Global Business Finance
Exam Bank
Course Introduction
Global Business Finance examines the principles and practices of financial management in an international context, focusing on the challenges and opportunities faced by firms operating across borders. The course covers key topics such as foreign exchange markets, international monetary systems, risk management strategies, global capital markets, cross-border investment decisions, and financing international trade. By analyzing case studies and real-world scenarios, students gain insights into how multinational corporations manage currency risk, optimize capital structure, and make strategic financial decisions in diverse regulatory and economic environments.
Recommended Textbook
Multinational Business Finance 15th Edition by David
Available Study Resources on Quizplus
18 Chapters
1227 Verified Questions
1227 Flashcards
Source URL: https://quizplus.com/study-set/218
Page 2
K. Eiteman
Chapter 1: Multinational Financial Management: Opportunities and Challenges
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/3222
Sample Questions
Q1) The securities at the heart of the global capital markets are the Mortgage Backed Securities (MBS). The health and security of the global financial system rely on the quality of these securities.
A)True
B)False
Answer: False
Q2) International trade might have approached the comparative advantage model in the 19th century, and it does so even more today.
A)True
B)False
Answer: False
Q3) A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?
A) an open marketplace
B) high-quality strategic management
C) access to capital
D) none of the above
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The International Monetary System
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3223
Sample Questions
Q1) Based on the premise that, other things equal, countries would prefer a fixed exchange rate: Variable rates provide stability in international prices for the conduct of trade.
A)True
B)False
Answer: False
Q2) Which of the following led to the eventual demise of the fixed currency exchange rate regime worked out at Bretton Woods?
A) widely divergent national monetary and fiscal policies among member nations
B) differential rates of inflation across member nations
C) several unexpected economic shocks to member nations
D) all of the above
Answer: D
Q3) The ability of a country to profit from its ability to print money is known as:
A) profiteering.
B) dollarization.
C) seigniorage.
D) inflation.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: The Balance of Payments
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/3224
Sample Questions
Q1) International debt security purchases and sales are defined as portfolio investments for financial account purposes because by definition debt securities do not provide the buyer with ownership or control.
A)True
B)False
Answer: True
Q2) Under an international regime of fixed exchange rates, countries with a BOP
________ should consider ________ their currency while countries with a BOP ________ should consider ________ their currency.
A) deficit, revaluing; surplus, revaluing
B) deficit, devaluing; surplus, devaluing
C) surplus, devaluing; deficit, revaluing
D) surplus, revaluing; deficit, devaluing
Answer: D
Q3) The effect of an imbalance in the BOP is the same for countries on a fixed exchange rate regime as for those on a floating exchange rate regime.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Financial Goals and Corporate Governance
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/3225
Sample Questions
Q1) One of the most challenging issues in the financial management of the enterprise is the possible separation of ownership from management resulting in the so-called principal agent problem. Define the agency problem, explain possible ways to alleviate the agency problem and discuss differences in across global markets.
Q2) In the Anglo-American model of corporate governance, the primary goal of management is to:
A) maximize the wealth of all stakeholders.
B) maximize shareholder wealth.
C) minimize costs.
D) minimize risk.
Q3) The decline of share listings in the United States has led to considerable debate over whether these trends represent a fundamental global business shift away from the publicly traded corporate form, or something that is more U.S.-centric combined with the economic times. Develop an argument to why the decline happened.
Q4) In the stakeholder capitalism model (SCM) the assumption of market efficiency is absolutely critical.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Foreign Exchange Market
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/3226
Sample Questions
Q1) Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.
A)True
B)False
Q2) Refer to Table 5.1. The one-month forward bid price for dollars as denominated in Japanese yen is:
A) -¥20.
B) -¥18.
C) ¥129.74/$.
D) ¥129.62/$.
Q3) The four currencies that constitute about 80% of all foreign exchange trading are:
A) U.K pound, Chinese yuan, euro, and Japanese yen.
B) U.S. dollar, euro, Chinese yuan, and U.K. pound.
C) U.S. dollar, Japanese yen, euro, and U.K. pound.
D) U.S. dollar, U.K. pound, yen, and Chinese yuan.
Q4) Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.
To view all questions and flashcards with answers, click on the resource link above.
7
Chapter 6: International Parity Conditions
Available Study Resources on Quizplus for this Chatper
62 Verified Questions
62 Flashcards
Source URL: https://quizplus.com/quiz/3227
Sample Questions
Q1) If we set the real effective exchange rate index between Canada and the United States equal to 100 in 1998, and find that the U.S. dollar has risen to a value of 112.6, then from a competitive perspective the U.S. dollar is:
A) overvalued.
B) undervalued.
C) very competitive.
D) There is not enough information to answer this question.
