Test bank International Finance MCQ wordChap 10.docx
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TestbankInternationalFinanceMCQwordChap10
FundamentalsofMultinationalFinance,3e（Moffett）
Chapter10
OperatingExposure
10.1
MultipleChoiceandTrue/FalseQuestions
1）
Anothernameforoperatingexposureis________exposure.
A）
economic
B）
competitive
C）
strategic
D）
alloftheabove
Answer:
D
Topic:
OperatingExposure
Skill:
Recognition
2）
Whattypeofinternationalriskexposuremeasuresthechangeinpresentvalueofafirmresultingfromchangesinfutureoperatingcashflowscausedbyanyunexpectedchangeinexchangerates?
A）
transactionexposure
B）
accountingexposure
C）
operatingexposure
D）
translationexposure
Answer:
C
Topic:
OperatingExposure
Skill:
Recognition
3）
Thegoalofoperatingexposureanalysisistoidentifystrategicoperatingtechniquesthefirmmightadopttoenhancevalueinthefaceofunanticipatedexchangeratechanges.
Answer:
TRUE
Topic:
OperatingExposure
Skill:
Conceptual
4）
________cashflowsarisefromintracompanyandintercompanyreceivablesandpaymentswhile________cashflowsarepaymentsfortheuseofloansandequity.
A）
Financing;operating
B）
Operating;financing
C）
Operating;accounting
D）
Accounting;financing
Answer:
B
Topic:
OperatingandFinancialCashFlows
Skill:
Recognition
5）
Operatingcashflowsmayoccurindifferentcurrenciesandatdifferenttimes,butfinancingcashflowsmayoccuronlyinasinglecurrency.
Answer:
FALSE
Topic:
OperatingandFinancialCashFlows
Skill:
Recognition
6）
WhichofthefollowingisNOTanexampleofafinancialcashflow?
A）
parentinvestedequitycapital
B）
interestonintrafirmlending
C）
paymentforgoodsandservices
D）
intrafirmprincipalpayments
Answer:
C
Topic:
FinancialCashFlows
Skill:
Recognition
7）
WhichofthefollowingisNOTanexampleofanoperatingcashflow?
A）
managementfeesanddistributedoverhead
B）
royaltiesandlicensefees
C）
rentandleasepayments
D）
dividendpaidtoparentcompany
Answer:
D
Topic:
OperatingCashFlows
Skill:
Recognition
8）
________exposureisfarmoreimportantforthelong-runhealthofabusinessthanchangescausedby________or________exposure.
A）
Operating;translation;transaction
B）
Transaction;operating;translation
C）
Accounting;translation;transaction
D）
Translation;operating;transaction
Answer:
A
Topic:
Operating;Transaction;andTranslationExposure
Skill:
Conceptual
9）
Expectedchangesinforeignexchangeratesshouldalreadybefactoredintoanticipatedoperatingresultsbymanagementandinvestors.
Answer:
TRUE
Topic:
Expectations
Skill:
Conceptual
10）
Underconditionsofequilibrium,managementwoulduse________exchangerateasanunbiasedpredictoroffuturespotrateswhenpreparingoperatingbudgets.
A）
thecurrentspot
B）
theforwardrate
C）
theblackmarket
D）
noneoftheabove
Answer:
B
Topic:
ForwardRate
Skill:
Conceptual
11）
SimpsonSignCompanybasedinFrostbiteFalls,Minnesotahasa6-monthC$100,000contracttocompletesignworkinWinnipeg,Manitoba,Canada.Thecurrentspotrateis$1.02/C$andtheforwardrateis$1.01/C$.Underconditionsofequilibrium,managementwouldusetoday________whenpreparingoperatingbudgets.
A）
$102,000
B）
$101,000
C）
$100,000
D）
Noneoftheabove
Answer:
B
Topic:
ForwardRate
Skill:
Analytical
12）
Inequilibrium,expectedcashflowtoamortizeinternationaldebtobligationsshouldreflectthe________.
A）
currentspotrate
B）
thespotratewhentheloanwascontracted
C）
theinternationalFishereffect
D）
noneoftheabove
Answer:
C
Topic:
ExchangeRateEquilibrium
Skill:
Conceptual
13）
Fromaninvestor'sperspective,iftheforeignexchangemarketisefficient,informationaboutexpectedchangesinexchangeratesshouldbewidelyknownandthusreflectedinafirm'smarketvalue.Only________inexchangeratesoran________foreignexchangemarket,shouldcausemarketvaluetochange.
A）
expectedchanges;efficient
B）
unexpectedchanges;efficient
C）
expectedchanges;inefficient
D）
unexpectedchanges;inefficient
Answer:
D
Topic:
ExchangeRateEquilibrium
Skill:
Conceptual
14）
WhichofthefollowingisNOTanexampleofdiversifyingoperations?
A）
diversifyingsales
B）
diversifyinglocationofoperations
C）
raisingfundsinmorethanonecountry
D）
sourcingrawmaterialsinmorethanonecountry
Answer:
C
Topic:
ForeignExchangeDiversification
Skill:
Recognition
15）
WhichofthefollowingisNOTanexampleofdiversificationinfinancing?
