Question 1

The decision about where to invest abroad is influenced by behavioral factors. Explain the behavioral approach to FDI.

Accepted Answer

The behavioral approach to analyzing the

Question 2

Licensing is a popular form of foreign investment because it does not need a sizable commitment of funds, and political risk is often minimized.

Accepted Answer

A) True 
 B)False

Question 3

Banks are very hesitant to engage in fronting loans because of the low probability of repayment and thus their risk exposure up to a 100% loss.

Accepted Answer

A) True 
 B)False

Question 4

What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

Accepted Answer

The OLI Paradigm is an attempt to develo

Question 5

OPIC stands for:

Accepted Answer

A)  Organization for the Prevention of Insufficient Capitalization. 
B)  Organization of Petroleum Importing Countries. 
C)  Overseas Private Investment Corporation. 
D)  Overseas Public Insurance Commission. 
A)  Organization for the Prevention of Insufficient Capitalization. 
B)  Organization of Petroleum Importing Countries. 
C)  Overseas Private Investment Corporation. 
D)  Overseas Public Insurance Commission.

Question 6

Based on observations of firms that have successfully invested abroad, we can conclude that one of the competitive advantages enjoyed by MNEs is:

Accepted Answer

A)  managerial expertise. 
B)  financial strength. 
C)  competitiveness of their home markets. 
D)  All of the above are competitive advantages. 
A)  managerial expertise. 
B)  financial strength. 
C)  competitiveness of their home markets. 
D)  All of the above are competitive advantages.

Question 7

An investment agreement spells out specific rights and responsibilities of both the foreign firm and the host government. What are the main financial policies that should be included in an investment agreement?

Accepted Answer

An investment agreement spells out speci

Question 8

The owner-specific advantages of OLI must be:

Accepted Answer

A)  firm-specific. 
B)  not easily copied. 
C)  transferable to foreign subsidiaries. 
D)  all of the above 
A)  firm-specific. 
B)  not easily copied. 
C)  transferable to foreign subsidiaries. 
D)  all of the above

Question 9

A/An ________ would be an example of a location-specific advantage for an MNE.

Accepted Answer

A)  patent 
B)  economy of scale 
C)  unique source of raw materials 
D)  possession of proprietary information 
A)  patent 
B)  economy of scale 
C)  unique source of raw materials 
D)  possession of proprietary information

Question 10

Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?

Accepted Answer

A)  The parent makes a deposit equal to the size of the desired loan into a large commercial bank. 
B)  The bank lends to the subsidiary firm an amount equal to the parent deposit at a slightly higher interest rate. 
C)  The lending bank is located in the subsidiary's country. 
D)  All of the above are typical characteristics of a fronting loan. 
A)  The parent makes a deposit equal to the size of the desired loan into a large commercial bank. 
B)  The bank lends to the subsidiary firm an amount equal to the parent deposit at a slightly higher interest rate. 
C)  The lending bank is located in the subsidiary's country. 
D)  All of the above are typical characteristics of a fronting loan.

Question 11

A ________ loan, also known as ________ is a parent-to-affiliate loan channeled through a financial intermediary such as a large commercial bank.

Accepted Answer

A)  fronting; link financing 
B)  parallel; a back-to-back loan 
C)  fronting; a back-to-back loan 
D)  link financing; parallel loan 
A)  fronting; link financing 
B)  parallel; a back-to-back loan 
C)  fronting; a back-to-back loan 
D)  link financing; parallel loan

Question 12

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

Accepted Answer

A)  possible loss of quality control 
B)  establishment of a potential competitor in third-country markets 
C)  possible improvement of the technology by the local licensee, which then enters the original firm's home market 
D)  All of the above are potential disadvantages to licensing. 
A)  possible loss of quality control 
B)  establishment of a potential competitor in third-country markets 
C)  possible improvement of the technology by the local licensee, which then enters the original firm's home market 
D)  All of the above are potential disadvantages to licensing.

Question 13

List and explain three strategic motives why firms could become multinationals and give an example of each.

Accepted Answer

The strategic motives for firms to becom

Question 14

The L in OLI refers to an advantage in a firm's home market that is a:

Accepted Answer

A)  liability in the domestic market. 
B)  location-specific advantage. 
C)  longevity in a particular market. 
D)  none of the above 
A)  liability in the domestic market. 
B)  location-specific advantage. 
C)  longevity in a particular market. 
D)  none of the above

Question 15

________ risks are those that affect the MNE at the local or project level, but originate at the country level.

Accepted Answer

A)  Country-specific 
B)  Firm-specific 
C)  Global-specific 
D)  none of the above 
A)  Country-specific 
B)  Firm-specific 
C)  Global-specific 
D)  none of the above

The decision about where to invest abroad is influenced by behavioral factors. Explain the behavioral approach to FDI.

Licensing is a popular form of foreign investment because it does not need a sizable commitment of funds, and political risk is often minimized.

Banks are very hesitant to engage in fronting loans because of the low probability of repayment and thus their risk exposure up to a 100% loss.

What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

OPIC stands for:

Based on observations of firms that have successfully invested abroad, we can conclude that one of the competitive advantages enjoyed by MNEs is:

An investment agreement spells out specific rights and responsibilities of both the foreign firm and the host government. What are the main financial policies that should be included in an investment agreement?

The owner-specific advantages of OLI must be:

A/An ________ would be an example of a location-specific advantage for an MNE.

Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?

A loan, also known as is a parent-to-affiliate loan channeled through a financial intermediary such as a large commercial bank.

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

List and explain three strategic motives why firms could become multinationals and give an example of each.

The L in OLI refers to an advantage in a firm's home market that is a:

________ risks are those that affect the MNE at the local or project level, but originate at the country level.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 17: Foreign Direct Investment and Political Risk

The decision about where to invest abroad is influenced by behavioral factors. Explain the behavioral approach to FDI.

Licensing is a popular form of foreign investment because it does not need a sizable commitment of funds, and political risk is often minimized.

Banks are very hesitant to engage in fronting loans because of the low probability of repayment and thus their risk exposure up to a 100% loss.

What does the OLI Paradigm propose to explain? Define each component and provide an example of each.

OPIC stands for:

Based on observations of firms that have successfully invested abroad, we can conclude that one of the competitive advantages enjoyed by MNEs is:

An investment agreement spells out specific rights and responsibilities of both the foreign firm and the host government. What are the main financial policies that should be included in an investment agreement?

The owner-specific advantages of OLI must be:

A/An ________ would be an example of a location-specific advantage for an MNE.

Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?

A ________ loan, also known as ________ is a parent-to-affiliate loan channeled through a financial intermediary such as a large commercial bank.

Which of the following is NOT a potential disadvantage of licensing relative to FDI?

List and explain three strategic motives why firms could become multinationals and give an example of each.

The L in OLI refers to an advantage in a firm's home market that is a:

________ risks are those that affect the MNE at the local or project level, but originate at the country level.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

A loan, also known as is a parent-to-affiliate loan channeled through a financial intermediary such as a large commercial bank.