Q2) The Fisher Effect is a familiar economic theory in the domestic market. In words, define the Fisher Effect and explain why you think it is also appropriately applied to international markets.
Q3) According to the international Fisher Effect, if an investor purchases a five-year U.S. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6%, then the investor must be expecting the ________ to ________ at a rate of at least 1% per year over the next 5 years.
A) British pound; appreciate B) British pound; revalue
C) U.S. dollar; appreciate
D) U.S. dollar; depreciate
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Foreign Currency Derivatives: Futures and Options
Available Study Resources on Quizplus for this Chatper
88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/3228
Sample Questions
Q1) Volatility is viewed the following ways EXCEPT:
A) historic.
B) forward-looking.
C) implied.
D) spot.
Q2) A call option whose exercise price exceeds the spot price is said to be:
A) in-the-money.
B) at-the-money
C) out-of-the-money.
D) over-the-spot.
Q3) The Rho of an option is defined as:
A) expected change in the option premium for a small change in time to expiration.
B) expected change in the option premium for a small change in volatility.
C) expected change in the option premium for a small change in the foreign interest rate.
D) expected change in the option premium for a small change in the domestic interest rate.
Q4) List and explain three "Greek" elements and their impact on a call option premium.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Interest Risk and Swaps
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/3229
Sample Questions
Q1) The interest rate swap strategy of a firm with fixed rate debt and that expects rates to go up is to:
A) do nothing.
B) pay floating and receive fixed.
C) receive floating and pay fixed.
D) none of the above
Q2) How does counterparty risk influence a firm's decision to trade exchange-traded derivatives rather than over-the-counter derivatives?
Q3) Which of the following is an unlikely reason for firms to participate in the swap market?
A) To replace cash flows scheduled in an undesired currency with cash flows in a desired currency.
B) Firms may raise capital in one currency but desire to repay it in another currency.
C) Firms desire to swap fixed and variable payment or receipt of funds.
D) All of the above are likely reasons for a firm to enter the swap market.
Q4) Swap rates are derived from the yield curves in each major currency.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Foreign Exchange Rate Determination and Intervention
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/3230
Sample Questions
Q1) The Asian Currency crisis appeared to begin in:
A) South Korea.
B) Taiwan.
C) Thailand.
D) Japan.
Q2) Indirect intervention for domestic currency valuation typically uses tools of monetary policy as opposed to using tools of fiscal policy.
A)True
B)False
Q3) It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate, i.e., they are linked AND mutually determined.
A)True
B)False
Q4) Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?
Q5) Foreign exchange forecasting can be either long-term, or short-term in duration. Compare and contrast the motivation for and the techniques a forecaster might use for each of the time periods.
11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Transaction Exposure
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/3231
Sample Questions
Q1) With the use of forwards, a perfect hedge is possible.
A)True
B)False
Q2) Refer to Instruction 10.1. What is the cost of a call option hedge for CVT's euro receivable contract? (Note: Calculate the cost in future value dollars and assume the firm's cost of capital as the appropriate interest rate for calculating future values.)
A) $57,600
B) $59,904
C) $62,208
D) $63,936
Q3) In efficient markets, interest rate parity should assure that the costs of a forward hedge and money market hedge should be approximately the same.
A)True
B)False
Q4) Remaining unhedged is NOT an option when dealing with foreign exchange transaction exposure.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Translation Exposure
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/3232
Sample Questions
Q1) If the parent firm and all subsidiaries denominate all exposed assets and liabilities in the parent's reporting currency this will ________ exposure but each subsidiary would have ________ exposure.
A) maximize translation; no transaction
B) eliminate translation; transaction
C) maximize transaction; no translation
D) eliminate transaction; translation
Q2) One possible reason for a balance sheet hedge could be because the foreign subsidiary is about to be liquidated, so that value of its Cumulative Translation Adjustment (CTA) would be realized.
A)True
B)False
Q3) Translation exposure may also be called ________ exposure.
A) transaction
B) operating
C) accounting
D) currency
Q4) Describe a balance sheet hedge and give at least two examples of when such a hedge could be justified.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Operating Exposure
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/3233
Sample Questions
Q1) ________ exposure is far more important for the long-run health of a business than changes caused by ________ or ________ exposure.
A) Operating; translation; transaction
B) Transaction; operating; translation
C) Accounting; translation; transaction
D) Translation; operating; transaction
Q2) An MNE has a contract for a relatively predictable long-term inflow of Japanese yen that the firm chooses to hedge by paying for imports from Canada in Japanese yen. This hedging strategy is known as:
A) a natural hedge.
B) currency-switching.
C) matching.
D) diversification.
Q3) Which of the following is NOT an example of diversification in financing?
A) raising funds in more than one market
B) raising funds in more than one country
C) diversifying sales
D) All of the above qualify.
