International Financial Management Exam Preparation Guide
Course Introduction
International Financial Management explores the principles and practices of managing financial operations in a global context. The course covers topics such as foreign exchange markets, international financial instruments, risk management, cross-border investment strategies, and global financing decisions. Students will analyze the challenges faced by multinational corporations, including currency exposure, country risk, and regulatory frameworks, while learning to apply financial tools and techniques to optimize value in a dynamic international environment. The course blends theoretical concepts with real-world case studies, equipping students with the skills needed to navigate the complexities of global financial management.
Recommended Textbook
International Financial Management 8th Edition by Madura
Available Study Resources on Quizplus
21 Chapters
1110 Verified Questions
1110 Flashcards
Source URL: https://quizplus.com/study-set/1035
Page 2
Chapter 1: Multinational Financial Management: An Overview
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/20499
Sample Questions
Q1) Licensing is the process by which a firm provides its technology (copyrights,patents,trademarks,or trade names)in exchange for fees or some other specified benefits.
A)True
B)False
Answer: True
Q2) A recent study by McKinsey & Co.found that investors assign a higher value to firms that exhibit ________ corporate governance standards and are likely to ________ ethical constraints.
A) high;not obey
B) high;obey
C) low;not obey
D) low;obey
Answer: B
Q3) In some countries,bribes are commonplace.If a U.S.-based MNC decides to adhere to a strict code of ethics and not pay bribes,its subsidiary may be at a competitive disadvantage in the foreign country.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: International Flow of Funds
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/20500
Sample Questions
Q1) Exporting of products by one country to other countries at prices below cost is called elasticity.
A)True
B)False
Answer: False
Q2) The World Bank frequently enters into cofinancing agreements.Under these agreements,financing is provided by the World Bank and/or official aid agencies,export credit agencies,or commercial banks.
A)True
B)False
Answer: True
Q3) If a country's government imposes a tariff on imported goods,that country's current account balance will likely __________ (assuming no retaliation by other governments).
A) decrease
B) increase
C) remain unaffected
D) either A or C are possible
Answer: B
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: International Financial Markets
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/20501
Sample Questions
Q1) As a result of the Smithsonian Agreement,the U.S.dollar was:
A) the currency to be used by all countries as a medium of exchange for international trade.
B) forced to be freely floating relative to all currencies without any boundaries.
C) devalued relative to major currencies.
D) revalued (upward) relative to major currencies.
Answer: C
Q2) Futures contracts are typically _______;forward contracts are typically _______.
A) sold on an exchange;sold on an exchange
B) offered by commercial banks;sold on an exchange
C) sold on an exchange;offered by commercial banks
D) offered by commercial banks;offered by commercial banks
Answer: C
Q3) Eurobonds are certificates representing bundles of stock.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Exchange Rate Determination
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/20502
Sample Questions
Q1) The real interest rate adjusts the nominal interest rate for:
A) exchange rate movements.
B) income growth.
C) inflation.
D) government controls.
E) none of the above
Q2) The exchange rates of smaller countries are very stable because the market for their currency is very liquid.
A)True
B)False
Q3) If inflation increases substantially in Australia while U.S.inflation remains unchanged,this is expected to place _______ pressure on the value of the Australian dollar with respect to the U.S.dollar.
A) upward
B) downward
C) either upward or downward (depending on the degree of the increase in Australian inflation)
D) none of the above;there will be no impact
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Currency Derivatives
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/20503
Sample Questions
Q1) Futures and options are available for crossrates.
A)True
B)False
Q2) In the U.S.,the typical currency futures contract is based on a currency value in terms of:
A) euros.
B) U.S. dollars.
C) British pounds.
D) Canadian dollars.
Q3) The writer of a call option is obligated to sell the underlying currency to the buyer of the option if the option is exercised.
A)True
B)False
Q4) If your firm expects the euro to substantially depreciate,it could speculate by _______ euro call options or _______ euros forward in the forward exchange market.
A) selling;selling
B) selling;purchasing
C) purchasing;purchasing
D) purchasing;selling
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Government Influence on Exchange Rates
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/20504
Sample Questions
Q1) Under a fixed exchange rate system,U.S.inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system.
A)True
B)False
Q2) Which of the following countries was probably the least affected (directly or indirectly)by the Asian crisis
A) Thailand.
B) Indonesia.
C) Russia.
D) China.
E) Malaysia.
Q3) The European countries conforming to the euro are completely insulated from movements in the euro's value with respect to other currencies.
A)True
B)False
Q4) Dollarization refers to the replacement of local currency with U.S.dollars.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: International Arbitrage and Interest Rate Parity
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/20505
Sample Questions
Q1) Based on interest rate parity,the larger the degree by which the U.S.interest rate exceeds the foreign interest rate,the:
A) larger will be the forward discount of the foreign currency.
B) larger will be the forward premium of the foreign currency.
C) smaller will be the forward premium of the foreign currency.
