1) implementing capital import neutrality means that
a.a sovereign government follows the taxation policies of foreign tax authorities on the
foreign-source income of its resident mncs
b.the tax burden a host country imposes on the foreign subsidiary of a mnc should be
the same regardless of the country in which the mnc is incorporated
c.the tax burden a host country imposes on the foreign subsidiary of a mnc should be
the same as that placed on domestic firms
d.all of the above
2) 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 and the
public
d.none of the above
3) the european stock exchange, comparable in volume to the nyse
a.is located in milan
b.is located in london
c.is located in frankfurt
d.none of the above
4) the “j-curve effect”
a.happens most of the time, in the short run
b.actually only occurs in about 40 percent of the cases according to a study by sebastian
edwards
c.is a long-run phenomenon, not a short-run one
d.none of the above
5) one enduring truth of banking is that
a.for some reason, bankers always seem willing to lend huge amounts to borrowers with
a limited potential to repay
b.credit ratings work, but only in the aggregate
c.when liquidity dries up, bankers are typically able to ride out the storm by buying up
other investors debt at pennies on the dollar, holding it until the crisis is over, and then
selling at a huge profit
d.none of the above
6) euro-medium term notes
a.are typically fixed-rate corporate notes issued with maturities ranging from less than a
year to about ten years
b.are typically fixed-rate corporate notes issued with maturities ranging from three
years to about ten years
c.are sold just like bonds in the primary market
d.none of the above
7) the foreign tax credit method followed by the united states is
a.to grant the parent firm credit against its u.s. tax liability for taxes paid to foreign tax
authorities on foreign-source income
b.in place for the purpose of avoiding double taxation
c.both a and b
d.none of the above
8) eurocredits feature rollover pricing.
a.rollover pricing was created on eurocredits so that eurobanks do not end up paying
more on eurocurrency time deposits than they earn from the loans
b.because of the rollover pricing feature, a eurocredit may be viewed as a series of
shorter-term loans, where at the end of each time period (generally three or six months),
the loan is rolled over and the base lending rate is repriced to current libor over the next
time interval of the loan
c.the lending rate on these eurocredits is stated as libor + x percent, where x is the
lending margin charged depending upon the creditworthiness of the borrower. libor is
reset according to a set schedule
d.all of the above are true
9) severe imperfections in the labor market lead to persistent wage differentials among
countries. some explanations include
a.because workers are not allowed to freely move across national boundaries to seek
higher wages
b.because workers may choose to not move across national boundaries to seek higher
wages due to the cultural differences
c.but these differences are offset by low productivity in low labor cost countries
d.both a and b
10) find the weighted average cost of capital for a firm that has a debt-to-equity ratio of
1, a tax rate of 34%, a levered cost of equity of 12% and an after-tax cost of debt of 8%.
a.9.6%
b.7.968%
c.14%
d.none of the above
11) active income
a.that results from production by the firm or individual (of goods or services)
b.is income earned by professional athletes
c.includes dividend and interest income, since the tax court has ruled that taking risk is
a form of work
d.none of the above
12)
using the table above, what is the bid price of pounds in terms of euro?
a.1.3371/£
b.1.3378/£
c.£0.7475/
d.£0.7479/