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International Financial Management

1: Eurenasia is a country that has frequently been assigned low macro-assessment ratings of country risk in the recent past due to its tendency to war with neighboring nations. MNC A is considering the establishment of a subsidiary to manufacture personal computers, while MNC B is considering the establishment of a subsidiary to manufacture tanks. Which of the two MNCs is likely to be less affected by the low macro-assessment?
A) MNC A.
B) MNC B.
C) Both MNC A and MNC B will be equally affected, since the macroassessment does not vary.
D) none of these.

2: Under a letter of credit arrangement, the bank issuing the letter of credit is known as the _______ bank, the correspondent bank in the beneficiary's country to which the issuing bank sends the letter of credit is known as the _______ bank, and the bank that agrees to examine documents under the letter of credit and pay the beneficiary is called the _______ bank.
A) issuing; negotiating; advising
B) issuing; advising; negotiating
C) advising; issuing; negotiating
D) negotiating; issuing; advising
E) advising; negotiating; issuing

3: Assume the U.S. financing rate is 10 percent and that the financing rate in Germany is 9 percent. An MNC would be indifferent between financing in dollars and financing in euros next year if the euro is expected to _______.
A) appreciate by 0.92%.
B) depreciate by 0.92%.
C) appreciate by 1.00%.
D) depreciate by 1.00%.

4: 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 shifting 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 shifting operations from Japanese subsidiaries to American subsidiaries.
D) None of these are true.

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1: Eurenasia is a country that has frequently been assigned low macro-assessment ratings of country risk in the recent past due to its tendency to war with neighboring nations. MNC A is considering the establishment of a subsidiary to manufacture personal computers, while MNC B is considering the establishment of a subsidiary to manufacture tanks. Which of the two MNCs is likely to be less affected by the low macro-assessment?
A) MNC A.
B) MNC B.
C) Both MNC A and MNC B will be equally affected, since the macroassessment does not vary.
D) none of these.

MNC B is more likely to be affected because if the country goes to war then its assets will be taken over by the ...

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