D) smaller will be the forward discount of the foreign currency.
Q2) Assume that interest rate parity holds.The Mexican interest rate is 50%,and the U.S.interest rate is 8%.Subsequently,the U.S.interest rate decreases to 7%.According to interest rate parity,the peso's forward ___________ will __________.
A) premium;increase
B) discount;decrease
C) discount;increase
D) premium;decrease
Q3) Assume locational arbitrage is possible and involves two different banks.The realignment that would occur due to market forces would increase one bank's ask rate and would decrease the other bank's bid rate.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Relationships among Inflation,Interest Rates,and Exchange Rates
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/20506
Sample Questions
Q1) If interest rate parity holds,then the one-year forward rate of a currency will ______ the predicted spot rate of the currency in one year according to the international Fisher effect.
A) greater than B) less than C) equal to
D) answer is dependent on whether the forward rate has a discount or premium
Q2) Given a home country and a foreign country,purchasing power parity (PPP)suggests that:
A) a home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate.
B) a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate.
C) a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate.
D) a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate.
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: Forecasting Exchange Rates
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/20507
Sample Questions
Q1) According to the text,research supports _______ in foreign exchange markets.
A) weak form efficiency
B) semistrong-form efficiency
C) strong form efficiency
D) A and B
E) B and C
Q2) Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% discount. Today's spot rate of the Canadian dollar is $.80. The spot rate forecasted for one year ahead is:
A) $.860.
B) $.848.
C) $.740.
D) $.752.
E) none of the above
Q3) Research indicates that currency forecasting services almost always outperform forecasts based on the forward rate.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Measuring Exposure to Exchange Rate
Fluctuations
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/20508
Sample Questions
Q1) One argument why exchange rate risk is irrelevant to corporations is that shareholders can deal with this risk individually.
A)True
B)False
Q2) Under FASB 52:
A) translation gains and losses are included in the reported net income.
B) translation gains and losses are included in stock holder's equity.
C) A and B
D) none of the above
Q3) Appreciation in a firm's local currency causes a(n)__________ in cash inflows and a(n)_________ in cash outflows.
A) reduction;reduction
B) increase;increase
C) increase;reduction
D) reduction;increase
Q4) Two highly negatively correlated currencies act almost as if they are the same currency.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Managing Transaction Exposure
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/20509
Sample Questions
Q1) If an MNC is hedging various currencies,it should measure the real cost of hedging in each currency as a dollar amount for comparison purposes.
A)True
B)False
Q2) Which of the following reflects a hedge of net payables on British pounds by a U.S.firm
A) purchase a currency put option in British pounds.
B) sell pounds forward.
C) sell a currency call option in British pounds.
D) borrow U.S. dollars, convert them to pounds, and invest them in a British pound deposit.
E) A and B
Q3) When a perfect hedge is not available to eliminate transaction exposure,the firm may consider methods to at least reduce exposure,such as ___________.
A) leading
B) lagging
C) cross-hedging
D) currency diversification
E) all of the above
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Managing Economic Exposure and Translation Exposure
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/20510
Sample Questions
Q1) Assume a U.S.firm uses a forward contract to hedge all of its translation exposure. Also assume that the firm underestimated what its foreign earnings would be. Assume that the foreign currency depreciated over the year. The firm would generate a translation _______,which would be _______ than the gain generated by the forward contract.
A) loss;smaller
B) loss;larger
C) gain;larger
D) gain;smaller
Q2) In general,it is more difficult to effectively hedge economic or translation exposure than to hedge transaction exposure.
A)True
B)False
Q3) ________ exposure occurs when an MNC translates each subsidiary's financial data to its home currency for consolidated financial statements.
A) Translation
B) Transaction
C) Economic
D) None of the above
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Direct Foreign Investment
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/20511
Sample Questions
Q1) Which of the following is not an advantage resulting from the Asian crisis that would favor direct foreign investment in Asia
A) strong local demand for products.
B) low production costs.
C) weak local currencies.
D) all of the above are advantages.
Q2) When a firm perceives that a foreign currency is _________,the firm may attempt direct foreign investment in that country,as the initial outlay should be relatively
A) overvalued;high
B) overvalued;low
C) undervalued;high
D) undervalued;low
Q3) ____________ is not a cost-related motive for direct foreign investment.
A) Exploiting monopolistic advantages
B) Fully benefiting from economies of scale
C) Uses foreign factors of production
D) Using foreign raw materials
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Multinational Capital Budgeting
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/20512
Sample Questions
Q1) When evaluating international project cash flows,which of the following factors is relevant
A) future inflation.
B) blocked funds.
C) exchange rates.
D) all of the above
Q2) The impact of blocked funds on the net present value of a foreign project will be greater if interest rates are _______ in the host country and there are _______ investment opportunities in the host country.
A) very high;limited
B) very low;limited
C) very low;numerous
D) very high;numerous
Q3) The break-even salvage value of a particular project is the salvage value necessary to:
A) offset any losses incurred by the subsidiary in a given year.
