Question 1

A eurodollar deposit is a demand deposit.

Accepted Answer

A eurodollar deposit is a time deposit, not a demand deposit, meaning it has a fixed term and cannot be withdrawn on demand without penalty.

Question 2

Financial globalization has NOT resulted in:

Accepted Answer

C

Question 3

A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?

Accepted Answer

A Brazil-based MNE may face challenges in accessing capital due to potential economic instability, currency fluctuations, and higher interest rates in Brazil compared to more developed markets.

Question 4

Several of the world's major currency exchange rates follow a specific quotation convention that is the result of tradition and history. The exchange rate between the U.S. dollar and the Japanese yen is always quoted as "dollars per Japanese yen."

Accepted Answer

The exchange rate between the U.S. dollar and the Japanese yen is typically quoted as "yen per U.S. dollar," not "dollars per Japanese yen."

Question 5

A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

Accepted Answer

A well-established, large U.S.-based MNE (Multinational Enterprise) typically has the resources and capabilities to overcome obstacles such as an open marketplace, high-quality strategic management, and access to capital, thus none of the options listed would be obstacles it cannot overcome.

Question 6

The institutions of global finance are:

Accepted Answer

The institutions of global finance include central banks, which are responsible for setting monetary policy and regulating the banking system; commercial banks, which provide loans and other financial services to individuals and businesses; and investment banks, which help companies raise capital through the sale of stocks and bonds. Therefore, all of the options are correct.

Question 7

Eurocurrencies are domestic currencies of one country on deposit in a second country.

Accepted Answer

Eurocurrencies are indeed domestic currencies deposited in a bank outside their country of origin, hence being in a second country.

Question 8

The securities at the heart of the global capital markets are the Mortgage Backed Securities (MBS). The health and security of the global financial system rely on the quality of these securities.

Accepted Answer

Mortgage Backed Securities (MBS) are significant components of the global capital markets, but they are not the sole securities at the heart of these markets. The global financial system relies on a wide range of securities, including government and corporate bonds, equities, and derivatives, in addition to MBS. The health and security of the global financial system are dependent on the quality and performance of all these types of securities, not just MBS.

Question 9

Ownership, control, and governance changes radically across the world. The publicly traded company is not the dominant global business organization-the privately held or family-owned business is the prevalent structure-and their goals and measures of performance differ dramatically.

Accepted Answer

The statement is true.

Question 10

Interest spreads in the eurocurrency market are small for many reasons EXCEPT:

Accepted Answer

Eurocurrency loans are generally unsecured loans, not secured loans, so the spread is not small for this reason. The other options all explain reasons why interest spreads in the eurocurrency market are small. B) Because eurocurrency deposits and loans are usually unsecured and made in large amounts, lenders have more confidence in the borrower's ability to repay the loan, which results in smaller interest spreads. C) The eurocurrency market is a wholesale market, meaning it is only available to large institutional investors, which results in smaller spreads. D) Borrowers in the eurocurrency market are typically large corporations or government entities, which have a lower risk of default and higher credit ratings, resulting in smaller interest spreads.

Question 11

The reference rate of interest in the eurocurrency market is the:

Accepted Answer

The London Interbank Offered Rate (LIBOR) is the reference rate of interest in the eurocurrency market, which is the market for loans and deposits denominated in currencies other than the currency of the country where the bank is located. It is the average interest rate at which a group of banks in London are willing to lend to each other for a stated period of time in a particular currency.

Question 12

Several of the world's major currency exchange rates follow a specific quotation convention that is the result of tradition and history. The exchange rate between the U.S. dollar and the euro is always quoted as "dollars per euro."

Accepted Answer

This is true. The exchange rate between the U.S. dollar and euro is traditionally quoted as the number of dollars needed to purchase one euro, resulting in the quotation convention "dollars per euro."

Question 13

The U.S. dollar has been the focal point of currency trading since the 1940s. As a result, most of the world's currencies are quoted against the dollar.

Accepted Answer

This is true, as the dominance of the U.S. economy and its role in international trade has made the dollar the most widely used currency in the world.

Question 14

Several of the world's major currency exchange rates follow a specific quotation convention that is the result of tradition and history. The exchange rate between the U.S. dollar and the British pound is always quoted as "dollars per pound."

