1. Which of the following statements about Multinational financial management is FALSE:
a. The effects of changing currency values must be included in financial analyses.
b. Legal and economic differences must be considered in financial decisions.
c. Political risk must be included from multinational corporate financial analyses.
d. It is illegal and discriminatory to consider cultural differences when considering firm goals and employee management.
2. ______________ occurs if a firm has assets or liabilities in foreign countries.
a) Translation Exposure
b) Transaction Exposure
c) Economic Exposure
d) Political Exposure
3. _______________ says that the ratio of forward exchange rates to spot exchange rates must also equal the ratio of nominal risk free rates.
a) Fisher Effect
b) Interest Rate Parity
c) Purchasing Power Parity
d) Inflation Parity
4. Which statement is FALSE?
a The United States has a large current account deficit in its balance of payments
b A Eurodollar is a US dollar deposited in a bank outside of the US
c American Depository Receipts represent ownership of stock of foreign companies
d An Interest Rate Swap is when banks lend to each other
5. In the currency markets, 1 U.S. dollar = 0.6 British pound and 1 U.S. dollar equals 1.1 euros. Wolverine Cola produces cherry cola in England at a cost of 0.55 British pound per unit. The product is sold in France for 1.25 euros. In terms of U.S. dollars, how much profit is Wolverine realizing on each unit sold?
a. $0.78 b. $0.46 c. $0.35 d. $0.11
1. Which of the following statements about Multinational financial management is FALSE:
a. The effects of changing currency values must be included in financial analyses.
b. Legal and economic differences must be considered in financial decisions.
c. Political risk must be included from multinational corporate financial analyses.
d. It is illegal and discriminatory to consider cultural differences when considering firm goals and employee management.
2. ______________ occurs if a firm has assets or liabilities in foreign countries.
a) Translation Exposure
b) Transaction Exposure
c) Economic Exposure
d) Political Exposure
3. _______________ says that the ratio of forward exchange rates to spot exchange rates must also equal the ratio of nominal risk free rates.
a) Fisher Effect
b) Interest Rate Parity
c) Purchasing Power Parity
d) Inflation Parity
4. Which statement is FALSE?
a The United States has a large current account deficit in its balance of payments
b A Eurodollar is a US dollar deposited in a bank outside of the US
c American Depository Receipts represent ownership of stock of foreign companies
d An Interest Rate Swap is when banks lend to each other
5. In the currency markets, 1 U.S. dollar = 0.6 British pound and 1 U.S. dollar equals 1.1 euros. Wolverine Cola produces cherry cola in England at a cost of 0.55 British pound per unit. The product is sold in France for 1.25 euros. In terms of U.S. dollars, how much profit is Wolverine realizing on each unit sold?
a. $0.78 b. $0.46 c. $0.35 d. $0.11
