Question 1

A translation exposure occurs when the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes.

Accepted Answer

A) True 
 B)False

Question 2

What is the main challenge companies face in listing ADRs in the United States?

Accepted Answer

A)   paying costly fees and tariffs
B)   complying with SEC reporting requirements
C)   listing shares in U.S. dollars instead of Eurodollars
D)   conducting time-consuming performance evaluationsE) None of the above
F) B) and D)

Question 3

A transaction exposure results in a foreign exchange gain or loss.

Accepted Answer

A) True 
 B)False

Question 4

Subpart F income is passive and usually derived from operations in a tax-haven country.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a characteristic of the Eurocurrency market?

Accepted Answer

A)   The Eurocurrency market is both short and medium term.
B)   Private borrowers are the major players in the Eurocurrency market.
C)   The Eurocurrency market is a retail, rather than wholesale, market.
D)   The interest rates in the Eurocurrency market are about the same as in domestic markets.E) B) and C)
F) All of the above

Question 6

A transaction exposure for a U.S. company ________.

Accepted Answer

A)   occurs when the dollar value of a payable from exports changes as the exchange-rate changes
B)   generally takes place when foreign currencies weaken against the dollar
C)   occurs when reporting systems are inadequate
D)   does not result in a gain or loss in cash flowsE) A) and C)
F) A) and B)

Question 7

What is foreign currency translation exposure? How can this type of exposure affect an MNE?

Accepted Answer

Foreign currency financial statements ar...

Question 8

According to 2010 data,which of the following statements about the mix of debt and equity to fund operations is true?

Accepted Answer

A)   The debt/asset ratio has risen in Japan since 2007.
B)   A growing number of Russian firms are relying more on debt.
C)   The equity/asset ratio fell for firms in France and Germany since 2007.
D)   In most emerging markets, shares of stock are broadly held like in the U.S.E) None of the above
F) A) and C)

Question 9

Assume that a Canadian exporter sells to a French importer and denominates the sale in euros,which opens the exporter up to foreign exchange risk. Also,assume that the exporter goes to its investment bank and enters into a contract with the bank to gain the right but not the obligation to deliver euros for Canadian dollars at an agreed-upon exchange rate. This is an example of a ________.

Accepted Answer

A)   lead strategy
B)   lag strategy
C)   foreign-currency option
D)   forward contractE) A) and B)
F) A) and C)

Question 10

An economic exposure ________.

Accepted Answer

A)   occurs when reporting systems are inadequate
B)   generally takes place when foreign currencies weaken against the dollar
C)   occurs when the sourcing and costs of components change as exchange rates change
D)   is the same as a translation exposureE) A) and D)
F) A) and B)

Question 11

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound,what types of economic exposure and/or possible strategies could the exporter or importer face?

Accepted Answer

A)   The U.S. exporter has no economic risk because the sale is denominated in dollars.
B)   The British importer has only economic risk if the dollar falls against the pound.
C)   The U.S. exporter could lower prices in order to reduce the cost to the importer and thereby keep up sales volume.
D)   The U.S. exporter does not face an economic exposure, but the British importer does because it must pay in dollars.E) B) and D)
F) A) and D)

Question 12

According to U.S. tax law,if a foreign subsidiary earns income,________.

Accepted Answer

A)   its income is immediately taxable to the parent, irrespective of the type of income earned
B)   that income is not taxable to the parent company as long as the subsidiary pays income taxes in the country where it is earned
C)   passive income is taxable to the parent unless the parent company is a controlled foreign corporation
D)   active income is taxable to the parent when it is remitted as a dividendE) B) and C)
F) C) and D)

Question 13

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.

Accepted Answer

A)   transfer pricing
B)   a tax credit
C)   lag strategies in tax planning
D)   passive income reductionsE) A) and C)
F) A) and D)

Question 14

A price on goods and services sold by one member of a corporate family to another is known as a(n) ________.

Accepted Answer

A)   transfer price
B)   tax credit price
C)   passive price
D)   active priceE) A) and D)
F) A) and B)

Question 15

Which of the following countries has the largest market for domestic bonds?

Accepted Answer

A)   the U.K.
B)   the U.S.
C)   Japan
D)   ChinaE) A) and D)
F) All of the above

Question 16

Assume that a company has a foreign subsidiary in a country with an exchange rate that is expected to strengthen against the parent company's currency. If the parent is planning the timing for the subsidiary to send a dividend to the parent,it would probably choose a lag strategy.

Accepted Answer

A) True 
 B)False

Question 17

A Japanese company exports merchandise to a U.S. importer for ¥1,000,000 when the exchange rate is ¥107 per dollar. Payment is not due until the end of the month. At the end of the month,the exchange rate has moved to ¥105 per dollar,and the U.S. importer pays the Japanese exporter for the merchandise. From the standpoint of the U.S. importer,________.

