试题四英文

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国际金融：理论、市场与管理试题

Part Ⅰ

Direction: Choice the best proper answer.

1、What trend is there in foreign direct investment？ A、 diversification products B、 global C、 technical products D、financial investment

2、Synergistic gains may or may not arise from cross-border acquisitions, depending on .

A、The development of global economy B、the amount of foreign direct investments C、The motive of acquiring firms D、the technical progress

3、 can play a major role in motivating firms to undertake cross-border acquisitions. A、Imperfections in the market for intangible assets B、Trade barriers in international exchange C、Imperfect labor markets of countries in the world

D、Vertical integration in the development of cross-border corporations 4、What is a Midwestern manufacture of small kitten electrical appliances? A、The cross-border company B、The Centralia company C、The cross-border corporation D、The Centralia corporation 5、What does a lower cost of capital mean?

A、More capital projects will have a positive net present value to the multinational firm

B、More capital expenditure will have a lower net present value to the multinational firm

C、More capital projects will have a lower net present value to the multinational firm D、More capital expenditure will have a positive net present value to the multinational firm

6、The APV model we presented and demonstrated is suitable for use in analyzing

A、a capital expenditure that is of individual riskiness in comparison to the firm B、a capital expenditure that is of sum riskiness in comparison to the firm as a whole C、a capital expenditure that is of average riskiness in comparison to the firm as a whole

D、a capital expenditure that is average riskiness in comparison to the firm as a section 7、 refers to the investment the firm has in transaction balances to cover scheduled outflows of funds during a cash budgeting period and the funds the firms has tied up in precautionary cash balances.

A、Cash management B、foreign direct investment

C、International capital budgeting D、foreign financial investment 8、The foundation of any cash management system is . A、its investment management B、Its cash budget

C、The cross-border investment of a corporation D、The operational management of a corporation

9、The benefits of a central cash depository derive mainly from . A、The financial operation in capital management

B、The cash management during the developing stage of the corporation C、The cash flowing because of exchanging products

D、The business transactions the affiliates have with external parties 10、What is a guarantee from the importer’s bank ? A、A letter of credit B、a commercial paper C、A large deposit D、a banker’s acceptance

11、What is a document issued by the common carrier specifying that it has received the goods for shipment?

A、A bill of lading B、A letter of credit C、a commercial paper D、a banker’s acceptance

12、What is based on the term to maturity of the time draft and the creditworthiness of the importer?

A、the bill of lading B、The acceptance commission C、The commercial paper D、the banker’s acceptance

13、What implies there is demand for a country’s products ,that its labor force is benefiting from employment, and that some resources are used for technological advancement?

A、Success in international finance B、success in importing C、Success in exporting D、success in foreign direct investment

14、What is an umbrella term used to describe many different types of transaction? A、Counter-trade B、forward-trade C、option-trade D、discount-trade

15、What involves the establishment of new facilities in foreign countries and acquisition of existing foreign businesses?

A、counter-trade B、financial investment in international market C、FDI D、forward-trade

16、What represents an internal organizational expansion by MNCs? A、counter-trade B、financial investment in international market C、FDI D、forward-trade

17、What is essential to the welfare of MNCs in FDI? A、To effectively manage political risk B、To effectively operate and manage MNC C、To acquire supporting from the host government D、To expand new market

18、Which country did play a relatively minor roles as a host of FDI inflows during the period 1994-1998?

A、The United States B、Japan C、the United Kingdom D、Canada

19、Which country received the largest amount of FDI inflows during the period 1994-1998?

A、The United States B、Japan C、the United Kingdom D、Canada 20、Generally speaking, which countries may MNCs undertake FDI in?

A、In countries where outputs are available in order to secure the supply of outputs at a stable price

B、In countries where inputs are available in order to secure the supply of inputs at a stable price

C、In countries where there are plentiful resources

D、In countries where the development of market economy is more mature

21、If MNCs have monopolistic control over the input market what can this serve as? A、The cross-border cash management B、A market imperfection of the host countries C、The foreign direct investment D、A barrier to entry to the industry

22、Why are the majority of vertical FDIs backward?

A、In that FDI involves an industry abroad that produces inputs for MNCs B、In that FDI involves an industry abroad that produces outputs for MNCs C、In that FDI involves an industry abroad that is poor in natural resources D、In that FDI involves an industry abroad that is rich in natural resources

23、Although the majority of vertical FDIs are backward, when can foreign investments take the form of forward vertical FDI?

A、They involve an industry abroad that is poor in natural resources. B、They involve an industry abroad that sells a MNCs inputs. C、They involve an industry abroad that sells a MNCs outputs. D、They involve an industry abroad that is rich in natural resources.

24、Which stage of the product life cycle is the demand for the new product relatively incentive to the price in?

