When a Firm Holds Assets in Many Countries

question 69

Multiple Choice

When a firm holds assets in many countries,

• A)the firm's cash flows are internationally hedged.
• B)thus, shareholders of the firm can indirectly benefit from international diversification even if they are not directly holding foreign shares.
• C)thus, shareholders of the firm can directly benefit from international diversification even if they are not directly holding foreign shares.
• D)none of the above

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Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a predetermined time frame.

Put Option

A financial agreement granting the bearer the option, without being compelled, to offload a predetermined quantity of a fundamental asset at an agreed-upon price during a designated period.

Futures Contract

A contractual arrangement committing to the purchase or sale of a specific financial asset or commodity at an agreed price, set to occur at a future date.

Short-Sale

A trading strategy that involves selling borrowed securities with the expectation of buying them back at a lower price to profit from a decline in their value.