is to: a. maximize short-term earnings. b.

Chapter 10: Measuring Exposure to Exchange Rate Fluctuations Copyright Cengage Learning. Powered by Cognero. Page 14 Copyright Cengage Learning. Powered by Cognero. Page 14 Copyright Cengage Learning. Powered by Cognero. Page 14 ANSWER: b POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: INFM.MADU.15.10.02 NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03 STATE

Chapter 10: Measuring Exposure to Exchange Rate Fluctuations Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Translation exposure reflects: a. the exposure of a firm's international transactions to exchange rate

Chapter 11: Managing Transaction Exposure days. 4. Repay the U.S. loan in 30 days, plus interest; the amount owed is $1,000,830 (computed as $995,851 [1 + (.06 30/360)]). POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: INFM.MADU.15.11.02 NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States - OH - DISC.INFM.MADU.15.10

Chapter 11: Managing Transaction Exposure Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Assume zero transaction costs. If the 90-day forward rate of the euro is an accurate estimate of the

Chapter 12: Managing Economic Exposure and Translation Exposure Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Depreciation of the euro relative to the U.S. dollar will cause a U.S.-based MNCs reported

Chapter 13: Direct Foreign Investment Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following purchases does not represent direct foreign investment? a. machinery to be used in

Chapter 14: Multinational Capital Budgeting Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. If a U.S. parent is setting up a French subsidiary, and funds from the subsidiary will be periodically

Chapter 15: International Corporate Governance and Control Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. International governance is achieved by all of the following except: a. poison pills. b.

Chapter 15: International Corporate Governance and Control Copyright Cengage Learning. Powered by Cognero. Page 12 Copyright Cengage Learning. Powered by Cognero. Page 12 Copyright Cengage Learning. Powered by Cognero. Page 12 DIFFICULTY: Moderate LEARNING OBJECTIVES: INFM.MADU.15.15.06 NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States - OH

Chapter 16: Country Risk Analysis Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. A macro-assessment of country risk: a. is adjusted for the particular business of the firm involved.

Chapter 17: Multinational Cost of Capital and Capital Structure Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. An argument for an MNC to have a debt-intensive capital structure is that:

Chapter 18: Long-Term Debt Financing Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. If an MNC finances with a currency different from its invoice currency, it would prefer that the loan

Chapter 19: Financing International Trade Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following is a reason why commercial banks may facilitate international trade? a. The exporter

Chapter 02: International Flow of Funds Copyright Cengage Learning. Powered by Cognero. Page 12 Copyright Cengage Learning. Powered by Cognero. Page 12 Copyright Cengage Learning. Powered by Cognero. Page 12 38. The value of financial assets transferred across country borders by people who move to a different

Chapter 02: International Flow of Funds Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Recently, the U.S. experienced an annual balance of trade representing a ____. a. large surplus (exceeding

Chapter 20: Short-Term Financing Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. MNCs may be able to lock in a lower cost by financing in a low-interest rate foreign currency if

Chapter 21: International Cash Management Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. The Mexican one-year interest rate is 9 percent, while the U.S. one-year interest rate is 3 percent. Assume

Chapter 03: International Financial Markets Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its

Chapter 03: International Financial Markets Copyright Cengage Learning. Powered by Cognero. Page 16 Copyright Cengage Learning. Powered by Cognero. Page 16 Copyright Cengage Learning. Powered by Cognero. Page 16 a. 48.90 b. 146.70 c. 55.21 d. none of the above ANSWER: b RATIONALE: 3

Chapter 04: Exchange Rate Determination Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian dollar was

Chapter 05: Currency Derivatives Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Kalons, Inc. is a U.S.-based MNC that frequently imports raw materials from Canada. Kalons is typically invoiced for these

Chapter 05: Currency Derivatives Copyright Cengage Learning. Powered by Cognero. Page 36 Copyright Cengage Learning. Powered by Cognero. Page 36 Copyright Cengage Learning. Powered by Cognero. Page 36 of this option expiration is expected to be $1.51. Speculators could profit by: a. writing a put option.

Chapter 05: Currency Derivatives Copyright Cengage Learning. Powered by Cognero. Page 21 Copyright Cengage Learning. Powered by Cognero. Page 21 Copyright Cengage Learning. Powered by Cognero. Page 21 b. The currency options offered by commercial banks are more liquid and have a smaller bid/ask spread than the

Chapter 06: Government Influence on Exchange Rates Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. To force the value of the pound to appreciate against the dollar, the Federal Reserve should:

Chapter 06: Government Influence on Exchange Rates Copyright Cengage Learning. Powered by Cognero. Page 18 Copyright Cengage Learning. Powered by Cognero. Page 18 Copyright Cengage Learning. Powered by Cognero. Page 18 KEYWORDS: Bloom's: Knowledge 59. The Smithsonian Agreement was an agreement to allow currencies of major

Chapter 07: International Arbitrage and Interest Rate Parity = 294,444.40 $1.08 = $318,109.10 DIFFICULTY: Moderate LEARNING OBJECTIVES: INFM.MADU.15.07.01 NATIONAL STANDARDS: United States - BUSPROG.INFM.MADU.15.03 STATE STANDARDS: United States - OH - DISC.INFM.MADU.15.02 KEYWORDS: Bloom's: Application = 294,444.40 $1.08 = $318,109.10 DIFFICULTY: Moderate LEARNING OBJECTIVES: INFM.MADU.15.07.01 NATIONAL STANDARDS: United

Chapter 07: International Arbitrage and Interest Rate Parity Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Due to ____, market forces should realign the relationship between the interest rate differential of

Chapter 08: Relationships among Inflation, Interest Rates, and Exchange Rates Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Assume a two-country world: Country A and Country B. Which of the following

Chapter 09: Forecasting Exchange Rates Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 Copyright Cengage Learning. Powered by Cognero. Page 1 1. Which of the following forecasting techniques would be most likely to use today's forward exchange rate to forecast

Chapter 09: Forecasting Exchange Rates Copyright Cengage Learning. Powered by Cognero. Page 15 Copyright Cengage Learning. Powered by Cognero. Page 15 Copyright Cengage Learning. Powered by Cognero. Page 15 the same amount as the forward premium or discount, respectively. a. True b. False ANSWER: a POINTS: