InternationalFinancialManagement_5thEd_Eun_TestBank03
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InternationalFinancialManagement_5thEd_Eun_TestBank03

Course Number: FIN 308, Summer 2011

College/University: UNLV

Word Count: 5458

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03 Student: ___________________________________________________________________________ 1. The current account balance, which is the difference between a country's exports and imports, is a component of the country's GNP. Other components of GNP include A. Consumption and investment and government expenditure. B. Consumption and government expenditure and net exports. C. Consumption and net exports and...

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03 Student: ___________________________________________________________________________ 1. The current account balance, which is the difference between a country's exports and imports, is a component of the country's GNP. Other components of GNP include A. Consumption and investment and government expenditure. B. Consumption and government expenditure and net exports. C. Consumption and net exports and government expenditure. D. Consumption less imports. 2. If the United States imports more than it exports, then this means that A. The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. The demand for dollars is likely to exceed the supply in the foreign exchange market, ceteris paribus. C. The U.S. dollar would be under pressure to appreciate against other currencies. D. Both b) and c) are correct 3. Balance of payments A . is defined as the statistical record of a country's international transactions over a certain period of time presented in the form of a double-entry bookkeeping B. provides detailed information concerning the demand and supply of a country's currency C. can be used to evaluate the performance of a country in international economic competition D. all of the above 4. If a country is grappling with a major balance-of-payment difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to A. impose measures to restrict imports and B. impose measures to discourage capital outflows C. Both a) and b) D. None of the above 5. If the United States imports more than it exports, then A. The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus. B. One can infer that the U.S. dollar would be under pressure to depreciate against other currencies C. a) and b) D. None of the above 6. Generally speaking, any transaction that results in a receipt from foreigners A. Will be recorded as a debit, with a negative sign, in the U.S. balance of paymentsA.

