CÂU HỎI TRẮC NGHIỆM TÀI CHÍNH QUỐC TẾ

1. Other factors are held constant, and the USD/VND exchange rate is free to fluctuate, how would the value of VND
against USD change if the inflation in Vietnam is higher than that of the US?
A. Does not change
B. Other answers
C. Increases
D. Decreases
2. Factors effect to BOP
A. All of them
B. Restriction of government
C. Exchange rate
D. Inflation
3. Net income is an item of:
A. Current balance
B. Operations balance
C. Capital balance
D. Trade balance
4. The Fisher Effect assumes that the.
A. Nominal interest rate is equal to the real interest rate plus the inflation rate
B. Inflation rate is equal to the real interest rate
C. Nominal interest rate is equal to the inflation rate
D. Real interest rate is equal to the norminal interest rate
E. Nominal interest rate is lower than the inflation rate
5. The official BOP report is prepared periodically for
A. Yearly
B. Monthly
C. Half yearly
D. Quarterly
6. The cross rate is:
A. None of them
B. Exchange rate which is determined between USD and another currency.
C. Exchange rate which is determined between any two currencies.
D. Exchange rate between two currencies that are both valued against a third currency.
7. What behavior makes CIA persisted:
A. Borrowing
B. Investment
C. Interest rate arbitrage
D. Other answers
8. Which is correct:
A. The future and forward contract is mainly used for speculation
B. The future contract is mainly applied by speculators; the forward market is used for hedging.
C. The forward contract is mainly applied by speculators, the future market is used for hedging
D. The future and forward contract is mainly used for hedging.
9. Which of the following is a weakness of absolute form of purchasing power parity theory?
A. The difference in education level
B. The proportion of goods in the basket
C. Compare the price of a basket of goods in local currency and the price of a basket of goods in foreign currencies
D. The respected assumption of the law of the one price
10. One of reason motivating FDI come in a country:
A. Foreign exchange rate increase.
B. A and B are true
C. All are wrong
D. Higher interest rate in investment recipient country.
11. Points above the IRP line show:
A. IRP exist.
B. CIA is feasible for foreign investors.
C. CIA is feasible for domestic investors.
D. CIA is not feasible for all investors.
12. Licensing is:
A. Allowing an organization/individual to use your brand, your prestige on their product.
B. All are correct.
 C. Conduct in international market without major investment.
D. Hard to control the quality of product under your own brand.
13. Assume that: Interest rate USD= 2,5% / year; Interest rate CHF= 5,3%/ year. Premium/discount U.S investors will
receive after 1 year (IRP exist)
A. -0.0266
B. 2.66%
C. 0.0266
D. 0.0266%
14. What is the result of comparing the prices of foreign and domestic goods?
A. Relative purchaisng power parity.
B. CIA exchange rate
C. IFE exchange rate
D. PPP exchange rate
15. A strike price in currency options markets is the specified exchange rate at which the.
A. Futures options can be sold
B. Option can be exercised
C. Option xan be bought
D. None of the above
E. Option can be sold
16. The theory of interest rate parity means that the.
A. Interest rates are equal in two countries
B. Difference between a forward rate and a spot rate equals the difference betweeen a domestic interest rate
and a foreign interest rate
C. Future spot rate reflects the inflation difference between two countries
D. All the above
E. Difference between the spot rate and the future spot rate reflects the interest rate difference between two countries
17. A company in the U.S exports products to Germany and they will rêcive payment 3 months latẻ. On 1 June 2022, Spot
rate: EUR/USD = 1.12; 3 months forward rate: EUR/USD = 1.10. A deal with bank to sell forward contract 200,000
EUR. On 1 Sept 2022, Spot rate EUR/USD = 1.15. Calculating the revenue in EUR?
A. 200,000
B. 224,000
C. 220,000
D. 230,000
18. What factors cause CIA not to be maintained?
A. Transaction costs
B. Government intervention
C. All are wrong
D. All are correct
19. The forward contracts
A. Include the responsibilities of parties and standardized
B. Supply the right buying a certain currency at a specified price
C. Include the responsibilities of parties who must fulfil their contractual obligations.
D. Supply right selling a certain currency and standardized
20. ABC has headquate in the US, they usually import raw materials from Chinese. ABC do payment CNY, and they
speculator CNY will be increased in future, which is thei option?
A. Buy the put option
B. Buy CNY future contract
C. Buy the call option.
D. Buy CNY forward contract.
21. Balance of Trade is also known as:
A. Overall balance
B. Current balance
C. Tangible balance
D. Official offsetting balance
22. A currency futures put option gives.
A. The buyer the obligations to sell a particular currency futures contract
B. The seller the right to sell an underlying currency
C. The buyer the right to sell a particular currency futures contract
D. Both the seller and the buyer to sell a particular currency futures contract
E. The seller the right to sell a particular currency futures contract
23. Agency problems exist due to:
A. The conflicts between managers and shareholders
 B. All are correct
C. The conflicts between parent company and subsidiaries
24. A transaction report between the residents and non-residents in a period time is called:
A. Basic balance
B. Payment for merchandise
C. Current account
D. Balance of payment
25. The purchasing power parity thẻoy states that:
A. Exchange rate differentials rèlect ìnlation diferentials
B. Interest rates are always greater than inflation rates.
C. A currency with a high inflation rate tends to depreciate.
D. A currency with a high inflation rate has a higher interest rate.
26. J curve effect shows:
A. All are wrong.
B. Balance of trade is deteriorated and then, it gets better due to weak home currency solution.
C. Balance of trade is affected by interest rates.
D. Weak home currency solution trend to increase inflation rate.
27. To choose to invest or borrow between one currency and another, what factors should we pay attention to?
A. Spot rate
B. Forward rate
C. All are correct
D. Interest rates
28. The purchasing power parity says:
A. All are wrong
B. The cost of a haircut in HK is exactly the same as the cost of a haircut in Vietnam.
C. Inflation rates are the same across countries.
D. All are correct
29. A forwad market hedge involves the following except.
A. A fixed amount of foreign currency
B. Commercial banks
C. Forward contract
D. Forward rate
E. Future spot rate
30. When will investors invest in VND instead of investing in USD then convert to VND?
A. The VND interest rate is higher than those of USD
B. The VND interest rate is lower than the interest rate invested in USD then convert into VND
C. The VND interest rate is lower than those of USD
D. The VND interest rate is higher than the interest rate invested in USD then convert into VND
31. Franchising is:
A. All are correct
B. Allowing an organization/individual to use your brand, your pretige in exchange for fee
C. Control the quality of product/services under your own brand.
D. Transferring the production process in exchange for fee
32. Exchange rate quotation at Vietcombank on Fed 28, 2023, as following:USD/VND = 23,535- 23,550; JPY/VND =
168.75- 178.65. Cross rate: Bid USD/JPY? Ask USD/JPY?
A. 131.73- 139.55
B. 131.73- 139.46
C. 131.82 – 139.46
33. Other factors are held constant, and the USD/VND axchange rate is free too fluctuate, how would the value of VND
against USD change if the inflation in Vietnam is higher than that of the US?
A. Decreases
B. Other answers
C. Does not change
D. Increases
34. Foreign exchange quotation: GBP/USD = 1.2205-1.2212 ;EUR/USD = 1.1105- 1.1109 ;GBP/EUR = 1.1017-1.022.
Does arbitrage exist? If yes, calculate the profit. Initial capital: 200.000 USD.
A. Yes, _ 642,6 USD
B. No
C. Yes, 366.5 USD
D. Yes, 376.5 USD
35. When the VND deposit interest rate is lower than the interest rate invested in USD then convert into VND, the investor
should
 A. Invest in VND
B. Invest in USD and then convert to VND
C. Do not invest
D. All wrong
36. A currency call option gives the.
A. Seller the right to buy the currency futures contracts
B. Seller the right to sell the underlying currency
C. None of the above
D. Broker the right to buy the underlying currency
E. Buyer the right to buy the underlying currency
37. Which of the following factors affect international direct investment capital:
A. Government limits
B. All 3 are correct
C. Political risk
D. War
38. Balance of Trade is also known as:
A. Current balance
B. Tangible balance
C. Official offsetting balnce
D. Overall balance
39. Which of the following theories that motivate firms to expand their business internationally?
A. Theory of comparative advantage
B. Imperfect markets theory
C. Product cycle theory
D. All of them
40. A transaction report between the residents and non-residents in a period time is called:
A. Payment for merchandise
B. Balance of payment.
C. Basic balance
D. Current account
41. In the inflation rate at the end of 2022 for VND and USD is 12% and 4%. The spot exchange rate is USD/VND = 22,
A. 23,305
B. 22,504
C. 22,226
D. 23,404
42. If calculated by 1 common currency, the Law of One Price states that the price of goods in the world will be
A. Difference
B. Approximate Equilibrium
C. A chance for arbitrage
D. Equilibrium
43. What is price quotation?
A. 1 USD exchanges an amount of foreign currency.
B. An amount of foreign currency exchange one home currency
C. 1 foreign currency exchanges an amount of home currency
D. The value of 1 home currency
44. A currency futures call option gives.

