1) fdi vertical integration is backward
a.when fdi involves an industry abroad that produces inputs for mncs
b.when fdi involves an industry abroad that sells the mnc’s outputs
c.none of the above
2) in terms of the types of instruments offered,
a.the yankee bond market has been more innovative than the international bond market
b.the international bond market has been much more innovative than the u.s. market
c.the most innovations have come from milan, just like any other fashion
d.none of the above
3) in the context of investments in securities (stocks and bonds), portfolio risk
diversification refers to
a.the time-honored adage “don’t put all your eggs in one basket”
b.investors’ ability to reduce portfolio risk by holding securities that are less than
perfectly positively correlated
c.the fact that the less correlated the securities in a portfolio, the lower the portfolio risk
d.all of the above
4) if one has agreed to buy foreign exchange forward
a.you have a short position in the forward contract
b.you have a long position in the forward contract
c.until the exchange rate moves, you haven’t made money, so you’re neither short nor
long
d.you have a long position in the spot market
5) in the 1960s, coca-cola, which had bottling plants in india, faced strong pressure
from the indian government to reveal the coke formula as a condition for continued
operations in india. as a result,
a.coke agreed to reveal the formula to the indian government, which has maintained it
as a state secret to this day
b.instead of revealing the formula, coke withdrew from the indian market
c.coke was able to successfully lobby the government to withdraw this demand
d.none of the above
6) consider a bank dealer who faces the following spot rates and interest rates. what
should he set his 1-year forward bid price at?
a.$1.4324/
b.$1.4358/
c.$1.4662/
d.$1.4676/
7) in the capital asset pricing model (capm), the term beta, , is
a.a measure of systematic risk inherent in a security
b.calculated as the “covariance of future returns between a specific security and the
market portfolio” divided by the “variance of returns of the market portfolio”
c.both a and b
d.none of the above
8) the euro zone remarkably comparable to the united states in terms of
a.population size
b.gdp
c.international trade share
d.all of the above
9) consider a simple exchange risk hedging strategy in which the u.s. dollar based
investor sells the expected foreign currency proceeds of a risky investment forward.
although the expected foreign investment proceeds will be converted into u.s. dollars at
the known forward exchange rate under this strategy, the unexpected foreign investment
proceeds
a.will have to be converted into u.s. dollars at the uncertain forward spot exchange rate
b.will have to be converted into u.s. dollars at the uncertain future spot exchange rate
c.will have to be converted into u.s. dollars at the uncertain swap exchange rate
d.none of the above
10) consider a u.s. mnc who owns a foreign asset. if the foreign currency value of the
asset is inversely related to changes in the dollar-foreign currency exchange rate,
a.the company has a built-in hedge
b.the dollar value variability that is independent of exchange rate movements
c.both a and b
d.none of the above
11) in the graph at right, for fortune 500 companies, x, y are
a.5% and 25%
b.15% and 50%
c.50% and 75%
d.none of the above