TCQT 3

3. Nominal interest rates in US and Japan are 8% and 5%. Assume the real rate of interest is

• 2% in each country. Which implication is correct according to IFE

  a. Inflation rate of US is still greater than the inflation rate of Japan

• b. JPY will expect to appreciate due to the higher inflation rate in US

• c. Japanese investors will earn no more than what they earn in the own country if JPY appreciates by 3%

• d. All of the above

4. Which situation refers to the purchasing power parity

 

• a. Foreign currency depreciates by 1% when home inflation rate exceeds by 1% than foreign inflation rate

• b. Foreign currency depreciates by 2% when foreign inflation rate is less than by 2% home inflation rate

• c. Foreign currency remains equal when foreign inflation rate is greater than home inflation rate

• d. Foreign currency appreciates by 1% when home inflation rate exceeds by 1% than foreign inflation rate

1.                     Which statement is true about covered interest arbitrage 

a. based on the relationship between forward rate premium and interest rate diffential

b. forward rate of foreign currency will contain a discount if foreign interest rate is higher than the local interest rate

c. covered interest arbitrage is not possible when forward premium is equal to interest rate difference of two countries

d. All of the above

 

• a. based on the relationship between forward rate premium and interest rate diffential

• b. forward rate of foreign currency will contain a discount if foreign interest rate is higher than the local interest rate

• c. covered interest arbitrage is not possible when forward premium is equal to interest rate difference of two countries

• d. All of the above

The commonly accepted goal of the MNC is to:

• a.

  maximize short-term earnings.

• b.

  maximize shareholder wealth.

• c.

  minimize risk.

• d.

  maximize international sales.

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

. For the MNC, agency costs are typically:

.

• a.

  non-existent.

• 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 firm

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 the above are forms of corporate control that could reduce agency problems for an MNC

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

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 correct sentence

Which of the following theories suggests that firms seek to penetrate new markets over time? “ thâm nhập vào thị trường mới”

• a.

  theory of comparative advantage.

• b.

  imperfect markets theory.

• c.

  product cycle theory.

• d.

  none of the correct sentence