a. the seller the obligation to sell a particular underlying currency

b. the seller the right to sell a particular currency futures contract
c. the buyer the right to buy a particular currency futures contract
d. none of the above
e. the buyer the obligation to buy a particular currency futures contract

45. If the inflation at the end of 2022 for VND and USD 18.6% and 3%.. What is

A. 3.87%

B. ~3.9%

C. ~3.72%
 D. 3.9%

46. EUR/USD = 1,1803/16; USD?JPY = 112,45/55. BID EUR/JPY?ASK EUR/JPY?

A. 132.84-132.98

B. 132.72-132.98

C. 132.72-132.84

D. 132.72-132.90

47. USD/VND = 22.779/89; JPY/VND = 205,25/45. Bid USD/JPY =? Ask USD/JPY=?

A. 110.87-110.92

B. 110.87-111.03

C. 111.03-110.77

D. 110.92-111.03

48. 1) Given a home country and foreign country, PPP suggests that:
a. The home currency will appriciate if the current home inflation rate exceeds the current foreign inflation rate
b. The home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate
c. The home currency will depreciate if the current home interest rate exceeds the current foreign interest rate
d. The home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate

2) Given a home country and foreign ciuntry, IFE suggests that:

a. The home currency will appriciate if the current home inflation rate exceeds the current foreign inflation rate
b. The home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate
c. The home currency will depreciate if the current home interest rate exceeds the current foreign interest rate
d. The home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate

3) The VND (VND) has kept maintaining weak against the USD for a time, how has this fact affected the international cash
flows between two countries?
a. Cause the US International Trade surplus
b. Promote the VN export to the US States
c. Encourages US export to VN
d. Cause the VN International Trade deficit

4) A transaction report between the residents and non-residents in a period time is called:
a. Balance of payment.
b. Current account
c. Basic balance
d. Payment for merchandise

5) Which of the following transactions generates foreign currency supply:

a. Increasing reserves
b. Importing cars
c. Reducing foreign debt
d. Foreign investors investing money in Vietnam

6) If calculated by 1 common currency, the Law of One Price states that the price of goods in the world will be
a. Approximate Equilibrium
b. Equilibrium
c. A chance for arbitrage to happen
d. Difference
7) Other factors are held constant, and the USD/VND exchange rate is free to fluctuate, how would the value of VND against
USD change if the inflation in Vietnam is higher than that of the US?
a. Increases
b. Does not change
c. Other answers
d. Decreases

8) What is price quotation?

a. 1 foreign currency exchanges an amount of home currency.
b. The value of 1 home currency
c. 1 USD exchanges an amount of foreign currency.
d. An amount of foreign currency exchange one home currency

9) A currency futures put option gives.

