11) The existence of ________ allows multinationals to take advantage of unregulated financial markets to invest and raise short-term funds in a variety of countries and to protect themselves from foreign exchange exposure.
A) a strong U.S. dollar
B) the International Monetary Fund
C) Eurocurrency markets
D) European Economic Council
12) In the international context, the ________ interest rate involves only the MNC parent’s currency, while the ________ interest rate includes any forecast appreciation or depreciation of a foreign currency relative to that of the MNC parent.
A) effective; nominal
B) macro; nominal
C) nominal; effective
D) nominal; micro
13) A short-term financial decision based on an MNC management’s expectation that the local foreign currency will appreciate may be ________.
A) increasing local customers’ accounts receivable and increasing local notes payable
B) decreasing local notes receivable and decreasing accruals
C) increasing local inventories and increasing local notes payable
D) increasing local accounts receivable and decreasing local accounts payable
14) As a foreign exchange hedging tool, options ________.
A) provide the right to buy or sell an amount of foreign currency
B) allow the trading of one interest rate stream for another
C) permit firms to change the interest rate structure of their assets/liabilities
D) represent an obligation to buy or sell an amount of foreign currency
15) As a foreign exchange hedging tool, currency swaps ________.
A) provide the right to buy or sell an amount of foreign currency
B) allow each party to pay the other’s interest payments
C) represent an obligation to buy or sell
D) are a variety of combinations of the other hedging tools
16) In terms of inventory management, multinational firms ________.
A) have only economic factors to consider, since this is a fixed asset and is minimally affected by political factors
B) must deal with a wide number of factors, including exchange rate fluctuations, tariffs, nontariff barriers, integration schemes such as the EU, and other rules and regulations
C) have only economic factors to consider, since this is a current asset and is minimally affected by political factors
D) have only political factors to consider, since inventory is minimally affected by foreign economic factors
17) Foreign bonds are sold primarily in ________.
A) countries other than the country in which the issue is denominated
B) U.S by corporations based outside the United States
C) all major international markets except the domestic market
D) the country of the currency of issue
18) A bond that is sold primarily in countries other than the country of the currency in which the issue is denominated is called ________.
A) a sovereign bond
B) a foreign bond
C) a Eurobond
D) a double Dutch bond
19.6 Review recent trends in international mergers and joint ventures.
1) The creation of international joint ventures has increased significantly beginning in the 1980s.
2) In the U.S. over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form of mergers and acquisitions rather than through establishments.
3) In the most emerging/developing countries (including China) over the past 30 years, foreign direct investment (FDI) came overwhelmingly in the form or mergers and acquisitions rather than through establishments.
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