1) the asian crisis
a.followed a period of economic recession in the region coupled with record private
capital outflows
b.followed a period of economic expansion in the region financed by record private
capital inflows
c.began in the fall of 2001 when japan devalued the yen
d.none of the above
2) 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 above
3) the table below shows the bushels of wheat and the bottles of beer that north and
south dakota can produce per day of labor under two different hypothetical situations
(cases i and ii).
which state has a comparative advantage in producing wine in case ii?
a.south dakota
b.north dakota
c.neither state
4) the extent to which the firm’s operating cash flows would be affected by random
changes in exchange rates is called
a.asset exposure
b.operating exposure
c.both a and b
d.none of the above
5) in the united states, it is not uncommon for the same person to serve as both ceo and
chairman of the board.
a.this situation must not have much conflict of interest since it is common
b.this situation has a built-in conflict of interest
c.this is only legal if that individual owns a controlling number of shares in the firm
d.none of the above
6) using the notation of the text, the capm states:
a.
b.
c.
d.none of the above
7) “unbundling fund transfers” from an mnc and to its affiliates refers to the following
activity:
a.instead of lumping all costs into a single transfer price, for the mnc (parent firm) to
recognize the cost of the physical good and each service separately that it provides to its
affiliates
b.in addition to charging for the cost of the physical good, for the parent firm to charge
for technical training of the affiliates’ staff, cost of worldwide advertising, royalty,
licensing fee, and technology, whenever applicable, to facilitate for the mnc to present
and support to the taxing authority of a host country that each charge is legitimate and
can be well substantiated
c.used for removing blocked funds from a host country that is enforcing foreign
exchange restrictions
d.all of the above
8) mncs can use their global presence to
a.take advantage of underpriced labor services available in certain developing countries
b.gain access to special r&d capabilities residing in advanced foreign counties
c.boost profit margins and create shareholder value
d.all of the above
9) assume the time from acceptance to maturity on a $2,000,000 banker’s acceptance is
180 days. further assume that the importing bank’s acceptance commission is 1.25
percent and that the market rate for 180-day b/as is 5.0 percent. the bond equivalent
yield that the bank earns in holding the b/a to maturity is:
a.13.08%
b.6.54%
c.4.06%
d.none of the above
10) in 2002, 24 stock markets had concentration ratios of 40 percent or more, 16 had 50
percent or more, and 6 had 60 percent or more. by comparison, in 2006, 27 stock
markets had concentration ratios of 40 percent or more, 21 had 50 percent or more, and
11 had 60 percent or more. thus, one must conclude
a.that the number of equity investment opportunities in major stock markets in
developed countries has not been improving in recent years
b.that the number of equity investment opportunities in emerging stock markets in
developing countries has been improving in recent years
c.that the number of equity investment opportunities in emerging stock markets in
developing countries has not been improving in recent years
d.none of the above
11) assume that a product has the following three stages of production:
if the value-added tax (vat) rate is 20%, what would be the vat over all stages of
production?
a.110
b.120
c.150
d.225
12) there is an intimate relationship between a country’s bca and how the country
finances its domestic investment and pays for government expenditures. this
relationship is given by bca x – m (s – i) + (t – g). given this, which of the following is a
true statement?
a.if (s – i) < 0, it implies that a country’s domestic savings is insufficient to finance
domestic investment
b.if (t – g) < 0, it implies that a country’s tax revenue is insufficient to finance
government spending
c.both a and b are true
d.none of the above