A、The early stage B、the developing stage C、The mature stage D、the ebbing stage

25、What theory predicts that overtime the United States switches from an exporting country of new products to an importing country? A、The price theory

B、The product life-cycle theory C、The market mechanism theory D、The local-economy theory

26、In recent years, what has taken the form of cross-border acquisitions? A、A growing portion of FDI B、a ebbing portion of FDI

C、A growing portion of financial investment D、A ebbing portion of financial investment 27、What may cross-border be motivated by?

A、The acquirer’s desire to acquire and internalize the target firm’s financial assets B、The acquirer’s desire to acquire the target firm’s real assets C、The acquirer’s desire to internalize the target firm’s real assets

D、The acquirer’s desire to acquire and internalize the target firm’s intangible assets 28、In assessing investment opportunities in a foreign country, what is important for a parent firm?

A、To take into consideration the risk arising from the fact that investments are located in a foreign country

B、To investigate the condition of foreign direct investment C、To know of the law of foreign countries investing directly D、To be allowed by the government of investing country

29、 refers to the potential losses to the parent firm resulting from adverse political developments in the host country.

A、market risk B、Political risk C、credit risk D、interest risk

30、What is a broader measure of risk than political risk, as the former encompasses political risk, credit risk, and other economic performances? A、control risk B、transfer risk C、operation risk D、Country risk Part Ⅱ

Direction: Choice the proper answers 1、Why do firms invest overseas?

A、vertical integration B、imperfect labor market C、Intangible assets D、Trade barriers

2、What can the rapid increase in cross-border acquisitions be attributed to?

A、The technology progress

B、The integration of the world economy C、The ongoing liberalization of capital markets D、The international trades

3、 are thus important issues from the perspective of shareholder welfare and public policy.

A、Whether or not cross-border acquisitions produce synergistic gains B、When synergistic gains are obtained

C、That cross-border acquisition of businesses is a politically sensitive issue. D、How such gains are divided between acquiring and target firms

4、according to experts of political risk analysis evaluating, the key factors of political risk are .

A、The host country’s political and government system B、Regional security C、Key economic indicators D、Integration into the world system 5、Examples of transfer risk include .

A、The unexpected imposition of capital controls B、With holding taxes on dividend and interest payments C、Trade barriers D、Imperfect labor market

6、the cross-border corporations have been becoming multinational in . A、The scope of their business activities B、The amount of their capital C、Their capital structure

D、The categories of their corporations

7、The acceptance commission is based on the term to maturity of and . A、The time draft B、the credit worthiness of the importer C、The bill of lading D、the commercial paper 8、What does success in exporting imply?

A、That there is demand for a country’s products B、That a country’s resources are destroyed

C、That some resources are used for technological advancement D、That its labor force is benefiting from employment 9、What does FDI involve?

A、Acquisitions of supporting from foreign governments B、Acquisitions of existing foreign businesses C、The construction of new factories in foreign

D、The establishment of new production facilities in foreign countries

10、What do governments use to impose on exports and imports of goods and services?

A、Tariffs B、quotas C、technical indexes D、the rate of interest

11、Which aspects in intangible assets do MNCs often enjoy comparative advantages when investing directly foreign countries?

A、Technological B、 managerial C、brand names D、cultural

12、According to the internalization theory of FDI, please tell why firms that have intangible assets with a public good property tend to invest directly in foreign countries.

A、Use these intangible assets with a large scale B、Avoid the misappropriations of intangible assets C、Acquire more benefit in resource from foreign market D、Avoid the trade barriers from foreign countries 13、Which methods can FDI take place through? A、Greenfield investment B、bond investment C、Stock investment D、cross-border acquisitions

14、Which way may firms be motivated to engage in cross-border M&A deals to bolster their competitive positions in the world market by? A、Acquiring special assets from other firms B、Using their own assets on a larger scale C、Borrowing real assets from other firms

D、Selling their own assets to other firms 15、What may cross-border be motivated by?

A、The acquirer’s desire to internal the target firm’s real assets B、The acquirer’s desire to internalize the target firm’s intangible assets C、The acquirer’s desire to acquire the target firm’s real assets D、The acquirer’s desire to acquire the target firm’s intangible assets 16、What may the internalization proceed? A、Forward to internalize the acquirer’s assets B、Backward to internalize the target’s assets C、Forward to internalize the target’s assets D、Backward to internalize the acquirer’s assets

17、Depending on the incidence, what can political risk be classified into? A、transfer risk B、micro risk C、control risk D、Macro risk

18、Depending on the manner in which firms are affected, which types can political risk be classified into?

A、Transfer risk B、operational risk C、control risk D、management risk 19、What do examples for operational risk include? A、Unexpected changes in environmental policies B、Local content requirements C、Minimum wage law

D、Restrictions on access to local credit facilities 20、What do examples for control risk include?

A、Restrictions imposed on the maximum ownership by foreigners

B、Mandatory transfer of ownership to local firms over a certain period of time C、The nationalization of local operations of MNCs D、Restrictions on access to local credit facilities Part Ⅲ

Direction: answering chiefly

1、Recently, many foreign firms both developed and developing countries acquired

high-tech U.S firms. What might have motivated these firms to acquire U.S firms? 2、Japanese MNCs, such as Toyota, Toshiba, and Matsushita, made extensive investments in Southeast Asian counties like Thailand, Malaysia, and Indonesia. In your opinion, what forces are driving Japanese investments in this region?