a. both the seller and the buyer to sell a particular currency futures contract
b. the buyer the obligation to sell a particular currency futures contract
c. the seller the right to sell a particular currency futures contract
d. the buyer the right to sell a particular currency futures contract
e. the seller the right to sell an underlying currency

10) Factors effect to BOP

a. Inflation
b. Exchange rate
c. Restriction of government
d. All of them

11) A company in the U.S exports products to Germany and they will receive payment 3 months later. On 1 June 20 ,, Spot
rate: EUR/USD = 1.12; 3 months forward rate: EUR/USD = 1.10. A deal with bank to sell forward contract 200,000 EUR. On
1 Sept 2022, Spot rate EUR/USD = 1.15. Calculating the revenue in EUR?
a. 230,000
b. 220,000
c. 200,000
d. 224,000

12) Points above the IRP line show:

a. CIA is feasible for domestic investors.
b. CIA is feasible for foreign investors.
c. CIA is not feasible for all investors.
d. IRP exist.

13) Franchising is:

a. Transferring the production process in exchange for fee
b. All are correct.
c. Control the quality of product/services under your own brand.
d. Allowing an organization/individual to use your brand, your prestige in exchange for fee.

14) ABC has headquarter in the U.S, they usually import raw materials from Chinese. ABC do payment in CNY, and they
speculator CNY will be increased in future, which is their option?
a. Buy the put option.
b. Buy CNY future contract.
c. Buy CNY forward contract.
d. Buy the call option.

15) Which of the following is a weakness of the absolute form of purchasing power parity theory?
a. The respected assumption of the law of one price
b. Compare the price of a basket of goods in local currency and the price of a basket of goods in foreign currencies
c. The difference in education level
d. The proportion of goods in the basket

16) The Fisher Effect assumes that the.

a. inflation rate is equal to the real interest rate
b. nominal interest rate is lower than the inflation rate
c. nominal interest rate is equal to the real interest rate plus the inflation rate
d. nominal interest rate is equal to the inflation rate
e. real interest rate is equal to the nominal interest rate

17) A currency futures call option gives.

a. the seller the right to sell a particular currency futures contract
b. none of the above
c. the buyer the obligation to buy a particular currency futures contract
d. the buyer the right to buy a particular currency futures contract
e. the seller the obligation to sell a particular underlying currency

18) Foreign exchange quotation:GBP/USD = 1.2205-1.2212 ;EUR/USD = 1.1105- 1.1109 ;GBP/EUR = 1.1017-1.022. Does
arbitrage exist? If yes, calculate the profit. Initial capital: 200.000 USD.
a. Yes, 366.5 USD
b. No
c. Yes, 376.5 USD
d. Yes, _ 642,6 USD

19) When the VND deposit interest rate is lower than the interest rate invested in USD then convert into VND, the investor
should
a. Invest in VND
b. All wrong
c. Invest in USD and then convert to VND
d. Do not invest

20) One of reason motivating FDI come in a country:

a. Foreign exchange rate increase.
b. Higher interest rate in investment recipient country.
c. A and B are true
d. All are wrong.

21) A forward market hedge involves the following except.

a. a fixed amount of foreign currency
b. forward contract
c. forward rate
d. commercial banks
e. future spot rate

22) The of interest rate parity means that the.

a. future spot rate reflects the inflation difference between two countries
b. interest rates are equal in two countries
c. difference between the spot rate and the future spot rate reflects the interest rate difference between two countries
d. difference between a forward rate and a spot rate equals the difference between a domestic interest rate and a foreign
interest rate
e. all the above

23) Which arbitrage need to calculate cross rate:

a. Locational arbitrage
b. Triangular arbitrage
c. All are correct.
d. Covered interest arbitrage.

24) Licensing is:

a. Hard to control the quality of product under your own brand.
b. All are correct.
c. Conduct in international market without major investment.
d. Allowing an organization/individual to use your brand, your prestige on their product.

25) Points below the IRP line show

a. CIA is not feasible for all investors.
b. IRP exists.
c. CIA is feasible for foreign investors.
d. CIA is feasible for domestic investors.

