Quiz 1

Financial globalization has not resulted in:

• continuing imbalances of balance of payments.

• an increase in quantity and speed in the flow of capital across the world.

• capital markets less open and a decrease in the availability of capital for many organizations.

• uniform ways of ownership, control, and governance across the world.

A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

• an open market place

• high quality strategic management

• access to capital

• none of the above

The reference rate of interest in the eurocurrency market is the:

• London Interbank Offered Rate.

• Prima rate.

• Federal funds rate.

• Treasury rate.

The theory that suggests specialization by country can increase worldwide production is:

• the theory of comparative advantage.

• the theory of foreign direct investment.

• the international Fisher effect.

• the theory of working capital management.

Which of the following is NOT a reason governments interfere with comparative advantage?

• Governments attempt to achieve full employment.

• Governments promote economic development.

• national self-sufficiency in defense-related industries

• All are reasons governments interfere with comparative advantage.

In finance, an efficient market is one in which:

• prices are assumed to be correct.

• prices adjust quickly and accurately to new information.

• prices are the best allocators of capital in the macro economy.

• all of the above

The primary operational goal for the firm is to:

• maximize after-tax profits in each country where the firm is operating.

• minimize the total financial risk to the firm.

• maximize the consolidated after-tax profits of the firm.

• maximize the total risk to the firm.

Which of the following is NOT an important concept when distinguishing between international and domestic financial management?

• corporate governance

• culture, history, and institutions

• political risk

• All of the above are important distinguishing concepts.

Which of the following is NOT true regarding the market for foreign exchange?

• The market provides the physical and institutional structure through which the money of one country is exchanged for another.

• The rate of exchange is determined in the market.

• Foreign exchange transactions are physically completed in the foreign exchange market.

• All of the above are true.

It is characteristic of foreign exchange dealers to:

• bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale.

• act as market makers, willing to buy and sell the currencies in which they specialize.

• trade only with clients in the retail market and never operate in the wholesale market for foreign exchange.

• All of the above are characteristics of foreign exchange dealers.