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problem1) Recently, financial markets have become highly integrated. This development

a) allows investors to diversify their portfolios internationally.
b) allows minority investors to buy and sell stocks.
c) has increased cost of capital for firms.
d) answers a) and c) are both correct.

problem2) Deregulation of world financial markets

a) provided natural environment for financial innovations, such as currency futures and options.
b) has promoted competition among market participants.
c) has encouraged developing countries like Chile, Mexico, and Korea to liberalize by allowing foreigners to directly invest in their financial markets.
d) all of the above

problem3) Nestlé Corporation, a well-known Swiss MNC, used to issue two different classes of common stock, bearer shares and registered shares, and foreigners were allowed to hold only

a) registered shares.
b) bearer shares.
c) voting shares.
d) convertible shares.

problem4) Assume that you are U.S. producer of commodity good competing with foreign producers. Your inputs of production are priced in dollars and you sell your output in dollars. If the U.S. currency depreciates against currencies of our trading partners,

a) your competitive position is likely improved.
b) your competitive position is likely worsened.
c) your competitive position is unchanged.

problem5) The massive privatization which is presently taking place in formerly socialist countries, would like

a) eventually enhance standard of living to these countries' citizens.
b) depend on private investment.
c) increase opportunity set facing these countries' citizens.
d) all of the above

problem6) Most governments at least try to make it difficult for people to cross their borders illegally. This barrier to free movement of labour is the ex of

a) information asymmetry.
b) excessive transactions costs.
c) racial discrimination.
d) a market imperfection.

problem7) Owners of business are the

a) taxpayers.
b) workers.
c) suppliers.
d) shareholders.

problem8) Assume Mexico is main export market for your U.S.-based company and Mexican peso depreciates drastically against U.S. dollar, as it did in December 1994. This means

a) your company's products could be priced out of Mexican market, as the peso price of American imports would rise following the peso's fall.
b) your firm would be able to charge more in dollar terms while keeping peso prices stable.
c) your domestic competitors would enjoy period of facing little price competition from Mexican imports.
d) both b) and c) are correct

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M94218

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