Finance

Only available on StudyMode
  • Download(s) : 47
  • Published : January 18, 2013
Open Document
Text Preview
SUGGESTED ANSWERS AND SOLUTIONS TO
END-OF-CHAPTER QUESTIONS AND PROBLEMS

TABLE OF CONTENTS

Chapter

1. Globalization and the Multinational Firm Suggested Answers to End-of-Chapter Questions 3 2. International Monetary System Suggested Answers and Solutions to End-of-Chapter Questions and Problems 12 3. Balance of Payments Suggested Answers and Solutions to End-of-Chapter Questions and Problems 17 4. The Market for Foreign Exchange Suggested Answers and Solutions to End-of-Chapter Questions and Problems 23 5. International Parity Relationships Suggested Answers and Solutions to End-of-Chapter Questions and Problems 33 6. International Banking Suggested Answers and Solutions to End-of-Chapter Questions and Problems 40 7. International Bond Markets Suggested Answers and Solutions to End-of-Chapter Questions and Problems 50 8. International Equity Markets Suggested Answers and Solutions to End-of-Chapter Questions and Problems 56 9. Futures and Options on Foreign Exchange Suggested Answers and Solutions to End-of-Chapter Questions and Problems 62 10. Currency and Interest Rate Swaps Suggested Answers and Solutions to End-of-Chapter Questions and Problems 70 11. International Portfolio Investments Suggested Answers and Solutions to End-of-Chapter Questions and Problems 78 12. Management of Economic Exposure Suggested Answers and Solutions to End-of-Chapter Questions and Problems 87 13. Management of Transaction Exposure Suggested Answers and Solutions to End-of-Chapter Questions and Problems 94 14. Management of Translation Exposure Suggested Answers and Solutions to End-of-Chapter Questions and Problems 111 15. Foreign Direct Investment Suggested Answers and Solutions to End-of-Chapter Questions and Problems 125 16. International Capital Structure and the Cost of Capital Suggested Answers and Solutions to End-of-Chapter Questions and Problems 131 17. International Capital Budgeting Suggested Answers and Solutions to End-of-Chapter Questions and Problems 135 18. Multinational Cash Management Suggested Answers and Solutions to End-of-Chapter Questions and Problems 150 19. Trade Financing Suggested Answers and Solutions to End-of-Chapter Questions and Problems 161 20. International Tax Environment Suggested Answers and Solutions to End-of-Chapter Questions and Problems 166

CHAPTER 1 GLOBALIZATION AND THE MULTINATIONAL FIRM
SUGGESTED ANSWERS TO END-OF-CHAPTER QUESTIONS

QUESTIONS

1. Why is it important to study international financial management?

Answer: We are now living in a world where all the major economic functions, i.e., consumption, production, and investment, are highly globalized. It is thus essential for financial managers to fully understand vital international dimensions of financial management. This global shift is in marked contrast to a situation that existed when the authors of this book were learning finance some twenty years ago. At that time, most professors customarily (and safely, to some extent) ignored international aspects of finance. This mode of operation has become untenable since then.

2. How is international financial management different from domestic financial management?

Answer: There are three major dimensions that set apart international finance from domestic finance. They are: 1. foreign exchange and political risks,
2. market imperfections, and
3. expanded opportunity set.

3. Discuss the three major trends that have prevailed in international business during the last two decades.

Answer: The 1980s brought a rapid integration of international capital and financial markets. Impetus for globalized financial markets initially came from the governments of major countries that had begun to deregulate their foreign exchange and capital markets. The economic integration and globalization that began in the...
tracking img