B) offset any losses incurred by the MNC overall in a given year.
C) make the project have zero profits.
D) make the project's return equal the required rate of return.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Multinational Restructuring
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/20513
Sample Questions
Q1) Other things being equal,a foreign subsidiary in China would more likely be divested by the U.S.parent if new information caused the parent to suddenly anticipate that:
A) the Chinese yuan would depreciate in the future.
B) the Chinese yuan would appreciate in the future.
C) the Chinese yuan would remain somewhat stable in the future.
D) none of the above;the value of the Chinese yuan has no impact on the feasibility of a divestiture.
Q2) If an MNC targets a successful foreign company with plans to continue the target's local business in a more efficient manner,the risk of the business will be relatively _______,and therefore the MNC's required return from acquiring the target will be relatively _______.
A) high;high
B) high;low
C) low;high
D) low;low
Q3) The U.S.is one of the few countries with agencies that monitor mergers and acquisitions.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Country Risk Analysis
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/20514
Sample Questions
Q1) _________ involve(s)the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.
A) The checklist approach
B) The Delphi technique
C) Quantitative analysis
D) Inspection visits
Q2) As a result of the 2003 war in Iraq,some MNCs feared that oil prices would ______ and that U.S.inflation and interest rates would _______.
A) rise;rise
B) fall;fall
C) rise;fall
D) fall;rise
Q3) Risk assessors almost always arrive at the same opinion after completing a macroassessment of country risk.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Multinational Cost of Capital and Capital Structure
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/20515
Sample Questions
Q1) In general,MNCs probably prefer to use ____________ foreign debt when their foreign subsidiaries are subject to ___________ local interest rates.
A) more;low
B) more;high
C) less;low
D) B and C
E) none of the above
Q2) One argument for why subsidiaries should be only partlyowned by the parent is:
A) that the potential conflict of interests between the MNC's managers and shareholders is avoided.
B) that the potential conflict of interests between the MNC's majority shareholders and minority shareholders is avoided.
C) that the potential conflict of interests between the MNC's existing creditors is avoided. D) to offer some protection against threats of any adverse actions by the host government.
Q3) Normally,an MNC will issue stock in all of the countries where it does business.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Long-Term Financing
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/20516
Sample Questions
Q1) Minnie Corp.has decided to issue three-year bonds denominated in 5,000,000 Slovakian koruna (SKK)at par.The bonds have a coupon rate of 17%.If the koruna is expected to appreciate from its current level of $.03 to $.032,$.034,and $.035 in years 1,2,and 3,respectively,what is the financing cost of these bonds
A) 17%.
B) 23.18%.
C) 22.36%.
D) 23.39%.
Q2) In general,the _________ rate payer in a plain vanilla swap believes interest rates are going to _______.
A) fixed;decline
B) floating;decline
C) floating;increase
D) none of the above
Q3) A floating coupon rate can be an advantage to the bond issuer during periods of increasing interest rates.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Financing International Trade
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/20517
Sample Questions
Q1) Consider a bank that acknowledges that it will make payments on behalf of a beer importer after the beer is delivered to the importer. This reflects:
A) accounts receivable financing.
B) forfaiting.
C) factoring.
D) a letter of credit.
Q2) Under a countertrade arrangement,the exporter ships the goods to the importer while retaining title to the merchandise until it is sold.
A)True
B)False
Q3) The exchange of goods between two parties without the use of any currency as a medium of exchange is called factoring.
A)True
B)False
Q4) A letter of credit does not guarantee that the goods purchased will be those invoiced and shipped.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Short-Term Financing
Available Study Resources on Quizplus for this Chatper
48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/20518
Sample Questions
Q1) What is the expected financing rate of the portfolio contemplated by Cameron Corporation
A) 3.10%.
B) 1.90%.
C) 17.00%.
D) 13.00%.
E) none of the above
Q2) What is the expected standard deviation of the portfolio contemplated by Cameron
A) 2.24%.
B) 14.98%.
C) 2.89%.
D) 17.00%.
E) none of the above
Q3) If all currencies in a financing portfolio are not correlated with each other,financing with such a portfolio would not be very different from financing with a single foreign currency.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 22
Chapter 21: International Cash Management
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/20519
Sample Questions
Q1) Although netting typically increases the need for foreign exchange conversion,it generally reduces the number of cross border transactions between subsidiaries.
A)True
B)False
Q2) Preauthorized payment is an arrangement that allows a corporation to charge a customer's bank account up to some limit.
A)True
B)False
Q3) According to _______,the effective yield earned by U.S.investors will be the same as the effective yield earned by nonU.S.investors in any given period.
A) interest rate parity (IRP)
B) the international Fisher effect (IFE)
C) purchasing power parity (PPP)
D) none of the above
Q4) Leading refers to the payment of supplies earlier than necessary;lagging refers to the payment of supplies later than allowed.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 23