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习题一
Chapter01
GlobalizationandtheMultinationalFirm
MultipleChoiceQuestions
1. Whatmajordimensionsetsapartinternationalfinancefromdomesticfinance?
A. foreignexchangeandpoliticalrisks
B. Marketimperfections
C. Expandedopportunityset
D. alloftheabove
2. Anexampleofapoliticalriskis
A. Expropriationofassets
B. Adversechangeintaxrules
C. Theoppositionpartybeingelected
D. Bothanswersa)andb)arecorrect
3. Productionofgoodsandserviceshasbecomeglobalizedtoalargeextentasaresultof
A. Naturalresourcesbeingdepletedinonecountryafteranother
B. Skilledlaborbeinghighlymobile
C. Multinationalcorporations'effortstosourceinputsandlocateproductionanywherewherecostsarelowerandprofitshigher
D. Commontastesworldwideforthesamegoodsandservices
4. Recently,financialmarketshavebecomehighlyintegrated.Thisdevelopment
A. Allowsinvestorstodiversifytheirportfoliosinternationally
B. Allowsminorityinvestorstobuyandsellstocks
C. Hasincreasedthecostofcapitalforfirms
D. Answersa)andc)arebothcorrect.
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'sassetspayingonly80,000incompensation.Thisisanexampleof
A. Exchangeraterisk
B. Politicalrisk
C. Marketimperfections
D. Noneoftheabove,since$100,000=€80,000$1.25/1.00
7. Supposeyoustartwith$100andbuystockfor50whentheexchangerateis1=$2.Oneyearlater,thestockrisesto60.Youarehappywithyour20percentreturnonthestock,butwhenyousellthestockandexchangeyour60fordollars,youonlyget$45sincethepoundhasfallento1=$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. b)andc)arebothcorrect.
9. SupposeMexicoisamajorexportmarketforyourU.S.-basedcompanyandtheMexicanpesoappreciatesdrasticallyagainsttheU.S.dollar.Thismeans
A. Yourcompany'sproductscanbepricedoutoftheMexicanmarket,asthepesopriceofAmericanimportswillrisefollowingthepeso'sfall.
B. Yourfirmwillbeabletochargemoreindollartermswhilekeepingpesopricesstable.
C. YourdomesticcompetitorswillenjoyaperiodoffacinglessenedpricecompetitionfromMexicanimports.
D. b)andc)arebothcorrect
10. SupposeMexicoisamajorexportmarketforyourU.S.-basedcompanyandtheMexicanpesodepreciatesdrasticallyagainsttheU.S.dollar,asitdidinDecember1994.Thismeans
A. Yourcompany'sproductscanbepricedoutoftheMexicanmarket,asthepesopriceofAmericanimportswillrisefollowingthepeso'sfall.
B. Yourfirmwillbeabletochargemoreindollartermswhilekeepingpesopricesstable.
C. YourdomesticcompetitorswillenjoyaperiodoffacinglittlepricecompetitionfromMexicanimports.
D. b)andc)arebothcorrect
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. Botha)andb)
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. RecentcorporatescandalsatfirmssuchasEnron,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. Themassiveprivatizationthatiscurrentlytakingplaceinformerlysocialistcountries,willlikely
A. eventuallyenhancethestandardoflivingtothesecountries'citizens
B. dependonprivateinvestment
C. increasetheopportunitysetfacingthesecountries'citizens
D. alloftheabove
26. Afirmwithconcentratedownership
A. Maygiverisetoconflictsofinterestbetweendominantshareholdersandsmalloutsideshareholders.
B. Mayenjoymoreaccountingtransparencythanfirmswithdiffuseownershipstructures.
C. Isapartnership,neveracorporation.
D. TendstoexistoverseasbutnotintheU.S.
27. Theultimateguardiansofshareholderinterestinacorporation,arethe
A. Rankandfileworkers
B. Seniormanagement
C. Boardsofdirectors
D. Alloftheabove
28. IncountrieslikeFranceandGermany,
A. Managershaveoftenmadebusinessdecisionswithregardmaximizingmarketsharetotheexclusionofothergoals.
B. Managershaveoftenviewedshareholdersasoneofthe"stakeholders"ofthefirm,o