3、Since NAFTA was established, many Asian firms, especially those from Japan and Korea, have made extensive investments in Mexico. Why do you think these Asian firms decided to build production facilities in Mexico?

4、How would you explain the fact that China emerged as the second most important recipient of FDI after the United States in recent years?

5、Explain the internalization theory of FDI. What are the strengths and weaknesses of the theory?

6、Explain Vernon’s product life-cycle theory of FDI. What are the strengths and weakness of the theory?

7、Why do you think the host country tends to resist cross-border acquisitions rather than Greenfield investments?

8、How would you incorporate political risk into the capital budgeting process of foreign investment project?

9、Explain and compare forward versus backward internalization.

10、What could be the reason for the negative synergistic gains for British acquisitions of U.S. firms?

11、Define country risk. How is it different from political risk?

12、What are the advantages and disadvantages of FDI as compared to a licensing agreement with a foreign partner?

13、What operational and financial measures can a MNC take to minimize the political risk associated with a foreign investment project?

14、Study the experience of Enron in India and discuss what we can learn from it for the management of political risk.

15、Discuss the different ways political events in a host country may affect local operations of a MNC.

16、What factors would you consider in evaluating the political risk associated with making FDI in a foreign country.

17、Mini Project: Suppose you are hired as a political consultant by Coca-Cola, which

is considering investing in the bottling facilities in four countries: Mexico, Argentina, China, and Russia. Pick a country out of the four and analyze the political risk associated with investing there. Prepare a final report to Coca-Cola using a similar format as the following Exhibit. (385)

18、Suppose that your firm is operating in a segmented capital market. What actions would you recommend to mitigate the negative effects?

19、Explain why and how a firm’s cost of capital may decrease when the firm’s stock is cross-listed on foreign stock exchanges. 20、Explain the pricing spillover effect.

21、In what sense do firms with nontradable assets get a free ride from firms whose securities are internationally tradable?

22、Define and discuss indirect world systematic risk.

23、Discuss how the cost of capital is determined in segmented vs. integrated capital markets.

24、Suppose there exists a nontradable asset with a perfect positive correlation with a portfolio T of tradable assets. How will the nontradable asset be priced?

25、Discuss what factors motivated Novo Industri to seek U.S. listing of its stock. What lessons can be derived from Novo’s experiences?

26、Discuss foreign equity ownership restrictions. Why do you think countries impose these restrictions?

27、Explain the pricing-to-market phenomenon.

28、Explain how the premium and discount are determined when assets are priced to market. When would the law of one price prevail in international capital markets even if foreign equity ownership restrictions are imposed?

29、Under what conditions will the foreign subsidiary’s financial structure become relevant?

30、Under what conditions would you recommend that the foreign subsidiary conform to the local norm of financial structure?

31、Why is capital budgeting analysis so important to the firm? 32、What is the intuition behind the NPV capital budgeting framework? 33、Discuss what is meant by the incremental cash flows of a capital project.

34、Discuss the nature of the equation sequence, Equations 1 to 6. Equations:

CFt=(Rt – Oct - Dt- It)(1-T)+ Dt + It(1-T) (1) =NIt + Dt + It(1-T) (2) =(Rt –Oct -Dt)(1-T) + Dt (3) =NOIt(1-T) + Dt (4) =(Rt - OCt)(1-T) + T Dt (5) =OCFt(1-T) + Dt (6)

35、What makes the APV capital budgeting framework useful for analyzing foreign capital expenditures?

36、Relate the concept of lost sales to the definition of incremental cash flows. 37、What problems can enter into the capital budgeting analysis if project debt is evaluated instead of the borrowing capacity created by the project?

38、What is the nature of a concessionary loan and how is it handled in the APV model?

39、What is the intuition of discounting the various cash flows in the APV model at specific discount rates?

40、In the Modigliani-Miller equation, why is the market value of the levered firm greater than the market value of an equivalent unlevered firm?

41、Discuss the difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the project perspective.

42、Define the concept of a real option. Discuss some of the various real options a firm can be confronted with when investing in real projects. 43、Discuss the four major types of political risk.

44、What are some of the qualitative questions asked by political analysts when measuring the political risk of a country? What are some of the quantitative questions asked by these political analysts?

45、Discuss three ways to manage political risk.

46、Why are banks so interested in political, or country, risk?

47、What are the benefits to be derive from foreign direct investment？ 48、Why has so little FDI flowed into the less-developed countries? 49、What is the internalization theory? Is it valid?

50、What are the key questions that top management must answer when establishing an international cash management system? Part Ⅳ

Direction: calculating

1、There is a capital project now whose expected after-tax cash flow for per year is 1 million dollars. Its expected after-tax terminal value is 50 million dollars. Initial investment an inception is 20 million dollars, and weighted-average cost of capital is 10%. Its existing period of this project is 5 years. Whether can this capital project acquire return?