Accepted Answer

The exchange rate between the U.S. dollar and the British pound is traditionally quoted as "dollars per pound," reflecting a longstanding convention in how major currency pairs are quoted, where the base currency is the British pound and the quote currency is the U.S. dollar.

Question 15

The modern eurocurrency market was born shortly after:

Accepted Answer

The modern eurocurrency market was born shortly after World War II. The rebuilding efforts after the war created a need for international financing, leading to the development of the eurocurrency market.

Question 16

Multinational enterprises (MNEs) are firms, both for-profit companies and not-for-profit organizations, that have operations in more than one country, and conduct their business through foreign subsidiaries, branches, or joint ventures with host country firms.

Accepted Answer

This statement accurately defines multinational enterprises as firms that have operations in more than one country, conducting their business through foreign subsidiaries, branches, or joint ventures with host country firms.

Question 17

Your authors suggest that one way to characterize the global financial marketplace is through its assets, institutions, and linkages.

Accepted Answer

The authors suggest that one way to characterize the global financial marketplace is through its assets (such as stocks and bonds), institutions (such as banks and stock exchanges), and linkages (such as global payment systems and cross-border investment strategies).

Question 18

A well-established, large, China-based MNE will probably be most adversely affected by which of the following elements of firm value?

Accepted Answer

A well-established, large China-based MNE may face challenges in an open marketplace due to increased competition from domestic and international businesses. This can lead to a loss of market share, reduced revenue, and decreased profits for the company. Additionally, an open marketplace may also bring about regulatory challenges and restrictions on operations for the MNE, further impacting their ability to generate profits. Thus, a lack of an open marketplace may be less detrimental to such companies than the presence of one.

Question 19

Financial globalization has NOT resulted in:

Accepted Answer

The answer of Financial globalization has NOT resulted in:
...

Question 20

A major cost avoided in the eurocurrency markets is the payment of deposit insurance fees, such as:

Accepted Answer

The Federal Deposit Insurance Corporation (FDIC) is an independent agency that provides deposit insurance to protect depositors in case a bank fails. However, since the eurocurrency market operates outside of any particular country's regulatory system, there is no requirement for banks to pay FDIC fees or equivalent deposit insurance fees. Therefore, option A is the best choice. Options B, C, and D do not relate to deposit insurance fees and are not relevant to the question.

Quiz 1: Multinational Financial Management: Opportunities and Challenges

A eurodollar deposit is a demand deposit.

Financial globalization has NOT resulted in:

A well-established, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?

Several of the world's major currency exchange rates follow a specific quotation convention that is the result of tradition and history. The exchange rate between the U.S. dollar and the Japanese yen is always quoted as "dollars per Japanese yen."

A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

The institutions of global finance are:

Eurocurrencies are domestic currencies of one country on deposit in a second country.

The securities at the heart of the global capital markets are the Mortgage Backed Securities (MBS). The health and security of the global financial system rely on the quality of these securities.

Ownership, control, and governance changes radically across the world. The publicly traded company is not the dominant global business organization-the privately held or family-owned business is the prevalent structure-and their goals and measures of performance differ dramatically.

Interest spreads in the eurocurrency market are small for many reasons EXCEPT:

The reference rate of interest in the eurocurrency market is the:

Several of the world's major currency exchange rates follow a specific quotation convention that is the result of tradition and history. The exchange rate between the U.S. dollar and the euro is always quoted as "dollars per euro."

The U.S. dollar has been the focal point of currency trading since the 1940s. As a result, most of the world's currencies are quoted against the dollar.

Several of the world's major currency exchange rates follow a specific quotation convention that is the result of tradition and history. The exchange rate between the U.S. dollar and the British pound is always quoted as "dollars per pound."

The modern eurocurrency market was born shortly after:

Multinational enterprises (MNEs) are firms, both for-profit companies and not-for-profit organizations, that have operations in more than one country, and conduct their business through foreign subsidiaries, branches, or joint ventures with host country firms.

Your authors suggest that one way to characterize the global financial marketplace is through its assets, institutions, and linkages.

A well-established, large, China-based MNE will probably be most adversely affected by which of the following elements of firm value?

Financial globalization has NOT resulted in:

A major cost avoided in the eurocurrency markets is the payment of deposit insurance fees, such as: