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Multiple choice

12 Practice Finance Multiple Questions
I need help on these questions. Please briefly explain how you got the answers. Thanks.

12 Practice Finance Multiple Questions
I need help on these questions. Please briefly explain how you got the answers. Thanks.

1. The commonly accepted goal of the MNC is to:
A) maximize short?term earnings.
B) maximize shareholder wealth.
C) minimize risk.
D) A and C.
E) maximize international sales.

2. 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

3. An indirect benefit to the MNC of following a worldwide code of ethics is:
A) it allows them to receive special tax breaks in less developed countries.
B) it puts them at a competitive advantage in foreign markets.
C) the worldwide credibility associated with maintaining such standards can increase global demand for the MNC's products.
D) A and B.

4. 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.

5. A high home inflation rate relative to other countries would _______ the home country's current account balance, other things equal. A high growth in the home income level relative to other countries would _______ the home country's current account balance, other things equal.
A) increase; increase
B) increase; decrease
C) decrease; decrease
D) decrease; increase

6. 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

7. If the home currency begins to appreciate against other currencies, this should ____________ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same).
A) increase
B) have no impact on
C) reduce
D) all of the above are equally possible

8. Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of ?200,000 in three months. On June1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, Graylon negotiated a forward contract with a bank to sell ?200,000 forward in three months.The spot rate of the euroon September 1 is $1.15. Graylon will receive $_________ for the euros.

A) 224,000
B) 220,000
C) 200,000
D) 230,000

9. Currency futures contracts sold on an exchange:
A) contain a commitment to the owner, and are standardized.
B) contain a commitment to the owner, and can be tailored to the desire of the owner.
C) contain a right but not a commitment to the owner, and can be tailored to the desire of the owner.
D) contain a right but not a commitment to the owner, and are standardized.

10. Translation exposure reflects:
A) the exposure of a firm's ongoing international transactions to exchange rate fluctuations.
B) the exposure of a firm's local currency value to transactions between foreign exchange traders.
C) the exposure of a firm's financial statements to exchange rate fluctuations.
D) the exposure of a firm's cash flows to exchange rate fluctuations.

11. Which of the following operations benefits from appreciation of the firm's local currency?
A) borrowing in a foreign currency and converting the funds to the local currency prior to the appreciation.
B) receiving earnings dividends from foreign subsidiaries.
C) purchasing supplies locally rather than overseas.
D) exporting to foreign countries.

12. A firm may incorporate a country risk rating into the capital budgeting analysis by:
A) adjusting the NPV upward if the country risk rating has fallen (implying increased risk) below a benchmark level.
B) adjusting the discount rate upward as the country risk rating decreases (implying increased risk).
C) A and B
C) none of the above

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The solution explains some multiple choice questions relating to international investments

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