2、There was a man who bought 0.5 million shares H stock at $10 of per share. After 5 years, he sold them at $20 of per share. There is $2 dividend of per share in per year. Its weighted-average cost of capital is 10%. What is NPV?

3、Answer problems based on the stock market data given by the following table.

Telmex Mexico World

Telmex 1.00

Correlation Coefficients Mexico .90 1.00

World 0.60 0.75 1.00

SD(%) 18 15 10

R(%)

? 14 12

The above table provides the correlations among Telmex, a telephone/communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 5%.

Compute the domestic country beta of Telmex as well as its world beta. What do these betas measure?

4、Suppose that the index model for stocks A and B is estimated with the following results: RA=1.0%+0.9RM + eA , RB=-2.0%+1.1RM + eB ,бM = 20%，б（eA）=30%，б（eB）=10%. Find the standard deviation of each stock and the covariance between them.

5、The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows:

A B T-bills Expected return 10% 30 5 Standard deviation 20% 60 0 The correlation coefficient between funds A and B is -0.2. Find the optimal risky portfolio, P, and its expected return and standard deviation.

6、There is a portfolio with A B C stock. Beta of A stock is 0.3, beta of B stock is 0.4, and beta of C stock is 0.2. There is 50% of A stock in sum funds, 30% of B stock, and 20% of C stock. What is beta of this portfolio?

7、The expected rate of return of a portfolio is 15%, the rate of free risk is 5%, the expected rate of market portfolio is 20%. What is beta of this portfolio?

8、Data from the period 1926 to 1999 for the S&P 500 index yield the following statistics: average excess return, 9.5%; standard deviation, 20.1%. If the coefficient of risk aversion were actually 3.5, what risk premium would have been consistent with the market’s historical standard deviation?

9、The expected rate of market portfolio is 20%. The expected rate of return of a portfolio is 15%, and Beta of the portfolio is 0.4. What is the rate of free risk? 10、Data from the period 1926 to 1999 for the S&P 500 index yield the following statistics: average excess return, 9.5%; standard deviation, 20.1%. To the extent that these averages approximated investor expectations for the period, what must have been the average coefficient of risk aversion?

11、Answer problems 1-3 based on the stock market data given by the following table.

Telmex Mexico World

Telmex 1.00

Correlation Coefficients

Mexico .90 1.00

World 0.60 0.75 1.00

SD(%) 18 15 10

R(%)

? 14 12

Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of capital of Telmex.

12、Suppose that the risk premium on the market portfolio is estimated at 8% with a standard deviation of 22%. What is the risk premium on a portfolio invested 25% in GM and 75% in Ford, if they have betas of 1.10 and 1.25, respectively?

13、Stock XYZ has an expected return of 12% and risk ofβ=1. Stock ABC has expected return of 13% and β=1.5. The market’s expected return is 11%, and rf=5%. According to the CAPM, which stock is a better buy?

14、The risk-free rate is 8% and the expected return on the market portfolio is 16%. A firm considers a project that is expected to have a beta of 1.3. What is the required rate of return on the project?

15、There is a portfolio with A B C stock, its weighted-average cost of capital is 10%, and its holding period is 5 years. $20 million of these funds is borrowed at 2% of interest rate. Please see the following table and tell what NPV of this portfolio is. stock Shares (million) A B C 2 1 0.5 initial price ($) 10 25 30 Ending price ($) 15 20 40 Dividend of per share($) 2 3 4 16、Suppose that the index model for stocks A and B is estimated with the following results: RA=1.0%+0.9RM + eA , RB=-2.0%+1.1RM + eB ,бM = 20%，б（eA）=30%，б（eB）=10%. We form an equally weighted portfolio of A and B. What will be the nonsystematic standard deviation of that portfolio?

17、Brambling (Electronics) Ltd is a research-led business that specialises in the development of surveillance equipment. The company has recently developed a new form of camera with a powerful fibre-optic lens and is currently considering whether or not to produce the camera. The board of directors will soon meet to make a final decision and has the following information available to help it decide:

(ⅰ)The cost of developing the camera has been $1,400,000 to date and the company is committed to spending a further $350,000 within the next two months.

(ⅱ)The company has spare production capacity and can produce the camera using

machinery that will cost $4,700,000 and which will be purchased immediately. It is expected to be sold at the end of four years for $800,000.

(ⅲ)Total fixed costs identified with the production of the camera are $1,725,000 per year. This includes a depreciation charge in respect of the machinery of $975,000 per year and a charge allocated to represent a fair share of the fixed costs of the business as a whole of $250,000 per year.

(ⅳ) The cameras are expected to sell for $10,000 each and the marketing department believes that the business can sell 800 cameras per year over the next four years. (ⅴ) The variable costs of production are $7,000 per camera.

(ⅵ) If the business decides not to produce the camera it can sell the patents immediately for $1,300,000.