Accepted Answer

A)   there is no transaction exposure since they will sell the merchandise in the United States for dollars
B)   the merchandise will be carried on the books at $93,468 (rounded) 
C)   the Japanese exporter will be paid $9,524
D)   the exposure is considered to be a translation exposure, not a transaction exposureE) B) and D)
F) B) and C)

Question 18

An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Accepted Answer

A) True 
 B)False

Question 19

What are the major sources of internal funds for MNEs? Why do many MNEs acquire external funds through the Eurodollar market?

Accepted Answer

The major sources of internal funds for ...

Question 20

What is a transfer price? Why are transfer prices used?

Accepted Answer

A major tax challenge,as well as impedim...

Exam 19: The Multinational Finance Function

What is foreign currency translation exposure? How can this type of exposure affect an MNE?

Correct Answer
verified
Foreign currency financial statements ar...
View Answer

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound,what types of economic exposure and/or possible strategies could the exporter or importer face?

Correct Answer
verified

According to U.S. tax law,if a foreign subsidiary earns income,________.

Correct Answer
verified

A transaction exposure for a U.S. company ________.

Correct Answer
verified

Assume that a company has a foreign subsidiary in a country with an exchange rate that is expected to strengthen against the parent company's currency. If the parent is planning the timing for the subsidiary to send a dividend to the parent,it would probably choose a lag strategy.

Correct Answer
verified

What are the major sources of internal funds for MNEs? Why do many MNEs acquire external funds through the Eurodollar market?

Correct Answer
verified
The major sources of internal funds for ...
View Answer

Correct Answer
verified

A price on goods and services sold by one member of a corporate family to another is known as a(n) ________.

Correct Answer
verified

Correct Answer
verified

An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Correct Answer
verified

What is a transfer price? Why are transfer prices used?

Correct Answer
verified
A major tax challenge,as well as impedim...
View Answer

Which of the following countries has the largest market for domestic bonds?

Correct Answer
verified

Subpart F income is passive and usually derived from operations in a tax-haven country.

Correct Answer
verified

Which of the following is a characteristic of the Eurocurrency market?

Correct Answer
verified

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.

Correct Answer
verified

An economic exposure ________.

Correct Answer
verified

According to 2010 data,which of the following statements about the mix of debt and equity to fund operations is true?

Correct Answer
verified

What is the main challenge companies face in listing ADRs in the United States?

Correct Answer
verified

A transaction exposure results in a foreign exchange gain or loss.

Correct Answer
verified

A translation exposure occurs when the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes.

Correct Answer
verified

Exam 19: The Multinational Finance Function

What is foreign currency translation exposure? How can this type of exposure affect an MNE?

Correct AnswerverifiedForeign currency financial statements ar...View AnswerShow Answer

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound,what types of economic exposure and/or possible strategies could the exporter or importer face?

Correct AnswerverifiedShow Answer

According to U.S. tax law,if a foreign subsidiary earns income,________.

Correct AnswerverifiedShow Answer

A transaction exposure for a U.S. company ________.

Correct AnswerverifiedShow Answer

Assume that a company has a foreign subsidiary in a country with an exchange rate that is expected to strengthen against the parent company's currency. If the parent is planning the timing for the subsidiary to send a dividend to the parent,it would probably choose a lag strategy.

Correct AnswerverifiedShow Answer

What are the major sources of internal funds for MNEs? Why do many MNEs acquire external funds through the Eurodollar market?

Correct AnswerverifiedThe major sources of internal funds for ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

A price on goods and services sold by one member of a corporate family to another is known as a(n) ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An option is a hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required.

Correct AnswerverifiedShow Answer

What is a transfer price? Why are transfer prices used?

Correct AnswerverifiedA major tax challenge,as well as impedim...View AnswerShow Answer

Which of the following countries has the largest market for domestic bonds?

Correct AnswerverifiedShow Answer

Subpart F income is passive and usually derived from operations in a tax-haven country.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of the Eurocurrency market?

Correct AnswerverifiedShow Answer

The principle by which the tax authorities allow firms to reduce their tax liability by the amount of income taxes paid to foreign governments is known as ________.

Correct AnswerverifiedShow Answer

An economic exposure ________.

Correct AnswerverifiedShow Answer

According to 2010 data,which of the following statements about the mix of debt and equity to fund operations is true?

Correct AnswerverifiedShow Answer

What is the main challenge companies face in listing ADRs in the United States?

Correct AnswerverifiedShow Answer

A transaction exposure results in a foreign exchange gain or loss.

Correct AnswerverifiedShow Answer

A translation exposure occurs when the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes.

Correct AnswerverifiedShow Answer

Correct Answer
verified
Foreign currency financial statements ar...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The major sources of internal funds for ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A major tax challenge,as well as impedim...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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