26) What behavior makes CIA persisted:

a. Interest rate arbitrage
b. Investment
c. Borrowing
d. Other answers

27) What factors cause CIA not to be maintained?

a. Government intervention
b. All are correct
c. Transaction costs
d. All are wrong

28) The official BOP report is prepared periodically for

a. Monthly
b. Yearly
c. Half yearly
d. Quarterly

29) Balance of Trade is also known as:

a. Overall balance
b. Current balance
c. Tangible balance
d. Official offsetting balance

30) To choose to invest or borrow between one currency and another, what factors should we pay attention to?
a. Spot rate
b. Interest rates
c. Forward rate
d. All are correct

31) Which of the following theories that motivate firms to expand their business internationally?
a. Theory of comparative advantage
b. Imperfect markets theory
c. All of them
d. Product cycle theory

32) The cross rate is:

a. Exchange rate which is determined between any two currencies.
b. None of them
c. Exchange rate which is determined between USD and another currency.
c. Exchange rate which is determined between USD and another currency.
d. Exchange rate between two currencies that are both valued against a third currency.

33) The purchasing power parity says:

a. The cost of a haircut in HK is exactly the same as the cost of a haircut in Vietnam.
b. All are correct
c. All are wrong
d. Inflation rates are the same across countries.

34) The forward contracts

a. Include the responsibilities of parties and standardized.
b. Supply right selling a certain currency and standardized.
c. Include the responsibilities of parties who must fulfil their contractual obligations.
d. Supply the right buying a certain currency at a specified price.

35) A strike price in currency options markets is the specified exchange rate at which the.
a. option can be bought
b. none of the above
c. option can be exercised
d. option can be sold
e. futures options can be sold

36) The forward contracts

a. Include the responsibilities of parties and standardized.
b. Supply right selling a certain currency and standardized.
c. Supply the right buying a certain currency at a specified price.
d. Include the responsibilities of parties who must fulfil their contractual obligations.

37) Agency problems exist due to:

a. The conflicts between parent company and subsidiaries
b. All are correct.
c. The conflicts between managers and shareholders

38) J curve effect shows:

a. Weak home currency solution trend to increase inflation rate.
b. Balance of trade is deteriorated and then, it gets better due to weak home currency solution.
c. Balance of trade is affected by interest rates.
d. All are wrong.

39) What is the result of comparing the prices of foreign and domestic goods?
a. CIA exchange rate
b. IFE exchange rate
c. Relative purchasing power parity.
d. PPP exchange rate

40) Which of the following factors affect international direct investment capital:
a. War
b. Political risk
c. Government limits
d. All 3 are correct

41) The purchasing power parity theory states that:

a. A currency with a high inflation rate has a higher interest rate.
b. A currency with a high inflation rate tends to depreciate.
c. Exchange rate differentials reflect inflation differentials.
d. Interest rates are always greater than inflation rates.

42) Which is correct:

a. The future and forward contract is mainly used for hedging.
b. The future and forward contract is mainly used for speculation
c. The future contract is mainly applied by speculators; the forward market is used for hedging.
d. The forward contract is mainly applied by speculators, the future market is used for hedging

43) The theory of interest rate parity means that the.

a. difference between a forward rate and a spot rate equals the difference between a domestic interest rate and a foreign
interest rate
b. all the above
c. interest rates are equal in two countries
d. difference between the spot rate and the future spot rate reflects the interest rate difference between two countries
e. future spot rate reflects the inflation difference between two countries

44) Net income is an item of:

a. Capital balance
b. Current balance
c. Trade balance
d. Operations balance

45) Assume that: Interest rate USD = 2,5 % / year; Interest rate CHF = 5,3% / year. Premium/discount U.S investors will
receive after 1 year (IRP exist)
a. 0.0266%
b. -0.0266
c. 0.0266
d. 2.66%

46) A currency call option gives the.

a. buyer the right to buy the underlying currency
b. broker the right to buy the underlying currency
c. none of the above
d. seller the right to buy the currency futures contracts e. seller the right to sell the underlying currency