A）
raisingfundsinmorethanonemarket
B）
raisingfundsinmorethanonecountry
C）
diversifyingsales
D）
Alloftheabovequalify.
Answer:
C
Topic:
ForeignExchangeDiversification
Skill:
Recognition
16）
Managementmustbeabletopredictdisequilibriaininternationalmarketstotakeadvantageofdiversificationstrategies.
Answer:
FALSE
Topic:
ForeignExchangeDiversification
Skill:
Conceptual
17）
Whendisequilibriaininternationalmarketsoccur,managementcantakeadvantageby
A）
doingnothingiftheyarealreadydiversifiedandabletorealizebeneficialportfolioeffects.
B）
recognizingdisequilibriafasterthanpurelydomesticcompetitors.
C）
shiftingoperationaloffinancingactivitiestotakeadvantageofthedisequilibria.
D）
alloftheabove.
Answer:
D
Topic:
ForeignExchangeDiversification
Skill:
Conceptual
18）
PurelydomesticfirmswillbeatadisadvantagetoMNEsintheeventofmarketdisequilibriabecause
A）
domesticfirmslackcomparativedatafromitsownsources.
B）
internationalfirmsarealreadysolarge.
C）
allofthedomesticfirm'srawmaterialsareimported.
D）
Noneoftheabove.Domesticfirmsarenotatadisadvantage.
Answer:
A
Topic:
ForeignExchangeDiversification
Skill:
Conceptual
19）
WhichofthefollowingisprobablyNOTanadvantageofforeignexchangeriskmanagement?
A）
thereductionofthevariabilityofcashflowsduetodomesticbusinesscycles
B）
increasedavailabilityofcapital
C）
reducedcostofcapital
D）
Alloftheabovearepotentialadvantagesofforeignexchangeriskmanagement.
Answer:
D
Topic:
ForeignExchangeDiversification
Skill:
Recognition
20）
WhichofthefollowingisNOTanexampleofaformofpoliticalriskthatmightbeavoidedorreducedbyforeignexchangeriskmanagement?
A）
expropriationofassets
B）
destructionofrawmaterialsthroughnaturaldisaster
C）
war
D）
unfavorablelegalchanges
Answer:
B
Topic:
PoliticalRisk
Skill:
Recognition
21）
WhichofthefollowingisNOTidentifiedbyyourauthorsasaproactivemanagementtechniquetoreduceexposuretoforeignexchangerisk?
A）
matchingcurrencycashflows
B）
currencyswaps
C）
remainingapurelydomesticfirm
D）
parallelloans
Answer:
C
Topic:
ManagementofForeignExchangeRisk
Skill:
Recognition
22）
Whichoneofthefollowingmanagementtechniquesislikelytobestoffsettheriskoflong-runexposuretoreceivablesdenominatedinaparticularforeigncurrency?
A）
borrowmoneyintheforeigncurrencyinquestion
B）
lendmoneyintheforeigncurrencyinquestion
C）
increasesalestothatcountry
D）
increasesalesinthiscountry
Answer:
A
Topic:
ManagementofForeignExchangeRisk
Skill:
Conceptual
23）
Whichoneofthefollowingmanagementtechniquesislikelytobestoffsettheriskoflong-runexposuretopayablesdenominatedinaparticularforeigncurrency?
A）
borrowmoneyintheforeigncurrencyinquestion
B）
lendmoneyintheforeigncurrencyinquestion
C）
relyontheFederalReserveBoardtoenactmonetarypolicyfavorabletoyourexposurerisk
D）
noneoftheabove
Answer:
B
Topic:
ManagementofForeignExchangeRisk
Skill:
Conceptual
24）
Theparticularstrategyoftryingtooffsetstableinflowsofcashfromonecountrywithoutflowsofcashinthesamecurrencyisknownas________.
A）
hedging
B）
diversification
C）
matching
D）
balancing
Answer:
C
Topic:
ManagementofForeignExchangeRisk
Skill:
Recognition
25）
WhichofthefollowingisNOTanacceptablehedgingtechniquetoreduceriskcausedbyarelativelypredictablelong-termforeigncurrencyinflowofJapaneseyen?
A）
ImportrawmaterialsfromJapandenominatedinyentosubstitutefordomesticsuppliers.
B）
Paysuppliersfromothercountriesinyen.
C）
ImportrawmaterialsfromJapandenominatedindollars.
D）
Acquiredebtdenominatedinyen.
Answer:
C
Topic:
ManagementofForeignExchangeRisk
Skill:
Recognition
26）
AnMNEhasacontractforarelativelypredictablelong-terminflowofJapaneseyenthatthefirmchoosestohedgebyseekingoutpotentialsuppliersinJapan.Thishedgingstrategyisreferredtoas________.
A）
anaturalhedge
B）
currency-switching
C）
matching
D）
diversification
Answer:
A
Topic:
NaturalHedge
Skill:
Recognition
27）
AnMNEhasacontractforarelativelypredictablelong-terminflowofJapaneseyenthatthefirmchoosestohedgebypayingforimportsfromCanadainJapaneseyen.Thishedgingstrateg
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