The company has a cost of capital of 12%. Ignore taxation. Please calculate the net present value of selling the patent.

18、Grebe Ltd operates a chain of cellular telephone stores in the UK. An abbreviated profit and loss account and balance sheet of the business for the year that has just ended is as follows:

$000 6,450 800 160 0 128 512 256 256 $000 1,800 $000 3,500

Less creditors: amounts falling due within one year Less creditors: amounts falling after more than one year Capital and reserves $0.50 ordinary shares Retain profit 1,100 700 4,200 2,000 2,200 600 1,600 2,200 The company is expecting a surge in sales following advances in cellular telephone technology that should translate into additional operating profits of $180,000 per year for the foreseeable future. However, the company will need to invest $1,200,000 immediately in expanding the asset base of the business if it is to achieve these additional profits.

The business has approached a large supplier that already has an equity investment in the business to see whether it would be prepared to provide further funds for the business. The supplier has indicated it would be willing to provide the necessary funds by either:

(ⅰ)an issue of $0.50 ordinary shares at a premium of $1.50 per share, or (ⅱ)an issue of $1,200,000 10% debentures at par.

The board of directors of Grebe Ltd has already announced that it will maintain the same dividend payout ratio in future years as in the past and that this policy will be unaffected by the form of finance raised.

Required: for each of the financing options, calculate the forecast earnings per share for the forthcoming year.

19、Bartok Ltd produces a single product. Financial data concerning the product is as follows: $ $

Selling price per unit 20 Variable cost per unit 17 Fixed costs per unit 2 19 Net profit 1

At present, total credit sales for the product are $1.2m and the average collection period is one month. In order to stimulate sales for the product, the company is considering liberalising its credit policy so as to allow an average collection period of 1 1/2 months. This change of policy will allow the company to break into the US market where, currently, it has no presence. As a result of this breakthrough, sales will increase by 25%. However, there would be an additional investment required in stocks of $150,000 and an increase in trade creditors of $50,000.

The company requires a 25% rate of return on its investments. Ignore taxation. Required: evaluate the proposal to increase the average collection period for debtors assuming all customers take advantage of the longer credit period.

20、Suppose that Intel currently is selling at $40 per share .You buy 500 shares, using $15,000 of your own money and borrowing the remainder of the purchase price from your broker .The rate on the margin loan is 8%. If the maintenance margin is 25%, how low can Intel’s price fall before you get a margin call?

21、Suppose that Intel currently is selling at $40 per share .You buy 500 shares, using $15,000 of your own money and borrowing the remainder of the purchase price from your broker .The rate on the margin loan is 8%. How would your answer to (b) change if you had financed the initial purchase with only $10,000 of your own money?

22、Suppose that Intel currently is selling at $40 per share .You buy 500 shares, using $15,000 of your own money and borrowing the remainder of the purchase price from your broker .The rate on the margin loan is 8%. What is the rate of return on your margined position (assuming again that you invest $15,000 of your own money) if Intel is selling after one year at (i)$44;(ii)$40;(iii)$36?

23、The composition of the Fingroup Fund portfolio is as follows:

Stock share price A 200,000 $35 B 300,000 $40 C 400,000 $20 D 600,000 $25

The fund has not borrowed any funds, but it’s accrued management fee with the portfolio manager currently totals $30,000. There are 4 million shares outstanding. What is the net asset value of the fund?

24、The data below describe a three-stock financial market that satisfies the single-index model. Stock Capitalization Beta Mean return A B C $3000 $1940 $1360 1.0 0.2 1.7 10% 2 17 excess Standard deviation 40% 30 50 The single factor in this economy is perfectly correlated with the value-weighted index of the stock market. The standard deviation of the market index portfolio is 25%. What is the covariance between stock B and the index?

25、The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows: A B T-bills Expected return 10% 30 5 Standard deviation 20% 60 0 The correlation coefficient between funds A and B is -0.2. How much will an investor with A = 5 invest in Funds A and B and in T-bills?

26、What will be the nonsystematic standard deviation of the equally weighted portfolio if the average value ofσ2(ei)equals 30%, and n = 1000? 27、The stock X and stock Y portfolio is as follows: Bear probability Stock X Stock Y 0.2 -20% -15% Market condition Normal 0.5 18% 20% Bull 0.3 50% 10% What are the standard deviations of returns on stock X and stock Y?

28、The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows: A B T-bills Funds A and B.

29、The data below describe a three-stock financial market that satisfies the single-index model. Stock Capitalization Beta Mean return A B C $3000 $1940 $1360 1.0 0.2 1.7 10% 2 17 excess Standard deviation 40% 30 50 Expected return 10% 30 5 Standard deviation 20% 60 0 The correlation coefficient between funds A and B is -0.2. Draw the opportunity set of The single factor in this economy is perfectly correlated with the value-weighted index of the stock market. The standard deviation of the market index portfolio is 25%. What is the mean excess return of the index portfolio?

