FIN 4000题库.docx

FIN 4000题库.docx

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FIN4000题库

Chapter01

GlobalizationandtheMultinationalFirm

MultipleChoiceQuestions

1.

Whatmajordimensionsetsapartinternationalfinancefromdomesticfinance?

A. 

Foreignexchangeandpoliticalrisks

B. 

Marketimperfections

C. 

Expandedopportunityset

D. 

Alloftheabove

2.

Anexampleofapoliticalriskis 

A. 

expropriationofassets.

B. 

adversechangeintaxrules.

C. 

theoppositionpartybeingelected.

D. 

bothanswersaandbarecorrect.

3.

Productionofgoodsandserviceshasbecomeglobalizedtoalargeextentasaresultof 

A. 

naturalresourcesbeingdepletedinonecountryafteranother.

B. 

skilledlaborbeinghighlymobile.

C. 

multinationalcorporations'effortstosourceinputsandlocateproductionanywherewherecostsarelowerandprofitshigher.

D. 

commontastesworldwideforthesamegoodsandservices.

4.

Recently,financialmarketshavebecomehighlyintegrated.Thisdevelopment 

A. 

allowsinvestorstodiversifytheirportfoliosinternationally.

B. 

allowsminorityinvestorstobuyandsellstocks.

C. 

hasincreasedthecostofcapitalforfirms.

D. 

answersaandcarebothcorrect.

5.

Japanhasexperiencedlargetradesurpluses.Japaneseinvestorshaverespondedtothisby 

A. 

liquidatingtheirpositionsinstockstobuydollardenominatedbonds.

B. 

investingheavilyinU.S.andotherforeignfinancialmarkets.

C. 

lobbyingtheU.S.governmenttodepreciateitscurrency.

D. 

lobbyingtheJapanesegovernmenttoallowtheyentoappreciate.

6.

Supposeyourfirminvests$100,000inaprojectinItaly.Atthetimetheexchangerateis$1.25=€1.00.Oneyearlatertheexchangerateisthesame,buttheItaliangovernmenthasexpropriatedyourfirm'sassetspayingonly€80,000incompensation.Thisisanexampleof 

A. 

exchangeraterisk.

B. 

politicalrisk.

C. 

marketimperfections.

D. 

noneoftheabove,since$100,000=€80,000×$1.25/€1.00

7.

Supposeyoustartwith$100andbuystockfor£50whentheexchangerateis£1=$2.Oneyearlater,thestockrisesto£60.Youarehappywithyour20percentreturnonthestock,butwhenyousellthestockandexchangeyour£60fordollars,youonlyget$45sincethepoundhasfallento£1=$0.75.Thislossofvalueisanexampleof 

A. 

exchangeraterisk.

B. 

politicalrisk.

C. 

marketimperfections.

D. 

weaknessinthedollar.

8.

SupposethatGreatBritainisamajorexportmarketforyourfirm,aU.S.-basedMNC.IftheBritishpounddepreciatesagainsttheU.S.dollar, 

A. 

yourfirmwillbeabletochargemoreindollartermswhilekeepingpoundpricesstable.

B. 

yourfirmmaybepricedoutoftheU.K.market,totheextentthatyourdollarcostsstayconstantandyourpoundpriceswillrise.

C. 

toprotectU.K.marketshare,yourfirmmayhavetocutthedollarpriceofyourgoodstokeepthepoundpricethesame.

D. 

bothbandcarecorrect

9.

SupposeMexicoisamajorexportmarketforyourU.S.-basedcompanyandtheMexicanpesoappreciatesdrasticallyagainsttheU.S.dollar.Thismeans 

A. 

yourcompany'sproductscanbepricedoutoftheMexicanmarket,asthepesopriceofAmericanimportswillrisefollowingthepeso'sfall.

B. 

yourfirmwillbeabletochargemoreindollartermswhilekeepingpesopricesstable.

C. 

yourdomesticcompetitorswillenjoyaperiodoffacinglessenedpricecompetitionfromMexicanimports.

D. 

bothbandcarecorrect

10.

SupposeMexicoisamajorexportmarketforyourU.S.-basedcompanyandtheMexicanpesodepreciatesdrasticallyagainsttheU.S.dollar,asitdidinDecember1994.Thismeansthat 

A. 

yourcompany'sproductscanbepricedoutoftheMexicanmarket,asthepesopriceofAmericanimportswillrisefollowingthepeso'sfall.

B. 

yourfirmwillbeabletochargemoreindollartermswhilekeepingpesopricesstable.

C. 

yourdomesticcompetitorswillenjoyaperiodoffacinglittlepricecompetitionfromMexicanimports.

D. 

bothbandcarecorrect

11.

SupposethatyouareaU.S.producerofacommoditygoodcompetingwithforeignproducers.Yourinputsofproductionarepricedindollarsandyousellyouroutputindollars.IftheU.S.currencydepreciatesagainstthecurrenciesofourtradingpartners, 

A. 

yourcompetitivepositionislikelyimproved.

B. 

yourcompetitivepositionislikelyworsened.

C. 

yourcompetitivepositionisunchanged.

12.

