Which statement is NOT CORRECT? a. Multinational firms can reduce their tax liab
ID: 2718295 • Letter: W
Question
Which statement is NOT CORRECT?
a. Multinational firms can reduce their tax liability through transfer pricing.
b. Countries that adopt a fixed exchange rate give up control of their monetary policy.
d. US companies must follow all US laws regardless of where their operations are.
The current spot rate is $.40/SF. The 6-month forward rate is $.41/SF. A call option that expires in 6-months on 100,000 SF with a strike price of $.40/SF is selling for $1,900. A put option that expires in 6-months on 100,000 SF with a strike price of $.40/SF is selling for $100. Six months from now, the spot rate will be $.39/SF (this information is unknown right now, but I’m telling you).
If you bought the put option, how much would you have made (or lost) including the original investment?
a Lost $900
b Lost $100
c Made $900
Which statement is FALSE?
b In a Spin-off, common stock in a division or subsidiary is distributed to shareholders of the parent company on a pro rata basis.
c If the shareholders gain from a merger comes at the expense of other stakeholders, then this is called hubris
d A tender offer is when the acquiring firm makes their offer directly to the target firm shareholders.
Explanation / Answer
I)
a. Multinational can use transfer pricing to avoid their tax liability by shifting profits of groupd companies from high-tax jurisdictions to low-tax jurisdictions.
b. Monetary policy is ineffective in influencing the economy in a fixed exchange rate system. Hence this statement is true.
Thus the answer is d.
II
The question doesnot sepcify anything about orginal investment. Hence, it is not possible answer the question.
III
The answer is (C). Hubris is the situtaiton where the company takes over confident and risky decisions. Hence this statement is false.
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