Question

In: Finance

question 46 Each ADR represents ________ of the shares of the underlying foreign stock. Select one:...

question 46

Each ADR represents ________ of the shares of the underlying foreign stock.

Select one:

a. 1

b. a multiple

c. 100

d. ADRs have nothing to do with foreign stocks.

Question 47

The five strategic motives driving the decision to invest abroad and become an MNE (market seekers, raw material seekers, production efficiency seekers, knowledge seekers, and political safety seekers) are mutually exclusive.

Select one:

True

False

Question 48

Systematic risk:

Select one:

a. none of the other answers

b. is the standard deviation of a security's return.

c. is measured with beta.

d. is measured with standard deviation.

Question 49

An example of economies of scale in financing include:

Select one:

a. being able to access the Euroequity, Eurobond, and Eurocurrency markets.

b. all of the other answers

c. being able to use large-scale plant and equipment.

d. being able to ship product in shiploads or carloads.

Question 50

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

Select one:

a. Office of the Comptroller of the Currency - OCC

b. Federal Deposit Insurance Corporation – FDIC

c. World Bank – WB

d. International Monetary Fund – IMF

Solutions

Expert Solution

Ans (46)

American Depositary Receipts are basically Transferable Securities that are issue by Foreign Companies (ie. Non US Companies) in US in order to raise Capital for various Projects. One ADR is composite of Multiple Shares of such Non US company. The Ration of such Shares is not fixed. Its decided by the company only as per its Capital Requirements.

ans = (b)

Ans (47) The Given Statement is False because Investment in a Foreign Stocks could be due to All of the 5 Strategic Motives. Hence the are not Mutually Exclusive Motive. There are Practical Examples of Big Mergers by Aquiring Shares of Foreign Companies where all the 5 Motives were present for such aquisition.

Ans (48)

Systematic Risk is Basically Risk that is beyond the control of any Company. It affects the Market as a Whole {eg: Recession in the Market, Political Decisions etc}. Systematic Risk is measured by Beta.

ans = (c)

Ans (49)

An example of economies of scale in Financing includes being able to access the Euroequity, Eurobond, and Eurocurrency markets.

ans = (a)

Ans (50)

Deposits in US Banks are Insured by Federal Deposit Insurance Corporation {FDIC} on Payment of Deposit Insurance Fees. In Eurocurrency Markets, the FDIC Deposit Insurance Fees is Avoided.

ans = (b)

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