Undoubtedly,wearenowlivinginaworldwhereallthemajoreconomicfunctions—consumption,production,andinvestment 

A. 

arestillinherentlylocal.

B. 

arestillregionalinnature.

C. 

areslowlybecomingglobalized.

D. 

arehighlyglobalized.

13.

Mostgovernmentsatleasttrytomakeitdifficultforpeopletocrosstheirbordersillegally.Thisbarriertothefreemovementoflaborisanexampleof 

A. 

informationasymmetry.

B. 

excessivetransactionscosts.

C. 

racialdiscrimination.

D. 

amarketimperfection.

14.

Althoughtheworldeconomyismuchmoreintegratedtodaythanwasthecase10or20yearsago,avarietyofbarriersstillhamperfreemovementsofpeople,goods,services,andcapitalacrossnationalboundaries.Thesebarriersinclude 

A. 

legalrestrictions.

B. 

excessivetransportationcosts.

C. 

informationasymmetry.

D. 

alloftheabove

15.

TheJapaneseautomobilecompanyHondadecidedtoestablishproductionfacilitiesinOhio,mainlyto 

A. 

circumventtradebarriers.

B. 

reducetransportationcosts.

C. 

reducetransactionscosts.

D. 

bothaandb

16.

Whenindividualinvestorsbecomeawareofoverseasinvestmentopportunitiesandarewillingtodiversifytheirportfoliosinternationally, 

A. 

theytradeonemarketimperfection,informationasymmetry,foranother,exchangeraterisk.

B. 

theybenefitfromanexpandedopportunityset.

C. 

theyshouldnotbothertoreadortounderstandtheprospectus,sinceitsprobablywritteninaforeignlanguage.

D. 

theyshouldinvestonlyindollarsoreuros.

17.

TheNestléCorporation,awell-knownSwissMNC,usedtoissuetwodifferentclassesofcommonstock,bearersharesandregisteredshares,andforeignerswereallowedtoholdonly 

A. 

registeredshares.

B. 

bearershares.

C. 

votingshares.

D. 

convertibleshares.

18.

Deregulatedfinancialmarketsandheightenedcompetitioninfinancialservicesprovidedanenvironmentforfinancialinnovationsthatresultedintheintroductionofvariousinstruments.Examplesoftheseinnovativeinstrumentsinclude 

A. 

currencyfuturesandoptions,foreignstockindexfuturesandoptions.

B. 

multicurrencybonds.

C. 

internationalmutualfunds,countryfunds,exchangetradedfunds.

D. 

alloftheabove

19.

Nestlé,awell-knownSwisscorporation, 

A. 

hasbeenaparagonofvirtueinitsoppositiontoallformsofpoliticalrisk.

B. 

atonetimeplacedrestrictionsonforeignownershipofitsstock.Whenitrelaxedtheserestrictions,thetotalmarketvalueofthefirmfell.

C. 

atonetimeplacedrestrictionsonforeignownershipofitsstock.Whenitrelaxedtheserestrictions,therewasamajortransferofwealthfromforeignshareholderstoSwissshareholders.

D. 

noneoftheabove

20.

Thegoalofshareholderwealthmaximization 

A. 

isnotappropriatefornon-U.S.businessfirms.

B. 

meansthatallbusinessdecisionsandinvestmentsthatafirmmakesaredoneforthepurposeofmakingtheownersofthefirmbetterofffinancially.

C. 

isasub-objectivethefirmshouldattempttoachieveaftertheobjectiveofcustomersatisfactionismet.

D. 

isinconflictwiththeprivatizationprocesstakingplaceinthird-worldcountries.

21.

Ascapitalmarketsarebecomingmoreintegrated,thegoalofshareholderwealthmaximization 

A. 

hasbeenalteredtoincludeothergoalsaswell.

B. 

haslostouttoothergoals,evenintheU.S.

C. 

hasbeengivenincreasingimportancebymanagersinEurope.

D. 

hasbeenshowntobeadeterrenttoraisingfundsabroad.

22.

CorporatescandalsatfirmssuchasEnron,WorldComandtheItalianfirmParmalat 

A. 

showthatmanagersmightbetemptedtopursuetheirownprivateinterestsattheexpenseofshareholders.

B. 

showthatItalianshareholdersarebetteratmonitoringmanagerialbehaviorthanU.S.shareholders.

C. 

showthatwhite-collarcriminalshardlyevergetpunished.

D. 

showthatsocialismisabetterwaytogothancapitalism.

23.

WhilethecorporategovernanceproblemisnotconfinedtotheUnitedStates, 

A. 

itcanbeamuchmoreseriousprobleminmanyotherpartsoftheworld,wherelegalprotectionofshareholdersisweakornonexistent.

B. 

ithasreacheditshighpointintheUnitedStates.

C. 

theU.S.legalsystem,withlawsuitsusedonlyasalastresort,ensuredthatanyconflictsofinterestwillsoonbeathingofthepast.

D. 

noneoftheabove

24.

Theownersofabusinessarethe 

A. 

taxpayers.

B. 

workers.

C. 

suppliers.

D. 

shareholders.

25.

Themassiveprivatizationthatiscurrentlytakingplacein