1) more important than he absolute size of a country’s balance-of-payments
disequilibrium
a.is the nature and cause of the disequilibrium
b.is whether it is a trade surplus or deficit
c.is whether the local government is mercantilist or not
d.nothing is more important than he absolute size of a country’s balance-of-payments
disequilibrium
2) one explanation for foreign equity ownership restrictions
a.is to make it difficult or impossible for foreigners to gain control of a domestic
company
b.is to expropriate wealth from domestic shareholders
c.is the arguments in favor of free trade
d.none of the above
3) 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 can charge a relatively high
price
b.it predicts that over time the u.s. switches from an exporting country of new products
to an importing country
c.it has an ‘s” shaped curve when plotting “quantity sold” versus “time”
d.all of the above
4) which of the follow options strategies are consistent in their belief about the future
behavior of the underlying asset price?
a.selling calls and selling puts
b.buying calls and buying puts
c.buying calls and selling puts
d.none of the above
5) 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.consumption and government expenditure and net exports
c.consumption and net exports and government expenditure
d.consumption less imports
6)
the 5-year project requires equipment that costs $100,000. if undertaken, the
shareholders will contribute $20,000 cash and borrow $80,000 at 6% with an
interest-only loan with a maturity of 5 years and annual interest payments. the
equipment will be depreciated straight-line to zero over the 5-year life of the project.
there will be a pre-tax salvage value of $5,000. there are no other start-up costs at year
0. during years 1 through 5, the firm will sell 25,000 units of product at $5; variable
costs are $3; there are no fixed costs.
what is the npv of the project using the apv methodology?
a.$49,613.03
b.$198,469
c.$102,727.55
d.$149,580.12
e.none of the above
7) which of the following is the most disingenuous argument in favor of fdi?
a.shareholder diversification
b.the internalization theory of fdi
c.the promise of synergistic gains
d.vertical integration
8) the firm’s tax rate is 34%. the firm’s pre-tax cost of debt is 8%; the firm’s
debt-to-equity ratio is 3; the risk-free rate is 3%; the beta of the firm’s common stock is
1.5; the market risk premium is 9%. calculate the weighted average cost of capital.
a.33.33%
b.8.09%
c.9.02%
d.16.5%
e.none of the above
9) a corporation that can source its products in one country, sell them in another
country, and raise the funds in a third country
a.is a multinational corporation
b.is a domestic firm if all of the shareholders are from the same country
c.enjoys a built-in hedge against exchange rate risk
d.enjoys a built-in hedge against political risk
10) use the following information to calculate the quality spread differential (qsd):
a.0.50%
b.1.00%
c.1.50%
d.2.00%
11) asprem (1989) found that changes in industrial production, employment, and
imports, the level of interest rates, and an inflation measure explained only a small
portion of the variability of equity returns for 10 european countries, but that
substantially more of the variation was explained by
a.an international market index
b.changes in exchange rates
c.the herfindahl index
d.the 4-firm concentration ratio