30、What will be the nonsystematic standard deviation of the equally weighted portfolio if the average value ofσ2(ei)equals 30%, and n = 10?

31、The data below describe a three-stock financial market that satisfies the single-index model. Stock Capitalization Beta Mean return A B C $3000 $1940 $1360 1.0 0.2 1.7 10% 2 17 excess Standard deviation 40% 30 50 The single factor in this economy is perfectly correlated with the value-weighted index of the stock market. The standard deviation of the market index portfolio is 25%. Break down the variance of stock B into its systematic and firm-specific components.

32、What was GM’s CAPM alpha per month during the period covered by the Merrill Lynch regression if during this period the average monthly rate of return on T-bills was 0.6%?

33、The composition of the Fingroup Fund portfolio is as follows:

The fund has not borrowed any funds, but it’s accrued management fee with the portfolio manager currently totals $30,000. There are 4 million shares outstanding. If the rate of stock A’s expected return is 0.2, that of B is 0.3, that of C is 0.25, and that of D is 0.4. Please calculate what the rate of the Fingroup Fund portfolio expected return is.

34、What will be the nonsystematic standard deviation of the equally weighted portfolio if the average value ofσ2(ei)equals 30%, and n = 100? 35、The stock X and stock Y portfolio is as follows: Bear probability Stock X Stock Y 0.2 -20% -15% Market condition Normal 0.5 18% 20% Bull 0.3 50% 10% Stock share price A 200,000 $35 B 300,000 $40 C 400,000 $20 D 600,000 $25 Please calculate the rate of expected return for stock X and stock Y. 36、What will be the nonsystematic standard deviation of the equally weighted portfolio if the average value ofσ2(ei)equals 30%, and n = 10000?

37、Suppose that portfolio P has an expected return of 10%, and β of 0.5, whereas portfolio Q has an expected return of 15% and β of 1. The risk-free rate, rf, is 5%. Find K for these portfolios, and confirm that they are equal.

38、Suppose that portfolio P has an expected return of 10%, and β of 0.5, whereas

portfolio Q has an expected return of 15% and β of 1. The risk-free rate, rf, is 5%. Find K for an equally weighted portfolio of P and Q, and show that it equals K for each individual security.

39、Brambling (Electronics) Ltd is a research-led business that specialises in the development of surveillance equipment. The company has recently developed a new form of camera with a powerful fibre-optic lens and is currently considering whether or not to produce the camera. The board of directors will soon meet to make a final decision and has the following information available to help it decide:

(ⅰ)The cost of developing the camera has been $1,400,000 to date and the company is committed to spending a further $350,000 within the next two months.

(ⅱ)The company has spare production capacity and can produce the camera using machinery that will cost $4,700,000 and which will be purchased immediately. It is expected to be sold at the end of four years for $800,000.

(ⅵ) If the business decides not to produce the camera it can sell the patents immediately for $1,300,000.

The company has a cost of capital of 12%. Ignore taxation.

Require: carry out a separate sensitivity analysis to show by how much the following factors would have to change before the proposal to produce and sell the new camera has an NPV of zero:

(1) the initial outlay on the machinery; (2) the discount rate;

(3) the residual value of the machinery; (4) the annual net operating cash flows.

40、Grebe Ltd operates a chain of cellular telephone stores in the UK. An abbreviated profit and loss account and balance sheet of the business for the year that has just ended is as follows:

Abbreviates profit and loss account for the year ended 31 may 2003 Sales Operating profit for the year Debenture interest payable Net profit before taxation Corporation tax (20%) Net profit after taxation Dividends proposed Retained profit for the year Abbreviated balance sheet as at 31 may 2003 Fixed assets at written down values Current assets Less creditors: amounts falling due within one year Less creditors: amounts falling after more than one year Capital and reserves $0.50 ordinary shares Retain profit The company is expecting a surge in sales following advances in cellular telephone technology that should translate into additional operating profits of $180,000 per year for the foreseeable future. However, the company will need to invest $1,200,000 immediately in expanding the asset base of the business if it is to achieve these additional profits.

The business has approached a large supplier that already has an equity investment in

$000 1,800 1,100 $000 3,500 700 4,200 2,000 2,200 600 1,600 2,200 $000 6,450 800 160 0 128 512 256 256

the business to see whether it would be prepared to provide further funds for the business. The supplier has indicated it would be willing to provide the necessary funds by either:

(ⅰ)an issue of $0.50 ordinary shares at a premium of $1.50 per share, or (ⅱ)an issue of $1,200,000 10% debentures at par.

Required: calculate the level of operating profit at which the earnings per share will be the same under each financing option.

41、Bartok Ltd produces a single product. Financial data concerning the product is as follows: $ $

Selling price per unit 20 Variable cost per unit 17 Fixed costs per unit 2 19 Net profit 1 At present, total credit sales for the product are $1.2m and the average collection period is one month. In order to stimulate sales for the product, the company is considering liberalising its credit policy so as to allow an average collection period of 1 1/2 months. This change of policy will allow the company to break into the US market where, currently, it has no presence. As a result of this breakthrough, sales will increase by 25%. However, there would be an additional investment required in stocks of $150,000 and an increase in trade creditors of $50,000.

The company requires a 25% rate of return on its investments. Ignore taxation. Required: evaluate the proposal to increase the average collection period for debtors assuming only new customers take advantage of the longer credit period.

42、Galena Ltd owns an open-cast coal mine in New York that was purchased from the US government in 1992. in recent years, the performance of the mine has been badly affected by a decline in demand for coal and also by cheap imports. Mining engineers employed by the company believe that the mine could be operated for another four years before coal supplies finally run out. If the mine is operated during this period, the following financial results are expected:

Year Operating profit Interest payable Net profit(loss)for the year 1 $m 11 43 2 $m (46) 11 (57) 3 $m (15) 11 (26) 4 $m 22 11 11 The following additional information is available: (ⅰ)The machinery and equipment at the mine cost $18.0 million and have a written down value of $8.0 million. The machinery and equipment will be sold at the end of the four-year period for an estimated $2.0 million.

(ⅱ)A depreciation charge for the machinery and equipment of $1.5 million per year and an amortization charge for depletion of the mine of $4.0 million per year are included in the above calculations.

(ⅲ)The working capital tied up in the mine is $3.6 million and this can be liquidated immediately the company discontinues its operations.

(ⅳ)Redundancy payments to employees will amount to $2.2 million if the company operates the mine for a further four years and employees are released at the end of this period.

(ⅴ)The company has agreed with the US government to fill in the mine and build a community centre in the area in five years’ time. This is estimated to cost $2.5 million and this commitment will not be affected by any decisions concerning the future of the mine.

The company has been approached by a miners’ co-operative, consisting of employees of the mine. The co-operative has offered to lease the mine for the remaining four years of its life at a lease rental of $6.0 million per year, payable at the end of each year. The co-operative has also offered to buy the existing machinery and equipment from the company for $5.0 million immediately if a lease agreement can be reached. It has also offered to make a contribution of $1.5 million towards the cost of building the community centre in five years. No other parties have declared an interest in taking over the mining operations. If the company agrees to lease the mine, and thereby discontinue operations, it will have to make redundancy payments of $3.4 million immediately.

Galena Ltd has a cost of capital of 10%. Ignore taxation.

Required: calculate the incremental cash flows arising from a decision to continue operations for a further four years rather than to lease the mine to the miners’ co-operative.

43、Galena Ltd owns an open-cast coal mine in New York that was purchased from the US government in 1992. in recent years, the performance of the mine has been badly affected by a decline in demand for coal and also by cheap imports. Mining engineers employed by the company believe that the mine could be operated for another four years before coal supplies finally run out. If the mine is operated during this period, the following financial results are expected: Year Operating profit Interest payable Net profit(loss)for the year 1 $m 11 43 2 $m (46) 11 (57) 3 $m (15) 11 (26) 4 $m 22 11 11 The following additional information is available: (ⅰ)The machinery and equipment at the mine cost $18.0 million and have a written down value of $8.0 million. The machinery and equipment will be sold at the end of the four-year period for an estimated $2.0 million.

(ⅲ)The working capital tied up in the mine is $3.6 million and this can be liquidated immediately the company discontinues its operations.

(ⅳ)Redundancy payments to employees will amount to $2.2 million if the company operates the mine for a further four years and employees are released at the end of this period.

The company has been approached by a miners’ co-operative, consisting of employees of the mine. The co-operative has offered to lease the mine for the

remaining four years of its life at a lease rental of $6.0 million per year, payable at the end of each year. The co-operative has also offered to buy the existing machinery and equipment from the company for $5.0 million immediately if a lease agreement can be reached. It has also offered to make a contribution of $1.5 million towards the cost of building the community centre in five years. No other parties have declared an interest in taking over the mining operations. If the company agrees to lease the mine, and thereby discontinue operations, it will have to make redundancy payments of $3.4 million immediately.

Galena Ltd has a cost of capital of 10%. Ignore taxation.

Required: calculate the net present value of continuing operations for a further four years rather than leasing the mine to the miners’ co-operative. 44、The stock X and stock Y portfolio is as follows: Bear probability Stock X Stock Y 0.2 -20% -15% Market condition Normal 0.5 18% 20% Bull 0.3 50% 10% Assume that of your $10,000 portfolio, you invest $9,000 in stock X and 1,000 in stock Y. What is the expected return on your portfolio?

45、The expected rate of market portfolio is 18%, the rate of free risk is 8%. Beta of a portfolio is 0.4. What is the expected rate of return of this portfolio?

46、The universe of available securities includes two risky stock funds, A and B, and T-bills. The data for the universe are as follows:

A B T-bills Expected return 10% 30 5 Standard deviation 20% 60 0 The correlation coefficient between funds A and B is -0.2. Find the slope of the CAL supported by T-bills and Portfolio P.

