1) which term correctly describes the following situation? when a country imposes
exchange restrictions on its own currency, limiting conversion to other currencies, a
mnc’s frustrated remittance of profits from a subsidiary would be
a.blocked funds
b.stopped funds
c.constipated funds
d.money down the toilet
2) with any successful hedge
a.you are guaranteed to lose money on one side
b.you can avoid the accounting ramifications of a loss on one side by keeping it off the
books
c.both a and b
d.none of the above
3) corporations are becoming multinational not only in the scope of their business
activities but also in their capital structure
a.by raising funds from domestic as well as government sources
b.by raising funds from foreign as well as domestic sources
c.this trend reflects not only a conscious effort on the part of firms to raise the cost of
capital by international sourcing of funds but also the ongoing liberalization and
deregulation of international financial markets that make them accessible for many
firms
d.both b and c
4) precautionary cash balances
a.represent an increasingly-important source of interest income for many mncs
b.are necessary in case the firm has underestimated the amount needed to cover
transactions
c.are synonymous with speculative cash balances
d.none of the above
5) your firm’s interaffiliate cash receipts and disbursements matrix is shown below
($000):
using your results to the last question, use bilateral netting to simplify.
6) the strongest protection for investors is provided by
a.english common law countries, such as canada, the united states, and the u.k
b.french civil law countries, such as belgium, italy, and mexico
c.a weak board of directors
d.socialized firms
7) robert a. mundell won the nobel memorial prize in economic science. he was
a.one of the intellectual fathers of both the new european common currency and
reagan-era supply-side economics
b.one of the intellectual fathers of both the new european common currency and
reagan-era keynesian economics
c.one of the intellectual fathers of both the bretton woods currency agreement and
keynesian economics
d.none of the above
8) one lesson from the credit crunch is that
a.in the aggregate, credit scores tend to understate the probability of defaultthereby a
pool of subprime mortgages is actually quite a safe investment since not every borrower
defaults
b.moral hazard, while an issue in the market for used cars, does not seem to affect the
u.s. financial system due to the effective regulatory environment
c.bankers seem not to scrutinize credit risk as closely when they serve only as mortgage
originators and then pass it on to mbs investors rather than hold the paper themselves
d.none of the above
9) call markets and crowd trading offer advantages for __________ because they
mitigate the possibility of sparse order flow over short time periods.
a.thinly traded issues
b.actively traded issues
c.stocks but not bonds
d.none of the above
10) the degree of home bias varies across investors
a.wealthier, more experienced, and sophisticated investors are less likely to exhibit
home bias
b.wealthier, more experienced, and sophisticated investors are more likely to exhibit
home bias
c.wealthier, more experienced, and sophisticated investors are less likely to invest in
foreign securities
d.both b and c
11) with a centralized cash depository
a.there is less chance for an mnc’s funds to be denominated in the wrong currency
b.the central cash manager has a global view of the mnc’s overall cash position
c.there is less chance of mislocated funds
d.all of the above