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UNLV - FIN - 308
04Student: _1.Corporate governance can be defined as:Athe economic, legal, and institutional framework in which corporate control and cash flow rights are. distributed among shareholders, managers and other stakeholders of the companyB. the general
UNLV - FIN - 308
05Student: _1.The world's largest foreign exchange trading center is:A. New YorkB. TokyoC. LondonD. Hong Kong2.On average, worldwide daily trading of foreign exchange isA. impossible to estimateB. $15 billionC. $504 billionD. $3.21 trillion3
UNLV - FIN - 308
06Student: _1.An arbitrage is best defined as:A. A legal condition imposed by the CFTCB The act of simultaneously buying and selling the same or equivalent assets or commodities for the. purpose of making reasonable profitsC The act of simultaneous
UNLV - FIN - 308
07Student: _1.A CME contract on 125,000 with September deliveryA. Is an example of a forward contractB. Is an example of a futures contractC. Is an example of a put optionD. Is an example of a call option2.Yesterday, you entered into a futures co
UNLV - FIN - 308
08Student: _1.Transaction exposure is defined as:A the sensitivity of realized domestic currency values of the firm's contractual cash flows denominated in. foreign currencies to unexpected exchange rate changesB. the extent to which the value of th
UNLV - FIN - 308
09Student: _1.Suppose the U.S. dollar substantially depreciates against the Japanese yen. The change in exchangerateA. Can have significant economic consequences for U.S. firms.B. Can have significant economic consequences for Japanese firms.C. Can
UNLV - FIN - 308
10Student: _1.Translation exposure refers to:A. accounting exposureB. the effect that an unanticipated change in exchange rates will have on the consolidated financial reportsof an MNCCthe change in the value of a foreign subsidiaries assets and li
UNLV - FIN - 308
11Student: _1.International banks are different from domestic banks in what way(s)?A. International banks can arrange trade financingB. International banks can arrange for foreign exchange transactions.C. International banks can assist their clients
UNLV - FIN - 308
12Student: _1.In any given year, what percent of new international bonds are likely to be Eurobonds rather than foreignbondsA. 80%B. 45%C. 25%D. 15%2.In any given year, what percent of outstanding bonds are likely to be international rather than
UNLV - FIN - 308
13Student: _1.The sale of new common stock by corporations to initial investors occurs inA. The primary marketB. The secondary marketC. The OTC marketD. The dealer market2.The sale of previously issued common stock traded between investors occurs
UNLV - FIN - 308
14Student: _1.The term interest rate swapA. refers to a "single-currency interest rate swap" shortened to "interest rate swap"B. involves "counterparties" who make a contractual agreement to exchange cash flows at periodicintervalsC. can be "fixed-
UNLV - FIN - 308
15Student: _1.Under the investment dollar premium system,A U.K. residents received a premium over the prevailing commercial exchange rate when they sold. foreign securities and repatriated the funds to the U.K.B U.K. residents had to pay a premium o
UNLV - FIN - 308
16Student: _1.Under a 1981 Voluntary Trade Agreement Japanese automobile manufacturers were not allowed toincrease their exports to the U.S. market. As a result:A. They exited the marketB. Honda was motivated to circumvent the trade barriers.C Hond
UNLV - FIN - 308
17Student: _1.The cost of capital is:A. The minimum rate of return an investment project must generate in order to pay its financing costs.B. The minimum rate of return an investment project must generate in order to pay its financing costs plusa re
UNLV - FIN - 308
18Student: _1.The financial manager's responsibility involves:A. increasing the per share price of the company's stock at any cost and by any means, ways and fashionthat is possibleB. the shareholder wealth maximizationC. which capital projects to
UNLV - FIN - 308
19Student: _1.Efficient cash management techniques can:A. reduce the investment in cash balances and foreign exchange transaction expensesB. provide for maximum return from the investment of excess cashC. result in borrowing at lowest rate when a te
UNLV - FIN - 308
20Student: _1.International trade is more difficult and risky from the exporter's perspective than is domestic tradebecause:A. The exporter may not be familiar with the buyer, and thus not know if the importer is a good creditrisk.B If the merchand
UNLV - FIN - 308
21Student: _1.The two main objectives of taxation areA. Tax neutrality and tax equity.B. Complexity and revenueC. Social engineering and tax equityD. Progressive taxation and tax neutrality2.The three basic types of taxation are:A. income tax, w
UNLV - FIN - 308
Problem Solution
UNLV - FIN - 308
CHAPTER 2 INTERNATIONAL MONETARY SYSTEMSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Explain Greshams Law.Answer: Greshams law refers to the phenomenon that bad (abundant) money drives good (scarce)money out of c
UNLV - FIN - 308
CHAPTER 3 BALANCE OF PAYMENTSSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Define the balance of payments.Answer:The balance of payments (BOP) can be defined as the statistical record of a countrysinternational
UNLV - FIN - 308
CHAPTER 4 CORPORATE GOVERNANCE AROUND THE WORLDSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQuestions1. The majority of major corporations are franchised as public corporations. Discuss the key strengthand weakness of the pu
UNLV - FIN - 308
CHAPTER 5 THE MARKET FOR FOREIGN EXCHANGESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Give a full definition of the market for foreign exchange.Answer: Broadly defined, the foreign exchange (FX) market encompasse
UNLV - FIN - 308
CHAPTER 6 INTERNATIONAL PARITY RELATIONSHIPS AND FORECASTING FOREIGNEXCHANGE RATESSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Give a full definition of arbitrage.Answer: Arbitrage can be defined as the act of s
UNLV - FIN - 308
CHAPTER 7 FUTURES AND OPTIONS ON FOREIGN EXCHANGESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Explain the basic differences between the operation of a currency forward market and a futuresmarket.Answer: The forw
UNLV - FIN - 308
CHAPTER 8 MANAGEMENT OF TRANSACTION EXPOSURESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS ANDPROBLEMSQUESTIONS1. How would you define transaction exposure? How is it different from economic exposure?Answer: Transaction exposure is the s
UNLV - FIN - 308
CHAPTER 9 MANAGEMENT OF ECONOMIC EXPOSURESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. How would you define economic exposure to exchange risk?Answer: Economic exposure can be defined as the possibility that the f
UNLV - FIN - 308
CHAPTER 10 MANAGEMENT OF TRANSLATION EXPOSURESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Explain the difference in the translation process between the monetary/nonmonetary method and thetemporal method.Answer:
UNLV - FIN - 308
CHAPTER 11 INTERNATIONAL BANKING AND MONEY MARKETSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Briefly discuss some of the services that international banks provide their customers and the marketplace.Answer: Int
UNLV - FIN - 308
CHAPTER 12 INTERNATIONAL BOND MARKETSSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Describe the differences between foreign bonds and Eurobonds. Also discuss why Eurobonds makeup the lions share of the internation
UNLV - FIN - 308
CHAPTER 13 INTERNATIONAL EQUITY MARKETSSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Exhibit 13.11 presents a listing of major national stock market indexes as displayed daily in the printedition of the Financial
UNLV - FIN - 308
CHAPTER 14 INTEREST RATE AND CURRENCY SWAPSSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Describe the difference between a swap broker and a swap dealer.Answer: A swap broker arranges a swap between two counterpar
UNLV - FIN - 308
CHAPTER 15 INTERNATIONAL PORTFOLIO INVESTMENTSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. What factors are responsible for the recent surge in international portfolio investment (IPI)?Answer: The recent surge in
UNLV - FIN - 308
CHAPTER 16 FOREIGN DIRECT INVESTMENT AND CROSS-BORDER ACQUISITIONSSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Recently, many foreign firms from both developed and developing countries acquired high-tech U.S.firm
UNLV - FIN - 308
CHAPTER 17 INTERNATIONAL CAPITAL STRUCTURE AND THE COST OF CAPITALSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1.Suppose that your firm is operating in a segmented capital market. What actions would yourecommend to
UNLV - FIN - 308
CHAPTER 18 INTERNATIONAL CAPITAL BUDGETINGSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Why is capital budgeting analysis so important to the firm?Answer: The fundamental goal of the financial manager is to maximi
UNLV - FIN - 308
CHAPTER 20 INTERNATIONAL TRADE FINANCESUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Discuss some of the reasons why international trade is more difficult and risky from the exportersperspective than is domestic tr
UNLV - FIN - 308
CHAPTER 21 INTERNATIONAL TAX ENVIRONMENT AND TRANSFER PRICINGSUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTERQUESTIONS AND PROBLEMSQUESTIONS1. Discuss the twin objectives of taxation. Be sure to define the key words.Answer: There are two basic objec
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