International Finance

Topics: United States dollar, Foreign exchange market, Currency / Pages: 12 (2817 words) / Published: Mar 25th, 2013
True/False
____T__ 1. Multinational financial management requires that financial analysts consider the effects of changing currency values.

__F__ 2.
Legal and economic differences among countries, although important, do NOT pose significant problems for most multinational corporations when they coordinate and control worldwide operations and subsidiaries.
Comment: Legal and economic differences among countries do affect the worldwide operations and subsidiaries.

___T_ 3.
When the value of the U.S. dollar appreciates against another country's currency, we may purchase more of the foreign currency with a dollar.
__T__ 4.
The United States and most other major industrialized nations currently operate under a system of floating exchange rates.
__F__ 5.
Exchange rate quotations consist solely of direct quotations.
Comment: Exchange rate quotations consist of direct and indirect quotations.
__T__ 6.
Calculating a currency cross rate involves determining the exchange rate for two currencies by using a third currency as a base.
__T__ 7.
A Eurodollar is a U.S. dollar deposited in a bank outside the United States.
__F__ 8.
LIBOR is an acronym for London Interbank Offer Rate, which is an average of interest rates offered by London banks to smaller U.S. corporations.
Comment: LIBOR is the interest rate offered by the largest and strongest London-based banks on large deposits.
__T__ 9.
Exchange rate risk is the risk that the cash flows from a foreign project, when converted to the parent company's currency, will be worth less than was originally projected because of exchange rate changes.
___F_ 10.
Because political risk is seldom negotiable, it cannot be explicitly addressed in multinational corporate financial analysis.
Comment: Political risk refers to potential actions by a host government that would reduce the value of a company’s investment. It includes at one extreme the expropriation without compensation of the subsidiary’s assets, but it

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