PART I Overview and Background Chapter 1 An Introduction to Multinational Finance

True / False 1. 2. MNCs have investment or financial operations in more than one country. ANS: True. Because of globalization in the world's markets, a multinational financial manager is more likely than a domestic financial manager to specialize in finance to the exclusion of other fields of business. ANS: False. The multinational financial manager must be well versed in each of the business disciplines in which the MNC is involved. The domestic financial manager must be knowledgeable in several areas within finance, whereas the multinational financial manager usually specializes in a single area, such as corporate finance, investments, or financial markets. ANS: False. The multinational financial manager is likely to require knowledge of several fields within finance. The investment opportunity set is the set of investments available to the corporation; that is, the set from which the company must select. ANS: True. Types of market efficiency used to describe the performance of financial markets are allocational, operational, and transactional efficiency. ANS: False. Three types of market efficiency are allocational, operational , and informational. An informationally efficient market is one with abundant information. ANS: False. It is a market in which prices fully reflect available information. Allocational efficiency refers to how efficiently a market channels capital toward its most productive uses. ANS: True. Allocational efficiency refers to whether a market allocates capital to those investments deemed most worthy by a host government. ANS: False. Allocational efficiency refers to how efficiently a market channels capital toward its most productive uses in an economic, rather than a political, sense. Operational efficiency refers to how large an influence transactions costs