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Question 1: Assume the British pound appreciates against the dollar while the Japanese yen depreciates against the dollar. Which of the following is true?
A) Japanese exporters can increase American sales by shift¬ing operations from their British subsidiaries to Japan.
B) British exporters can increase American sales by shifting operations from their Japanese subsidiaries to Britain.
C) American exporters can increase sales to Japan by shift¬ing operations from Japanese subsidiaries to American subsidiaries.
D) None of these are true.
A) Japanese exporters can increase American sales by shift¬ing operations from their British subsidiaries to Japan. The Japanese yen has depreciated against the dollar so shifting operations to Japan can help increase sales to US. The pound has actually increased against the dollar so it is twice helpful to shift the operations to Japan.
Question 2. Other things being equal, firms from a particular home country will engage in more international acquisitions if they expect foreign currencies to _______ against their home currency, and if their cost of capital is relatively _______.
A) appreciate; low
B) appreciate; high
C) depreciate; high
D) depreciate; low
A) appreciate; low. Again two advantages, appreciation of foreign currency means more money and low cost of capital means lower cots.
Question 3: A country with high unemployment could best increase its employment by:
A) encouraging foreign firms to establish subsidiaries that produce the same products local firms produce.
B) encouraging foreign firms to establish licensing arrange¬ments for products local firms produce.
C) encouraging foreign firms to establish subsidiaries that produce products local firms do not produce.
D) none of these would reduce employment.
C) encouraging foreign firms to establish subsidiaries that produce products local firms do not produce. This option has been selected so that the foreign companies do not compete with locals.
Question 4: _______ is not a disadvantage of direct foreign investment.
A) The expense of establishing a foreign subsidiary
B) The uncertainty of inflation and exchange rate movements
C) Political risk
D) All of these are disadvantages of direct foreign investment
All of these are disadvantages of direct foreign investment, Risk from ...
International financial management is discussed very comprehensively in this explanation..