1) the territorial method of declaring a national tax jurisdiction
a.is to tax national residents of the country on their worldwide income no matter in
which country it is earned
b.is to tax all income earned within the country by any taxpayer, domestic or foreign
c.is to tax foreign residents of the country on their home-country income but not
foreign-earned income
d.none of the above
2) the secondary market for eurobonds
a.is an over-the-counter market
b.is an organized exchange
c.has never developedthere is only a primary market for eurobonds
3) when exchange rates change,
a.u.s. firms that produce domestically and sell only to domestic customers will be
unaffected
b.u.s. firms that produce domestically and sell only to domestic customers can be
affected if they compete against imports
c.u.s. firms that produce domestically and sell only to domestic customers will be
affected, but only if they borrow in foreign currency to finance their domestic
operations
d.both a and b
4) solve for the weighted average cost of capital:
a.8.67%
b.8.00%
c.7.60%
d.7.33%
e.7.14%
5) mergers and acquisitions are a popular mode of investment for firms wishing to
protect, consolidate and advance their global competitive positions. examples include,
a.selling off divisions that fall outside the scope of their core competence
b.acquiring strategic assets that reduce their competitiveness
c.firms can better leverage their intangible assets and on a larger scale through licensing
d.none of the above
6) suppose you are the ceo of company a, and you serve on the board of company b,
while the ceo of b is on your board.
a.this is a potential conflict of interest for both parties
b.this is normal and even a desirable situation since it allows for efficient information
sharing between the firms
c.there is a potential conflict for the shareholders of the two firms
d.all of the above are true
7) one of the steps to follow to develop an investment fund which has been structured to
adhere to shari’ah principles whilst at the same time making use of forfaiting assets was
a.the fund sponsors had to be careful in ensuring that the pool of non-islamic forfaiting
assets was not used to directly satisfy the islamically compliant obligations under the
commodity and trade financing arrangements
b.screening is required to ensure that the products underlying the lcs do not run counter
to shari’ah principles
c.there had to be a signoff by islamic scholars to verify that shari’ah strictures had been
met with
d.all of the above
8) the following is an outline of certain potential benefits as well as costs associated
with the cross-border listings of stocks:
(i) – the company can expand its potential investor base
(ii) – issues involving the disclosure and listing requirements
(iii) – creates a secondary market for the company’s shares
(iv) – volatility spillover from the overseas markets
(v) – liquidity
(vi) – control of the company by foreigners
(vii) – enhances the visibility of the company’s name and its products in foreign
marketplaces
which of the following represent all the potential costs of the cross-border listings of
stocks?
a.(i), (ii), and (iii)
b.(ii), (iv), and (vi)
c.(i), (iii), (v), and (vii)
d.(iv), (v), (vi), and (vii)
9) edge act banks
a.can accept foreign deposits, extend trade credit, finance foreign projects abroad, trade
foreign currencies, and engage in investment banking activities with u.s. citizens
involving foreign securities
b.are federally chartered subsidiaries of u.s. banks that are physically located in the
united states and are allowed to engage in a full range of international banking activities
c.can underwrite securities, but can only be located in states on the edge of the u.s
d.both a and b
10) which of the following are principles of sound banking behavior?
a.avoid an undue concentration of loans to single activities
b.control mismatches between assets and liabilities
c.expand cautiously into unfamiliar activities
d.all of the above
11) under which method does the gain or loss due to translation adjustment not affect
reported cash flows, as it does with the other three translation methods?
a.current/noncurrent method
b.monetary/nonmonetary method
c.temporal method
d.current rate method
12) in 1992, the enron development corporation, a subsidiary of the houston-based
energy company, signed a contract to build the largest-ever power plant in india,
requiring a total investment of $2.8 billion. after enron had spent nearly $300 million,
the project was canceled by hindu nationalist politicians in the maharashtra state where
the plant was to be built. which of the following are true?
a.this move by the government played well with indian voters with visceral distrust of
foreign companies since the british colonial era
b.this move by the government was widely criticized in india on the grounds that it
would deter future foreign investment
c.this move by the government was widely criticized in india on the grounds that severe
power shortages have been one of the bottlenecks hindering india’s economic growth
d.none of the above
13) a stop order is an order to buy or sell a stock once the price of the stock reaches a
specified price, known as the stop price. when the specified price is reached, your stop
order becomes
a.a market order
b.a good-til-cancelled (gtc) order
c.a day order
d.none of the above
14) political risk refers to:
a.the potential losses to the parent firm of an mnc resulting from adverse political
developments in the host country
b.macroeconomic risks
c.microeconomic risks
d.bankruptcy or high inflation rates
15) studies suggest that international capital markets are not segmented anymore
a.and are therefore fully integrated
b.but are not as yet fully integrated
c.so cross-listing of shares will not lower a firm’s cost of capital
d.none of the above