International Financial Management- Quiz III

55 Questions | Total Attempts: 737

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International Financial Management- Quiz III

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Questions and Answers
  • 1. 
    Which of the following is not a form of corporate control that could reduce agency problems for an MNC?
    • A. 

      Investor monitoring

    • B. 

      Stock options

    • C. 

      Hostile takeover threat

    • D. 

      All of the above

  • 2. 
    Which of the following theories suggests that firms seek to penetrate new markets over time?
    • A. 

      Theory of comparative advantage

    • B. 

      Imperfect markets theory

    • C. 

      Product cycle theory

    • D. 

      None of the above

  • 3. 
    Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks or trade names) in exchange for fees or some other specified benefits.
    • A. 

      True

    • B. 

      False

  • 4. 
    Which of the following is not a way in which agency problems can be reduced through corporate control?
    • A. 

      Threat of hostile takeover

    • B. 

      Acquisition of a foreign subsidiary

    • C. 

      Executive compensation

    • D. 

      Monitoring by large shareholders

  • 5. 
    An increase in the current account deficit will place _______ pressure on the home currency value, other things equal
    • A. 

      Downward

    • B. 

      Upward

    • C. 

      No

    • D. 

      Upward or downward (depending on the size of the deficit)

  • 6. 
    A weakening of the U.S. dollar with respect to the British pound would likely reduce the U.S. exports to Britain and increase U.S. imports from Britain.
    • A. 

      True

    • B. 

      False

  • 7. 
    Assume that a bank's bid rate on Swiss francs is £0.25 and its ask rate is £0.26. Its bid-ask percentage spread is:
    • A. 

      4.26%

    • B. 

      4%

    • C. 

      About 4.17%

    • D. 

      About 3.85%

  • 8. 
    The forward rate is the exchange rate used for immediate exchange of currencies
    • A. 

      True

    • B. 

      False

  • 9. 
    Assume the Canadian dollar is equal to £0.51 and the Peruvian Sol is equal to £0.16. The value of the Peruvian Sol in Canadian dollars is:-
    • A. 

      About 2.36 Canadian dollars

    • B. 

      About .3621 Canadian dollars

    • C. 

      About 2.51 Canadian dollars

    • D. 

      About .3137 Canadian dollars

  • 10. 
    From 1944 to 1971, the exchange rate between any two currencies was typically:-
    • A. 

      Non existent; that is currencies were not exchanged, but gold was used to pay for all foreign transactions

    • B. 

      Floating, but subject to central bank intervention

    • C. 

      Fixed within narrow boundaries

    • D. 

      Floating and not subject to central bank intervention

  • 11. 
    Futures contracts are typically _______; forward contracts are typically _______.
    • A. 

      Sold on an exchange; Offered by commercial banks

    • B. 

      Sold on an exchange; Sold on an exchange

    • C. 

      Offered by commercial banks; Sold on an exchange

    • D. 

      Offered by commercial banks; Offered by commercial banks

  • 12. 
    When the foreign exchange market opens in the UK each morning, the opening exchange rate quotations will be based on the:-
    • A. 

      Prevailing prices in locations where the foreign exchange markets have been open

    • B. 

      Closing prices in Canada during the previous day

    • C. 

      Officially set by central banks before the U.S. market opens

    • D. 

      Closing prices in the U.S. during the previous day

  • 13. 
    Under the gold standard, each currency was convertible into gold at a specified rate and the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold.
    • A. 

      True

    • B. 

      False

  • 14. 
    The strike price is also known as the premium price.
    • A. 

      True

    • B. 

      False

  • 15. 
    Eurobonds are certificates representing bundles of stock.
    • A. 

      True

    • B. 

      False

  • 16. 
    A share of the ADR of a Dutch firm represents one share of that firm's stock that is traded on a Dutch stock exchange. The share price of the firm was 15 Euros when the Dutch market closed. As the U.S. market opens, the Euro is worth $1.10. Thus, the price of the ADR should be _____.
    • A. 

      $15

    • B. 

      $16.5

    • C. 

      16.50 euro

    • D. 

      15 euro

  • 17. 
    The commonly accepted goal of the MNC is to:-
    • A. 

      Maximize short-term earnings

    • B. 

      Maximize shareholder wealth

    • C. 

      Maximize international sales

    • D. 

      None of the above

  • 18. 
    An increase in UK interest rates relative to India's interest rates is likely to ________ the UK demand for Rupees and _________ the supply of Rupees for sale.
    • A. 

      Reduce; Increase

    • B. 

      Increase; Increase

    • C. 

      Reduce; Reduce

    • D. 

      Increase; Reduce

  • 19. 
    In general, when speculating on exchange rate movements, the speculator will borrow the currency that is expected to appreciate and invest in the country whose currency is expected to depreciate.
    • A. 

      True

    • B. 

      False

  • 20. 
    The exchange rates of smaller countries are very stable because the market for their currency is very liquid.
    • A. 

      True

    • B. 

      False

  • 21. 
    What is Option price
    • A. 

      Strike price Strike price Strike price Strike price Strike price

    • B. 

      Exercise price Exercise price Exercise price

    • C. 

      Option premium

    • D. 

      None of the above

  • 22. 
    When a company adopts the Home Market orient policy
    • A. 

      Geocentric

    • B. 

      Ethnocentric

    • C. 

      Poly-centric

    • D. 

      None

  • 23. 
    Which one of the following is  not a form of FDI
    • A. 

      Greenfield Investment

    • B. 

      Brownfield Investment

    • C. 

      M & A

    • D. 

      Listing in foreign Stock Market

  • 24. 
    Which of the following is not true about a poly-centric solution to international financial management?
    • A. 

      Decisions are made on the spot by those most informed about market considerations.

    • B. 

      It reduces the authority of the home office

    • C. 

      It treats the MNC as a holding company

    • D. 

      It centralizes decision making

  • 25. 
    Peso is currency of
    • A. 

      Norway

    • B. 

      Mexico

    • C. 

      Thailand

    • D. 

      Libya

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