Top 250+ Solved International Financial Management MCQ Questions Answer

From 151 to 165 of 203

Q. Which one of the following areas is NOT a way companies often respond to exchange raterisk when they alter their product strategy?

a. shifting the firm's manufacturing base to another country

b. the timing of new-product introduction

c. changing the size of its product line

d. product innovation with advanced technology

  • c. changing the size of its product line

Q. A perfect hedge (full coverage) on translation exposure can usually be achieved when:

a. using the money market hedge.

b. using the forward hedge.

c. using the futures hedge.

d. none of the above, since a perfect hedge is nearly impossible.

  • b. using the forward hedge.

Q. If a firm based in the Netherlands wishes to avoid the risk of exchange rate movements, andis due to receive USD100,000 in 90 days, it could:

a. sell US dollars 90 days from now at the spot rate.

b. enter into a 90-day forward sale of US dollars for euros;

c. purchase US dollars 90 days from now at the spot rate;

d. enter into a 90-day forward purchase of US dollars for euros;

  • b. enter into a 90-day forward sale of US dollars for euros;

Q. A forward currency transaction:

a. Sets the future date when delivery of a currency must be made at an unknown spot exchange rate

b. Calls for exchange in the future of currencies at an agreed rate of exchange

c. Means that delivery and payment must be made within one business day (USA/Canada) or two business days after the transaction date

d. Is always at a premium over the spot rate

  • b. Calls for exchange in the future of currencies at an agreed rate of exchange

Q. Two important practical differences between the monetary/non-monetary method and thecurrent rate method of translation is found in their treatment of:

a. Fixed assets and owner's equity

b. Issued share capital and retained earnings

c. Inventories and fixed assets

d. Monetary assets

  • c. Inventories and fixed assets

Q. When a foreign subsidiary is not wholly owned by the parent and a foreign project is partially

a. financed with retained earnings of the parent and of the subsidiary, then:

b. the parent's perspective should be used to evaluate a foreign project.

c. the subsidiary's perspective should be used to evaluate a foreign project.

d. the foreign project should enhance the value of both the parent and the subsidiary.

  • c. the subsidiary's perspective should be used to evaluate a foreign project.
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