Question 1

The threat of expropriation creates an incentive for the multinational firm to minimize inventory holdings in certain countries and to bring in goods only as needed.

Accepted Answer

True

Question 2

Calculating a currency cross rate involves determining the exchange rate for two currencies by using a third currency as a base.

Accepted Answer

True

Question 3

Legal and economic differences among countries, although important, do NOT pose significant problems for most multinational corporations when they coordinate and control worldwide operations of subsidiaries.

Accepted Answer

False

Question 4

A foreign currency will, on average, depreciate against the U.S.dollar at a percentage rate approximately equal to the amount by which its inflation rate exceeds that of the United States.

Accepted Answer

The answer of A foreign currency will, on average, depreciate...

Question 5

When the value of the U.S.dollar appreciates against another country's currency, we may purchase more of the foreign currency with a dollar.

Accepted Answer

The answer of When the value of the U.S.dollar appreciates...

Question 6

LIBOR is an acronym for London Interbank Offer Rate, which is an average of interest rates offered by London banks to smaller U.S.corporations.

Accepted Answer

The answer of LIBOR is an acronym for London Interbank...

Question 7

The United States and most other major industrialized nations currently operate under a system of floating exchange rates.

Accepted Answer

The answer of The United States and most other major...

Question 8

Multinational financial management requires that financial analysts consider the effects of changing currency values.

Accepted Answer

The answer of Multinational financial management requires that financial analysts...

Question 9

Due to advanced communications technology and the standardization of general procedures, working capital management for multinational firms is no more complex than it is for large domestic firms.

Accepted Answer

The answer of Due to advanced communications technology and the...

Question 10

A Eurodollar is a U.S.dollar deposited in a bank outside the United States.

Accepted Answer

The answer of A Eurodollar is a U.S.dollar deposited in...

Question 11

Individuals and corporations can buy or sell forward currencies to hedge their exchange rate exposure.Essentially, the process involves simultaneously selling the currency expected to appreciate in value and buying the currency expected to depreciate.

Accepted Answer

The answer of Individuals and corporations can buy or sell...

Question 12

If the United States is running a deficit trade balance with China, then in a free market we would expect the value of the Chinese yuan to depreciate against the U.S.dollar.

Accepted Answer

The answer of If the United States is running a...

Question 13

Because political risk is seldom negotiable, it cannot be explicitly addressed in multinational corporate financial analysis.

Accepted Answer

The answer of Because political risk is seldom negotiable, it...

Question 14

Credit policy for multinational firms is generally more risky due in part to the additional consideration of exchange rates and also due to uncertainty regarding the credit worthiness of many foreign customers.

Accepted Answer

The answer of Credit policy for multinational firms is generally...

Question 15

Exchange rates influence a multinational firm's inventory policy because changing currency values can affect the value of inventory.

Accepted Answer

The answer of Exchange rates influence a multinational firm's inventory...

Question 16

If an investor can obtain more of a foreign currency for a dollar in the forward market than in the spot market, then the forward currency is said to be selling at a discount to the spot rate.

Accepted Answer

The answer of If an investor can obtain more of...

Question 17

Exchange rate quotations consist solely of direct quotations.

Accepted Answer

The answer of Exchange rate quotations consist solely of direct...

Question 18

If a dollar will buy fewer units of a foreign currency in the forward market than in the spot market, then the forward currency is said to be selling at a premium to the spot rate.

Accepted Answer

The answer of If a dollar will buy fewer units...

Question 19

Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.

Accepted Answer

The answer of Exchange rate risk is the risk that...

Question 20

The Eurodollar market is essentially a long-term market; most loans and deposits in this market have maturities longer than one year.

Accepted Answer

The answer of The Eurodollar market is essentially a long-term...

Quiz 17: Multinational financial management