习题一.docx

1、习题一Chapter 01Globalization and the Multinational Firm Multiple Choice Questions1.What major dimension sets apart international finance from domestic finance?A.foreign exchange and political risksB.Market imperfectionsC.Expanded opportunity setD.all of the above2.An example of a political risk isA.Ex

2、propriation of assetsB.Adverse change in tax rulesC.The opposition party being electedD.Both answers a) and b) are correct3.Production of goods and services has become globalized to a large extent as a result ofA.Natural resources being depleted in one country after anotherB.Skilled labor being high

3、ly mobileC.Multinational corporations efforts to source inputs and locate production anywhere where costs are lower and profits higherD.Common tastes worldwide for the same goods and services4.Recently, financial markets have become highly integrated. This developmentA.Allows investors to diversify

4、their portfolios internationallyB.Allows minority investors to buy and sell stocksC.Has increased the cost of capital for firmsD.Answers a) and c) are both correct.5.Japan has experienced large trade surpluses. Japanese investors have responded to this byA.Liquidating their positions in stocks to bu

5、y dollar denominated bondsB.Investing heavily in U.S. and other foreign financial marketsC.Lobbying the U.S. government to depreciate its currencyD.Lobbying the Japanese government to allow the yen to appreciate6.Suppose your firm invests $100,000 in a project in Italy. At the time the exchange rate

6、 is $1.25 = 1.00. One year later the exchange rate is the same, but the Italian government has expropriated your firms assets paying only 80,000 in compensation. This is an example ofA.Exchange rate riskB.Political riskC.Market imperfectionsD.None of the above, since $100,000 = 80,000 $1.25/1.007.Su

7、ppose you start with $100 and buy stock for 50 when the exchange rate is 1 = $2. One year later, the stock rises to 60. You are happy with your 20 percent return on the stock, but when you sell the stock and exchange your 60 for dollars, you only get $45 since the pound has fallen to 1 = $0.75. This

8、 loss of value is an example of:A.Exchange Rate Risk.B.Political Risk.C.Market imperfections.D.Weakness in the dollar.8.Suppose that Great Britain is a major export market for your firm, a U.S. based MNC. If the British pound depreciates against the U.S. dollar,A.Your firm will be able to charge mor

9、e in dollar terms while keeping pound prices stable.B.Your firm may be priced out of the U.K. market, to the extent that your dollar costs stay constant and your pound prices will rise.C.To protect U.K. market share, your firm may have to cut the dollar price of your goods to keep the pound price th

10、e same.D.b) and c) are both correct.9.Suppose Mexico is a major export market for your U.S.-based company and the Mexican peso appreciates drastically against the U.S. dollar. This meansA.Your companys products can be priced out of the Mexican market, as the peso price of American imports will rise

11、following the pesos fall.B.Your firm will be able to charge more in dollar terms while keeping peso prices stable.C.Your domestic competitors will enjoy a period of facing lessened price competition from Mexican imports.D.b) and c) are both correct10.Suppose Mexico is a major export market for your

12、U.S.-based company and the Mexican peso depreciates drastically against the U.S. dollar, as it did in December 1994. This meansA.Your companys products can be priced out of the Mexican market, as the peso price of American imports will rise following the pesos fall.B.Your firm will be able to charge

13、 more in dollar terms while keeping peso prices stable.C.Your domestic competitors will enjoy a period of facing little price competition from Mexican imports.D.b) and c) are both correct11.Suppose that you are a U.S. producer of a commodity good competing with foreign producers. Your inputs of prod

14、uction are priced in dollars and you sell your output in dollars. If the U.S. currency depreciates against the currencies of our trading partners,A.Your competitive position is likely improved.B.Your competitive position is likely worsened.C.Your competitive position is unchanged.12.Undoubtedly, we

15、are now living in a world where all the major economic functionsconsumption, production, and investmentA.are still inherently localB.are still regional in natureC.are slowly becoming globalizedD.are highly globalized13.Most governments at least try to make it difficult for people to cross their bord