47、The composition of the Fingroup Fund portfolio is as follows:

Stock share price A 200,000 $35 B 300,000 $40 C 400,000 $20 D 600,000 $25

The fund has not borrowed any funds, but it’s accrued management fee with the portfolio manager currently totals $30,000. There are 4 million shares outstanding. The rate of the Fingroup Fund portfolio return is 25% in good circumstance which is the frequency of 0.2, 18% in common circumstance which is the frequency of 0.5,and 10% in bad circumstance which is the frequency of 0.3. Please calculate what the rate of the Fingroup Fund portfolio summed expected return is.

48、Answer problems 1-3 based on the stock market data given by the following table.

Telmex Mexico World

Telmex 1.00

Correlation Coefficients

Mexico .90 1.00

World 0.60 0.75 1.00

SD(%) 18 15 10

R(%)

? 14 12

Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex’s equity cost of capital. Discuss the possible effects of international pricing of Telmex shares on the share prices and the firm’s investment decisions.

49、There is a portfolio with A B C stock, its weighted-average cost of capital is 10%, and its holding period is 5 years. There is 50% of A stock in sum funds, 30% of B stock, and 20% of C stock. After 5 years, price of A stock increases by 50%, that of B decreases by 25%, and that of C increase by 20%. Sum fund of this portfolio is 100 million dollars, and its dividend is zero. What is NPV of the portfolio?

50、There is a portfolio with A B C stock, its weighted-average cost of capital is 10%,

and its holding period is 5 years. Please see the following table and tell what NPV of this portfolio is. stock Shares (million) A B C Part Ⅴ

Direction: comparing

1、Which differences are there between political risk and credit risk? 2、Which differences are there between political risk and market risk? 3、Which differences are there between systematic risk and nonsystematic risk? 4、Which differences are there between transfer risk and operational risk? 5、Which differences are there between transfer risk and control risk? 6、Which differences are there between operational risk and control risk? 7、Which differences are there transfer risk，operational risk and control risk? 8、Which differences are there between macro risk and micro risk? 9、Which differences are there between FDI and financial investment?

10、Which differences are there between financial investment and investment for real assets?

11、Which differences are there between FDI and investment for real assets? 12、Which differences are there between FDI，financial investment and investment for real assets?

13、Please compare differences between FDI and domestic investment for real assets. 14、Please compare differences between FDI and international market investment. 15、Please compare differences between FDI and international financial investment. 16、Please tell the differences between trade barriers and technical barriers. 17、Please tell the differences between trade barriers and green barriers.

18、Please tell the differences between trade barriers， technical barriers and green

2 1 0.5 initial price ($) 10 25 30 Ending price ($) 15 20 40 Dividend of per share($) 2 3 4

barriers.

19、Please tell the differences between technical barriers and green barriers. 20、Please show the differences between forward integration and backward integration in FDI.

21、Please compare domestic firms and MNCs, and show MNCs’ advantages. 22、Please show the differences between real assets and intangible assets.

23、Please show respectively advantages of real assets and intangible assets in FDI of MNCs.

24、Please show the differences between country risk and political risk. 25、Please show the differences between NPV and APV.

26、What are the differences between the U.S export-import bank and foreign credit insurance association?

27、Please compare the CAL, CML with the SML.

28、Please compare the SML on the CAPM with the SML on the APT.

29、What are the differences in the formats of the BERI, Euromoney, and Institutional Investor systems for ranking countries according to their political riskiness?

30、What is the difference between the insurance of and the management of political risk?

31、What are the differences between licensing and FDI in international business? 32、Discuss the differences between capital budgeting for an international project and capital budgeting for a domestic project.

33、How does the adjusted present value method differ from the ordinary net present value method?

34、What causes the differences in the cost of capital from one country to another? 35、Why might the discount rate applied to the foreign project cash flows be different from the discount rate applied to parent cash flows?

36、Please compare real options and financial options, and show their differences. 37、Please shoe the differences between the capital budgeting analysis and sensitivity analysis.

38、Which differences are there conforming to the parent company’s norm and conforming to the local norm of the country where the subsidiary operates in the

subsidiary’s financial structure?

39、Which differences are there foreign domestic investors in market share price? 40、Which differences are there the integration of international financial market and the segmentation of international financial market?

41、Explain and compare forward versus backward internalization.

42、What are the advantages and disadvantages of FDI as compared to a licensing agreement with a foreign partner?

43、Discuss the different ways political events in a host country may affect local operations of a MNC.

44、Which differences are there MNCs and domestic firms in risk?

45、Why do MNCs often use outside experts to do the analysis of political risk rather than in-house experts?

46、Which differences are there perfections and imperfections in the market for intangible assets when they play a role in motivating firms to undertake cross-border acquisitions?

47、Which differences are there the international real market and the international financial market?

48、Which differences are there when MNCs invest domestic market and foreign market?

49、Please compare and show the differences between country risk and domestic systematic risk.

50、Which differences are there the restriction of ownership for local and foreign firms in developed and developing countries?

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