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1) examples of control risk include
a.the unexpected imposition of capital controls, inbound or outbound, and withholding
taxes on dividend and interest payments
b.unexpected changes in environmental policies, sourcing/local content requirements,
minimum wage law, and restriction on access to local credit facilities
c.restrictions imposed on the maximum ownership share by foreigners, mandatory
transfer of ownership to local firms over a certain period of time (fade-out
requirements), and the nationalization of local operations of mncs
d.none of the above
2) there is an intimate relationship between a country's bca and how the country
finances its domestic investment and pays for government expenditures. 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
3) a subsidiary bank is
a.a locally incorporated bank that is wholly owned by a foreign parent
b.a locally incorporated bank that is majority owned by a foreign parent
c.a locally incorporated bank that is partially owned (but not controlled) by a foreign
parent
d.both a and b
4) in a pure flexible exchange rate regime, a country's central banks will not need to
maintain official reserves. under this regime
a.-bca = bka
b.bca = -bra = 0
c.bka = -bra
d.bsa = bca
5) purchasers of global bonds are
a.mainly institutional investors to date
b.desirous of the increased liquidity of the issues
c.have been willing to accept lower yields
d.all of the above
6) using the notation of the text, the capm states:
a.
b.
c.
d.none of the above
7) for european currency options written on euro with a strike price in dollars, what of
the effect of an increase in r$?
a.decrease the value of calls and puts ceteris paribus
b.increase the value of calls and puts ceteris paribus
c.decrease the value of calls, increase the value of puts ceteris paribus
d.increase the value of calls, decrease the value of puts ceteris paribus
8) assume that the risk-free rate of return is 4%, and the expected return on the market
portfolio is 10%. if the systematic risk inherent in the stock of abc corporation is 1.80,
using the capital asset pricing model (capm) calculate the expected return of abc.
a.14.0%
b.14.8%
c.16.0%
d.16.8%
9) in evaluating political risk, experts focus their attention on a set of key factors such
as
a.integration of the host country into the world political/economic system
b.the host country's ethnic and religious stability
c.the host country's regional security, and key economic indicators
d.all of the above
10) the key weakness of the public corporation is
a.too many shareholders, which makes it difficult to make corporate decision
b.relatively high corporate income tax rates
c.conflicts of interest between managers and shareholders
d.conflicts of interests between shareholders and bondholders
11) a minor currency is
a.anything other than the "big six": u.s. dollar, british pound, japanese yen, euro,
canadian dollar, and swiss franc
b.any currency that trades at less than one u.s. dollar
c.any currency that is less than a $20 denomination
d.none of the above
12) for a recent month, the following payments matrix of interaffiliate cash flows was
forecasted:
use multilateral netting to find the net payment from the british affiliate to the u.s.
affiliate.
the spot exchange rates are $1.20 = 1.00 and $1.80 = £1.00; affiliates get paid in home
currency.
a.$60
b.$20
c.$0
d.none of the above
13) during the period between world war i and world war ii, the political reality was
characterized by
a.halfhearted attempts and failure to restore the gold standard
b.political instabilities and bank failures
c.panicky flights of capital across borders
d.all of the above
14) a formal statement of irp is
a.
b.
c.
d.