16、ers illegally. This barrier to the free movement of labor is an example ofA.Information asymmetryB.Excessive transactions costsC.Racial discriminationD.A market imperfection14.Although the world economy is much more integrated today than was the case 10 or 20 years ago, a variety of barriers still h

17、amper free movements of people, goods, services, and capital across national boundaries. These barriers includeA.legal restrictionsB.excessive transportation costsC.information asymmetryD.All of the above15.The Japanese automobile company Honda decided to establish production facilities in Ohio, mai

18、nly toA.circumvent trade barriersB.reduce transportation costsC.reduce transactions costsD.Both a) and b)16.When individual investors become aware of overseas investment opportunities and are willing to diversify their portfolios internationally,A.they trade one market imperfection, information asym

19、metry, for another, exchange rate risk.B.they benefit from an expanded opportunity set.C.They should not bother to read or to understand the prospectus, since its probably written in a foreign languageD.They should invest only in dollars or euros.17.The Nestl Corporation, a well-known Swiss MNC, use

20、d to issue two different classes of common stock, bearer shares and registered shares, and foreigners were allowed to hold onlyA.registered sharesB.bearer sharesC.voting sharesD.convertible shares18.Deregulated financial markets and heightened competition in financial services provided an environmen

21、t for financial innovations that resulted in the introduction of various instruments. Examples of these innovative instruments includeA.Currency futures and options, foreign stock index futures and optionsB.multicurrency bondsC.international mutual funds, country funds, exchange traded fundsD.all of

22、 the above19.Nestl, a well-known Swiss corporation,A.Has been a paragon of virtue in its opposition to all forms of political risk.B.At one time placed restrictions on foreign ownership of its stock. When it relaxed these restrictions, the total market value of the firm fell.C.At one time placed res

23、trictions on foreign ownership of its stock. When it relaxed these restrictions, there was a major transfer of wealth from foreign shareholders to Swiss shareholders.D.None of the above20.The goal of shareholder wealth maximizationA.is not appropriate for non-U.S. business firmsB.means that all busi

24、ness decisions and investments that a firm makes are done for the purpose of making the owners of the firm better off financiallyC.is a sub-objective the firm should attempt to achieve after the objective of customer satisfaction is metD.is in conflict with the privatization process taking place in

25、third-world countries21.As capital markets are becoming more integrated, the goal of shareholder wealth maximizationA.Has been altered to include other goals as well.B.Has lost out to other goals, even in the U.S.C.Has been given increasing importance by managers in Europe.D.Has been shown to be a d

26、eterrent to raising funds abroad.22.Recent corporate scandals at firms such as Enron, WorldCom and the Italian firm ParmalatA.Show that managers might be tempted to pursue their own private interests at the expense of shareholders.B.Show that Italian shareholders are better at monitoring managerial

27、behavior than U.S. shareholders.C.Show that white-collar criminals hardly ever get punished.D.Show that socialism is a better way to go than capitalism.23.While the corporate governance problem is not confined to the United States,A.It can be a much more serious problem in many other parts of the wo

28、rld, where legal protection of shareholders is weak or nonexistent.B.It has reached its high point in the United States.C.The U.S. legal system, with lawsuits used only as a last resort, ensured that any conflicts of interest will soon be a thing of the past.D.None of the above24.The owners of a bus

29、iness are theA.TaxpayersB.WorkersC.SuppliersD.Shareholders25.The massive privatization that is currently taking place in formerly socialist countries, will likelyA.eventually enhance the standard of living to these countries citizensB.depend on private investmentC.increase the opportunity set facing

30、 these countries citizensD.all of the above26.A firm with concentrated ownershipA.May give rise to conflicts of interest between dominant shareholders and small outside shareholders.B.May enjoy more accounting transparency than firms with diffuse ownership structures.C.Is a partnership, never a corp

31、oration.D.Tends to exist overseas but not in the U.S.27.The ultimate guardians of shareholder interest in a corporation, are theA.Rank and file workersB.Senior managementC.Boards of directorsD.All of the above28.In countries like France and Germany,A.Managers have often made business decisions with regard maximizing market share to the exclusion of other goals.B.Managers have often viewed shareholders as one of the stakeholders of the firm, o