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The traditional reasons an aspiring MNE in a lesser developed country seeks funding outside its domestic market include: Market segmentation Market...

a. and b. only

3.The reasons more foreign firms do not sell equity securities in the US and list on the NYSE include all the following EXCEPT:

  1. Periodic reporting to the SEC
  2. Detailed US disclosure rules
  3. Complying with US GAAP
  4. US Federal Reserve monetary policy

4.Empirical evidence shows that additional issues of equity by domestic firms in the US market typically have a __________ stock price reaction and additional equity issues in the US markets by foreign firms with segmented domestic markets typically have a __________ stock price reaction.

  1. Negative; negative
  2. Positive; negative
  3. Negative; positive
  4. Positive; positive

5._________ is the ability to buy or sell assets (such as a firm's equity) without affecting their price.

  1. FOREX
  2. Profitability
  3. Liquidity
  4. Time value of money

6.The following statement, "MNEs' marginal cost of capital is constant for considerable ranges in their capital budgets, whereas emerging market domestic firms funded only with domestically sourced capital may suffer a rising marginal cost of capital as their capital budgets increase," is:

a. True

b. False

7.The following statement: "A national securities market is segmented if the required return on securities traded in that market differs from the required return on securities (identical in risk after including political and currency risk) traded in globally integrated markets," is:

a. True

b. False

8.A US-based firm with dollar-denominated debt but sales denominated in Japanese yen could manage its risk exposure by:

  1. Purchasing a forward rate agreement.
  2. Entering into a swap agreement to pay yen interest and receive dollar interest.
  3. Purchasing a series of rolling forward contracts to buy yen forward.
  4. All of the above.

9.According to our class discussion, the following statement, "When a firm from an emerging- market country cross-lists on a US exchange, its home market is negatively impacted. The trading of shares of the cross-listing firm migrates out of its home market and the liquidity of the shares of the other firms that do not cross-list falls" is:

a. True

b. False

10. A firm with a floating-rate bond investment portfolio could manage its interest rate risk by:

  1. Entering into a pay-fixed-receive-floating interest rate swap
  2. Entering into a pay-floating-receive-fixed interest rate swap
  3. Constructing an interest rate collar by buying a cap and selling a floor
  4. None of the above

11. A firm with fixed-rate debt that expects interest rates to fall may engage in a swap agreement to:

  1. Pay fixed-rate interest and receive floating rate interest.
  2. Pay floating-rate interest and receive fixed-rate interest.
  3. Pay fixed-rate interest and receive fixed-rate interest.
  4. Pay floating-rate interest and receive floating-rate interest. 
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