United States Dollar and Rate Parity

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Multiple Choice: Conceptual

Easy:

International operations motivationAnswer: e Diff: E
.Which of the following are reasons why companies move into international operations?

a.To take advantage of lower production costs in regions of inexpensive labor. b.To develop new markets for their finished products.
c.To better serve their primary customers.
d.Because important raw materials are located abroad.
e.All of the statements above are correct.

Multinational financial managementAnswer: d Diff: E
.Multinational financial management requires that

a.The effects of changing currency values be included in financial analyses. b.Legal and economic differences be considered in financial decisions. c.Political risk be excluded from multinational corporate financial analyses. d.Statements a and b are correct.

e.All of the statements above are correct.

Currency depreciationAnswer: a Diff: E
.If the inflation rate in the United States is greater than the inflation rate in Sweden, other things held constant, the Swedish currency will

a.Appreciate against the U.S. dollar.
b.Depreciate against the U.S. dollar.
c.Remain unchanged against the U.S. dollar.
d.Appreciate against other major currencies.
e.Appreciate against the dollar and other major currencies.

EMUAnswer: c Diff: E
.What is the common currency of the EMU?

a.U.S. dollar.
b.British pound.
c.Euro.
d.French franc.
e.None of the statements above is correct.

Medium:

International bond marketsAnswer: d Diff: M
.Which of the following statements is incorrect?

a.Any bond sold outside the country of the borrower is called an international bond. b.Foreign bonds and Eurobonds are two important types of international bonds. c.Foreign bonds are bonds sold by a foreign borrower but denominated in the currency of the country in which the issue is sold. d.The term Eurobond specifically applies to any foreign bonds denominated in U.S....
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