1) Imperfect markets represent conditions under which factors of production are
immobile.
2) Inflation and interest rate differentials between the U.S. and foreign countries are
examples of variables that could be used in fundamental forecasting.
3) The interest rate the bank charges the customer in a banker’s acceptance is referred to
as the all-in rate; it entirely consists of the acceptance commission.
4) International trade is the most common form of direct foreign investment (DFI).
5) All MNCs are subject to transaction exposure.
6) An MNC can avoid translation exposure if its earnings are not remitted by the
foreign subsidiary to the parent.
7) When an MNC assesses targets among countries, it would prefer a country in which
the growth potential for its respective industry is high and the competition within the
industry is not excessive.
8) When measuring forecast performance of different currencies, it is often useful to
adjust for their relative sizes. Thus, percentages rather than nominal amounts are often
used to compute forecast errors.
9) If a currency’s forward rate exhibits a discount, the currency is forced to appreciate.
10) The parent of MNC can implement compensation plans that directly reward the
subsidiary managers for enhancing the value of the MNC.
11) Economic conditions in the host country are probably more important for an MNC
that intends to use the target to generate revenues in the host country than an MNC that
intends to focus on exporting from the target’s home country.
12) There are no transactions costs associated with trading futures or options.