1) find the debt-to-value ratio for a firm with a debt-to-equity ratio of 1.
a.
b.
c.3/5
d.
e.5/7
2) under the bretton woods system
a.each country established a par value for its currency in relation to the dollar
b.the u.s. dollar was pegged to gold at $35 per ounce
c.each country was responsible for maintaining its exchange rate within 1 percent of the
adopted par value by buying or selling foreign exchanges as necessary
d.all of the above
3) according to the theory of optimum currency areas,
a.the relevant criterion for identifying and designing a common currency zone is the
degree of factor (i.e. capital and labor) mobility within the zone
b.exchange rates should reflect the degree to which workers are willing to move to get a
better job
c.exchange rates are determined by portfolio managers seeking the highest return
d.none of the above
4) 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.150
b.600
c.350
d.225
5) in general the united states claims
a.only a limited taxing jurisdiction over nonresident alien individuals and foreign
corporations
b.unlimited taxing jurisdiction over nonresident alien individuals and foreign
corporations
c.unlimited taxing jurisdiction over resident alien individuals and foreign corporations
d.none of the above
6) a firm keeps a precautionary cash balance to cover unexpected transactions during
the budget period. the size of this balance depends on how safe the firm desires to be in
its ability to meet unexpected transactions.
a.the larger the precautionary cash balance, the greater is the firm’s ability to meet
unexpected expenses
b.the larger the precautionary cash balance, the less is the risk of financial
embarrassment and loss of credit standing
c.the larger the precautionary cash balance, the greater the potential opportunity cost
d.all of the above
7) consider a u.s.-based mnc with a wholly-owned italian subsidiary. following a
depreciation of the dollar against the euro, which of the following describes the
competitive effect of the depreciation?
a.the cash flow in euro could be altered due an alteration in the firm’s competitive
position in the marketplace
b.a given operating cash flow in euro will be translated to a higher u.s. dollar cash flow
c.both a and b
d.none of the above
8) the world trade organization, wto,
a.has the power to enforce the rules of international trade
b.covers agriculture and physical goods, but not services or intellectual property rights
c.recently expelled china for human rights violations
d.ruled that nafta is to be the model for world trade integration
9) when exchange rates change, the value of a foreign subsidiary’s assets and liabilities
denominated in a foreign currency change
a.when they are viewed from the perspective of the subsidiary firm
b.when they are viewed from the perspective of the parent firm
c.but this is only of material concern if the parent firm is liquidating the subsidiary in a
bankruptcy and is forced to realize the value of the assets and liabilities at the current
exchange rate
d.none of the above
10) a classic example for trade barrier-motivated fdi is
a.honda’s investment in ohio
b.bridgestone’s investment in japan
c.nafta
d.none of the above
11) so-called subprime mortgages were typically
a.mortgages granted to borrowers with less-than-perfect credit
b.backed by the full faith and credit of the u.s. government
c.held to maturity by the originating lender, thereby assuring that default risk was priced
into the rate of return
d.none of the above