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Global Cost and Availability of Capital
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/3234
Sample Questions
Q1) International diversification benefits may induce investors to demand foreign securities.
A)True
B)False
Q2) The WACC is usually used as the risk-adjusted required rate of return for new projects that are of the same average risk as the firm's existing projects.
A)True
B)False
Q3) Theoretically, most MNEs should be in a position to support higher ________ than their domestic counterparts because their cash flows are diversified internationally.
A) equity ratios
B) debt ratios
C) temperatures
D) none of the above
Q4) Market imperfections do not necessarily imply that national securities markets are inefficient. Develop an argument as to why this is possible.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Funding the Multinational Firm
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/3235
Sample Questions
Q1) In early stages of a foreign subsidiary's life, local host country debt is the only possible source of funding.
A)True B)False
Q2) A significant advantage of borrowing foreign currency-denominated bonds is that the borrower need not worry about relative changes in the value of the home currency.
A)True B)False
Q3) Private equity funds differ from traditional venture capital funds. List and discuss three differences between them.
Q4) ADRs are a popular investment tool for many U.S. investors. In recent years several alternatives for investing in foreign equity securities have become available for U.S. investors, yet ADRs remain popular. Define what an ADR is and provide at least three examples of the advantages they may hold over alternative foreign investment vehicles for U.S. investors.
Q5) Eurobonds offer tax anonymity.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Multinational Tax Management
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/3236
Sample Questions
Q1) Refer to Instruction 15.2. If the U.S. has no bilateral trade agreement with the host country, what is the total amount of income taxes Green Valley Exporters will pay?
A) $25,000
B) $35,000
C) $51,250
D) $60,000
Q2) Tax-haven subsidiaries are typically established in a country that can meet the following requirements:
A) a low tax on foreign investment or sales income earned by resident corporations and a low dividend withholding tax on dividends paid to the parent firm.
B) the facilities to support financial services, for example, good communications, professional qualified office workers, and reputable banking services.
C) a stable government that encourages the establishment of foreign-owned financial and service facilities within its borders.
D) all of the above
Q3) What are the desired characteristics for a country if it expects to be used as a tax haven?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 16: International Trade Finance
Available Study Resources on Quizplus for this Chatper
75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/3237
Sample Questions
Q1) The primary advantage of a letter of credit is that it reduces risk.
A)True
B)False
Q2) In the United States, the Foreign Credit Insurance Corporation:
A) is a subsidiary of the Export-Import Bank.
B) provides letters of credit for U.S. importers.
C) provides letters of credit for U.S. exporters.
D) provides policies that protect U.S. exporters against default by foreign importers.
Q3) Issuing commercial papers to finance accounts receivable or short-term financing needs lies at the low end of the pecking order of trade financing alternatives.
A)True
B)False
Q4) Which of the following is NOT true about forfaiting?
A) The exporter is responsible for the quality of delivered goods.
B) Exporter receives an unconditional cash payment at the time of the transaction.
C) The exporter sells bank-guaranteed promissory notes at its face value.
D) The political and commercial risk is carried by the guaranteeing bank.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Foreign Direct Investment and Political Risk
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/3238
Sample Questions
Q1) A/An ________ would be an example of a location-specific advantage for an MNE.
A) patent
B) economy of scale
C) unique source of raw materials
D) possession of proprietary information
Q2) Which of the following is NOT an advantage to a joint venture?
A) Possible loss of opportunity to enter the foreign market with FDI later.
B) The local partner understands the customs and mores of the foreign market.
C) The local partner can provide competent management at many levels.
D) May be a realistic alternative when 100% foreign ownership is not allowed.
Q3) Blocked funds are cash flows that:
A) come in regular intervals in standardized amounts or blocks.
B) have been restricted in transfer out of a local country.
C) come from a certain sector or region of the world.
D) none of the above
Q4) A number of institutional services provide updated country risk ratings on a regular basis. This is an example of micro-risk information for MNEs using this data.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Multinational Capital Budgeting and Cross-Border Acquisitions
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3239
Sample Questions
Q1) When estimating a firm's cost of equity capital using the CAPM, you need to estimate:
A) the risk-free rate of return.
B) the expected return on the market portfolio.
C) the firm's beta.
D) all of the above
Q2) A foreign firm that is 20% to 49% owned by a parent is called a/an:
A) subsidiary.
B) affiliate.
C) partner.
D) rival.
Q3) When a multinational firm invests abroad, it is common to develop two capital budgets: one from the project viewpoint, and one from the parent viewpoint.
A)True
B)False
Q4) What is real option analysis? How is it a better method of making investment decisions than using traditional capital budgeting analysis?
To view all questions and flashcards with answers, click on the resource link above.
Page 20