Test bank for international financial management 9th edition by cheol eun bruce resnick

International Financial Management 9th Edition

,MULTIPLE CHOICE - Choose the one alternative that best completes the
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IIll statement oranswers the question.
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1) What major dimension sets apart international finance from domestic finance?
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A) Foreign exchange and political risks IIll IIll IIll IIll




B) Market imperfections IIll




C) Expanded opportunity set IIll IIll




D) all of the options
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2) An example(s) of a political risk is
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A) expropriation of assets. IIll IIll




B) adverse change in tax rules. IIll IIll IIll IIll




C) the opposition party being elected.
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D) both the expropriation of assets and adverse changes in tax rules are correct.
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3) Production of goods and services has become globalized to a large extent as a
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result of
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A) natural resources being depleted in one country after another.
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B) skilled labor being highly mobile. IIll IIll IIll IIll




C) multinational corporations' efforts to source inputs and locate production IIll IIll IIll IIll IIll IIll IIll IIll




IIll anywherewhere costs are lower and profits higher.
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D) common tastes worldwide for the same goods and services. IIll IIll IIll IIll IIll IIll IIll IIll




International Financial Management 9th Edition

,4) Recently, financial markets have become highly integrated. This development
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International Financial Management 9th Edition

, A) allows investors to diversify their portfolios internationally.
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B) allows minority investors to buy and sell stocks.
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C) has increased the cost of capital for firms.
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D) none of the options IIll IIll IIll




5) Japan has experienced large trade surpluses. Japanese investors have responded to
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this by
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A) liquidating their positions in stocks to buy dollar-denominated bonds. IIll IIll IIll IIll IIll IIll IIll IIll




B) investing heavily in U.S. and other foreign financial markets. IIll IIll IIll IIll IIll IIll IIll IIll




C) lobbying the U.S. government to depreciate its currency. IIll IIll IIll IIll IIll IIll IIll




D) lobbying the Japanese government to allow the yen to appreciate. IIll IIll IIll IIll IIll IIll IIll IIll IIll




6) Suppose your firm invests $100,000 in a project in Italy. At the time the exchange
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rate is
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$1.25 = €1.00. One year later the exchange rate is the same, but the Italian
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IIll government has expropriated your firm's assets paying only €80,000 in
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IIll compensation. This is an example of IIll IIll IIll IIll IIll




A) exchange rate risk. IIll IIll




B) political risk. IIll




C) market imperfections. IIll




D) none of the options, since $100,000 = €80,000 × $1.25/€1.00.
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International Financial Management 9th Edition