47) When will investors invest in VND instead of investing in USD then convert to VND?
a. The VND interest rate is higher than the interest rate invested in USD then convert into VND
b. The VND interest rate is lower than the interest rate invested in USD then convert into VND
c. The VND interest rate is higher than those of USD
d. The VND interest rate is lower than those of USD

48) USD/VND = 22.779/89;JPY/VND = 205,25/45. Bid USD/JPY =? Ask USD/JPY =?

a. 110.87-111.03
b. 111.03-110.77
c. 110.92- 111.03
d. 110.87- 110.92

49) Exchange rate quotation at Vietcombank on Feb 28, 2023, as following:USD/VND = 23,535- 23,550; JPY/VND = 168.75-
178.65. Cross rate: Bid USD/ JPY? Ask USD/JPY?
a. 131.82 - 139.46
b. 131.73- 139.46
c. 131.73- 139.55

50) If the inflation rate at the end of 2022 for VND and USD is 12% and 4%. The spot exchange rate is USD/VND =
22,950. What is the expected spot exchange rate of USD/VND after 3 months?
a. 23,404
b. 23,305
c. 22,504
d. 22,226

51) If the inflation rate at the end of 2022 for VND and USD is 18.6% and 3%. What is the exact percentage change in
the USD exchange rate after 3 months?
a. -3.9%
b. 3.9%
c. 3.87%
d. -3.72%
52. If the Japanese yen was worth $.0035 six months ago and is worth $.0045 today, how much has the yen appreciated or
depreciated?

A. depreciated; about 20%

B. depreciated; about 18%
C. appreciated; about 25%
D. appreciated; about 29%
E. appreciated; about 15%

53. If the spot rate of the Israel shekei is $.32 and the six month forward rate is $.30, what is the forward premium or discount on
an annual basis?

A. premiuml 11.5%
B. premium; 12.5%
C. discount; 11.5%
D. premium; 22.5%
E. discount; 12.5%

54. USD/JPY = 112,45/55; USD/NZD = 1,3856/67. Bid NZD/JPY=? Ask NZD/JPY=?

A. 81.09-81.22
 B. 81.15-81.22
C. 81.09-81.16
D. 81.15-81.16

55. The premium for a British put pound with an exercise price of $1.70 is $.05. What is the breakeven spot rate for the buyer of
the put?

A. $1.70.
B. $1.75.
C. $1.65.
D. $1.60.
E. $2.10.

56. ĐỀ KỲ TRƯỚC

1. If 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 is possible

2. Which of the following theories suggests that firms seek to penetrate new markets over time?
A. Theory of comparative advantage
B. Imperfect markets theory
C. Product cycle theory
D. None of the above

3. A high home inflation rate relative to other countries would the home country's current account balance, other things
being equal. High growth in the home income level relative to other countries would the home country's current account
balance, other things being equal
A. Increase; increase
B. Increase; decrease
C. Decrease; decrease
D. Decrease; increase

4. The commonly accepted goal of an MNC is to

A. Maximize short-term earnings
B. Maximize shareholder wealth
C. Minimize risk
D. Maximize international sales

5. Covered Interest Arbitrage (CIA) activities will result in

A. An unstable international financial market
B. Restoring equilibrium quite quickly
C. A disintermediation
D. No effect on the market

6. If you think that the dollar is going to appreciate against the euro, you should
A. Buy put options on the euro
B. Sell call options on the euro
C. Buy call options on the euro
D. None of the above

7. The agency costs of an MNC are likely to be lower if it

A. Scatters its subsidiaries across many foreign countries
B. Increases its volume of international business
C. Uses a centralized management style
D. A and B

8. For an MNC, agency costs are typically

A. Non-exist
B. Larger than agency costs of a small purely domestic firm
C. Smaller than agency costs of a small purely domestic firm
D. The same as agency costs of a small purely domestic

9. Which of the following theories identifies specialization as a reason for international

business?
A. Theory of comparative advantage
B. Imperfect markets theory
C. Product cycle theory
D. None of the above

