Chapter 17: Multinational Financial Management Test Banks

5879 words 24 pages
CHAPTER 17

MULTINATIONAL FINANCIAL MANAGEMENT
(Difficulty Levels: Easy, Easy/Medium, Medium, Medium/Hard, and Hard)

Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines.

Multiple Choice: True/False

(17-2) Multinational fin. mgmt. F T Answer: a EASY
[i]. Multinational financial management requires that financial analysts consider the effects of changing currency values.

a. True b. False

(17-2) Multinational fin. mgmt. F T Answer: b EASY
[ii]. Legal and economic differences among countries, although important, do NOT pose significant problems for most multinational corporations when they coordinate and control worldwide operations and subsidiaries.

a. True
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If the inflation rate in the United States is greater than the inflation rate in Britain, other things held constant, the British pound will

a. Appreciate against the U.S. dollar. b. Depreciate against the U.S. dollar. c. Remain unchanged against the U.S. dollar. d. Appreciate against other major currencies. e. Appreciate against the dollar and other major currencies.

(17-6) Interest rate parity C T Answer: a MEDIUM
[xxi]. In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT?

a. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market. b. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 180-day forward market. c. The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market. d. The yen-dollar exchange rate in the 180-day forward market equals the yen-dollar exchange rate in the 90-day spot market. e. The relationship between spot and forward interest rates cannot be

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