10. Comparing "forward" and "futures" exchange contracts, we can say that
A. They are both "marked-to-market" daily
B. Their major difference is in the way the underlying asset is priced for future purchase or sale: futures settle daily and
forwards settle at maturity.
C. A futures contract is negotiated by open outcry between floor brokers or traders and is traded on organized exchanges,
while forward contract is tailor-made by an international bank for its clients and is traded OTC.
D. Both b and c

11. Interest Rate Parity (IP) is best defined as

A. When a government brings its domestic interest rate in line with other major financial markets
B. When the central bank of a country brings its domestic interest rate in line with its major trading partners
C. An arbitrage condition that must hold when international financial markets are in equilibrium
D. None of the above

12. What paradigm is used to define the futures price?

A. IRP
B. Hedge ratio
C. Black Scholes
D. Risk neutral valuation

1. With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm
is mostly concerned with maximizing ____.
a. shareholder wealth; short-term earnings
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
d. short-term earnings; shareholder wealth

2. Which of the following could reduce agency problems for an MNC?

a. stock options as managerial compensation.
b. hostile takeover threat.
c. investor monitoring.
d. all of these are forms of corporate control that could reduce agency problems for an MNC.

3. The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ____ and
when foreign currencies denominating these cash flows are expected to ____.

a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
4. Which of the following theories identifies the non-transferability of resources as a reason for international
business?
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of these
5. Which of the following industries would most likely take advantage of lower costs in some less developed foreign
countries?
a. assembly line production.
b. specialized professional services.
c. nuclear missile planning.
d. planning for more sophisticated computer technology.
6. Due to the risks involved in international business, firms should:
a. only consider international business in major countries.
b. maintain international business to no more than 20% of total business.
c. maintain international business to no more than 35% of total business.
d. none of these

7. The agency costs of an MNC are likely to be lower if it:

a. scatters its subsidiaries across many foreign countries.
b. increases its volume of international business.
c. uses a centralized management style.
d. A and B.

8. An MNC may be more exposed to agency problems if most of its shares are held by:
a. a few mutual funds
b. a widely dispersed set of individual investors
c. a few pension funds
d. all of these would prevent agency problems

9. The Sarbanes-Oxley Act improves corporate governance of MNCs because it:

a. makes executives more accountable for verifying financial statements
b. eliminates stock options as a form of compensation
c. ties executive compensation to firm performance
d. places a limit on the amount of funds that managers can spend

10. MNCs can improve their internal control process by all of the following, except:
a. establishing a centralized data base of information
b. ensuring that all data are reported consistently among subsidiaries
c. ensuring that the MNC always borrows from countries where interest rates are lowest
d. using a system that checks internal data for unusual discrepancies
11. In comparing exporting to direct foreign investment (DFI), an exporting operation will likely incur ____ fixed
production costs and ____ transportation costs than DFI.
a. higher; higher
b. higher; lower
c. lower; lower
d. lower; higher
12. Which of the following is an example of direct foreign investment?
a. exporting to a country.
b. establishing licensing arrangements in a country.
c. purchasing existing companies in a country.
d. investing directly (without brokers) in foreign stocks.

13. According to the text, a disadvantage of licensing is that:

a. it prevents a firm from importing.
b. it is difficult to ensure quality control of the production process.
c. it prevents a firm from exporting.
d. none of these

14. ____ are most commonly classified as a direct foreign investment.

a. Foreign acquisitions
b. Purchases of international stocks
c. Licensing agreements
d. Exporting transactions

15. Which of the following is not mentioned in the text as an additional risk resulting from international business?
a. exchange rate fluctuations.
b. political risk.
c. interest rate risk.
d. exposure to foreign economies.

16. Licensing obligates a firm to provide ____, while franchising obligates a firm to provide ____.
a. a specialized sales or service strategy; its technology
b. its technology; a specialized sales or service strategy
c. its technology; its technology
d. a specialized sales or service strategy; a specialized sales or service strategy
e. its technology; an initial investment

17. Which of the following is not a way in which agency problems can be reduced through corporate control?
a. executive compensation.
b. threat of hostile takeover.
c. acquisition of a foreign subsidiary.
d. monitoring by large shareholders.

18. International trade:

a. is a relatively conservative approach to foreign market penetration.
b. entails minimal risk.
c. does not require large amount of investment.
d. all of these.

19. Assume that an American firm wants to engage in international business without major investment in the
foreign country. Which method is least appropriate in this situation?
a. International Trade
b. Licensing
c. Franchising
d. Direct foreign investment

20. The MNC's value depends on all of the following, except:

a. MNC's required rate of return
b. Amount of MNC's cash flows in particular currency
c. The exchange rate at which cash flows are converted to dollars
d. The value of MNC depends on all of the above factors

21. Which of the following is not an example of political risk?

a. Government may impose taxes on subsidiary
b. Government may impose barriers on subsidiary
c. Consumers may boycott the MNC
d. Consumers' income levels will decrease, thus decreasing consumption.

22. International trade generally results in ____ exposure to international political risk and ____ exposure to
international economic conditions, when compared to other methods of international business.
a. higher; lower
b. higher; higher
c. lower; higher
d. lower; lower

23. Assume that Boca Co. wants to expand its business to Japan, and wants complete control over the operations in
Japan. Which method of international business is most appropriate for Boca Co?
a. Joint venture
b. Licensing
c. Partial acquisition of existing Japanese firm
d. Establishment of Japanese subsidiary
24. Saller Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this
subsidiary have not changed since last month, but the valuation of Saller Co. has declined since last month. What could've
caused this decline in value?
a. A weaker Mexican economy
b. Lower Mexican interest rates
c. Depreciation of the Mexican peso
d. Appreciation of the Mexican peso.

25. Jensen Co. wants to establish a new subsidiary in Mexico that will sell computers to Mexican customers and
remit earnings back to the U.S. parent. The value of this project will be favorably affected if the value of the peso ____
while it establishes the new subsidiary and ____ when the subsidiary starts operations.
a. depreciates; appreciates
b. appreciates; appreciates
c. appreciates; depreciates
d. depreciates; depreciates

26. The goal of a multinational corporation (MNC) is

a. The minimization of taxes remitted from foreign subsidiaries.
b. The establishment of subsidiaries in any country where operations would provide a return over and above the cost of capital,
even if better projects are available domestically.
c. The maximization of shareholder wealth.
d. The maximization of social benefits resulting from actions such as the employment of foreign managers.

27. Agency costs faced by multinational corporations (MNCs) may be larger than those faced by purely domestic
firms because
a. Monitoring of managers located in foreign countries is more difficult.
b. Foreign subsidiary managers raised in different cultures may not follow uniform goals.
c. MNCs are relatively large.
d. All of these
e. A and B only

28. Which of the following is not one of the more common methods used by MNCs to improve their internal control
process?
a. Establishing a centralized database of information
b. Ensuring that all data are reported consistently among subsidiaries
c. Speeding the process by which all departments and all subsidiaries have access to the data that they need
d. Making executives more accountable for financial statements by personally verifying their accuracy
e. All of these are common methods used by MNCs to improve their internal control process.

29. Which of the following is not mentioned in the text as a theory of international business?
a. Theory of Comparative Advantage
b. Imperfect Markets Theory
c. Product Cycle Theory
d. Globalization of Business Theory
e. All of these are mentioned in the text as theories of international business

30. The most risky method(s) by which firms conduct international business is (are):
a. Franchising.
b. The acquisitions of existing operations.
c. The establishment of new subsidiaries.
d. All of these
e. B and C only

31. The least risky method by which firms conduct international business is:
a. Franchising.
b. The acquisitions of existing operations.
c. International Trade.
d. The establishment of new subsidiaries.
e. Licensing

32. Which of the following does not constitute a form of direct foreign investment?
a. Franchising
b. International trade
c. Joint ventures
d. Acquisitions of existing operations
e. Establishment of new foreign subsidiaries