Question 1

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. C

Question 2

________ industries are NOT typically "protected" by government policy.

Accepted Answer

A)  Textiles 
B)  Defense 
C)  Agriculture 
D)  "Infant" industries 
A)  Textiles 
B)  Defense 
C)  Agriculture 
D)  "Infant" industries A

Question 3

A country can react to the potential for blocked funds prior to making an investment, during operations, or by investing in the local country in assets than maintain their value.

Accepted Answer

A) True 
 B)False  True

Question 4

An alternative strategy to engaging in bribery in international investments include:

Accepted Answer

A)  Refuse bribery outright. 
B)  Retain local advisors to diffuse requests for bribes. 
C)  Educate management and local employees about the firm's bribery policy. 
D)  All of the above. 
A)  Refuse bribery outright. 
B)  Retain local advisors to diffuse requests for bribes. 
C)  Educate management and local employees about the firm's bribery policy. 
D)  All of the above.

Question 5

Governance risk due to goal conflict between an MNE and its host government is the main political ________ risk.

Accepted Answer

A)  firm-specific 
B)  country-specific 
C)  global-specific 
D)  cultural-specific 
A)  firm-specific 
B)  country-specific 
C)  global-specific 
D)  cultural-specific

Question 6

Sovereign risk is the danger

Accepted Answer

A)  that the country's royalty will be overthrown in a military coup. 
B)  that a country will need to pay a risk premium to investors in order to raise funds at home or abroad. 
C)  that country's royal family is unfit to rule. 
D)  none of the above. 
A)  that the country's royalty will be overthrown in a military coup. 
B)  that a country will need to pay a risk premium to investors in order to raise funds at home or abroad. 
C)  that country's royal family is unfit to rule. 
D)  none of the above.

Question 7

The possibility of suffering harm or loss, or a course involving uncertain danger or hazard is a definition of ________.

Accepted Answer

A)  risk 
B)  standard deviation 
C)  beta 
D)  variance 
A)  risk 
B)  standard deviation 
C)  beta 
D)  variance

Question 8

Which of the following is NOT an example of a subjective measure gathered by institutional researchers?

Accepted Answer

A)  a local country's ranking for political stability 
B)  a local country's ranking for economic stability 
C)  a local country's unemployment rate 
D)  All of the above are subjective measures. 
A)  a local country's ranking for political stability 
B)  a local country's ranking for economic stability 
C)  a local country's unemployment rate 
D)  All of the above are subjective measures.

Question 9

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 10

Government authorities are more likely to allow subsidiary repayment of a loan to a large international bank than to a parent firm because

Accepted Answer

A)  stopping payment to an international bank would have a negative impact on the credit image of the country. 
B)  the government is also borrowing money from that bank and wants a larger loan before they choose to default. 
C)  corrupt government officials have accounts at the bank and they have made an under-the-table agreement not to withhold funds from that bank. 
D)  none of the above are true. 
A)  stopping payment to an international bank would have a negative impact on the credit image of the country. 
B)  the government is also borrowing money from that bank and wants a larger loan before they choose to default. 
C)  corrupt government officials have accounts at the bank and they have made an under-the-table agreement not to withhold funds from that bank. 
D)  none of the above are true.

Question 11

Transfer risk concerns mainly the problem of ________.

Accepted Answer

A)  governance risk 
B)  cultural risk 
C)  blocked funds 
D)  environmental concerns 
A)  governance risk 
B)  cultural risk 
C)  blocked funds 
D)  environmental concerns

Question 12

Of the following, which would NOT be considered an issue for an investment agreement prior to investing in a foreign country?

Accepted Answer

A)  the basis for setting transfer prices 
B)  the right to export to third-country markets 
C)  provision for arbitration of disputes 
D)  All of the above could be negotiated prior to investing. 
A)  the basis for setting transfer prices 
B)  the right to export to third-country markets 
C)  provision for arbitration of disputes 
D)  All of the above could be negotiated prior to investing.

Question 13

Which of the following are NOT among the leaders in the world's anti-globalization movement?

Accepted Answer

A)  MNEs 
B)  environmentalists 
C)  unions whose workers lose jobs as a result of trade pacts such as NAFTA 
D)  those opposed to the loss of cultural identity due to combinations such as the European Union 
A)  MNEs 
B)  environmentalists 
C)  unions whose workers lose jobs as a result of trade pacts such as NAFTA 
D)  those opposed to the loss of cultural identity due to combinations such as the European Union

Question 14

What are blocked funds? List and explain two of the three methods the authors list in this chapter for dealing with blocked funds.

Accepted Answer

Blocked funds are those that have been r

Question 15

As a result of the terrorist attacks of September 11, 2001, many firms have employed a wide range of tactics to ensure continued flow of inventory in the face of government steps to curb terrorism. Which of the following is an inventory sourcing strategy response (as opposed to an inventory management response, or a transportation response)?

Accepted Answer

A)  carrying more inventory on-hand 
B)  minimize cross-border exposure from suppliers 
C)  shifting to air cargo shipments instead of co-habitation of products and passengers on commercial air flights 
D)  increasing the on-hand supply of critical parts 
A)  carrying more inventory on-hand 
B)  minimize cross-border exposure from suppliers 
C)  shifting to air cargo shipments instead of co-habitation of products and passengers on commercial air flights 
D)  increasing the on-hand supply of critical parts

Question 16

Negotiations under the General Agreement on Tariffs and Trade (GATT) have NOT had much impact on reducing the level of tariffs over the last several decades.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is NOT an example of a country-specific risk?

Accepted Answer

A)  transfer risk 
B)  war and ethnic strife 
C)  cultural and religious heritage 
D)  All of the above are examples of country-specific risk. 
A)  transfer risk 
B)  war and ethnic strife 
C)  cultural and religious heritage 
D)  All of the above are examples of country-specific risk.

Question 18

Adjusting the discount rate to account for increased political risk is almost always the best possible way to account for risk.

Accepted Answer

A) True 
 B)False

Question 19

________ is an acceptable method of adjusting for risk when analyzing the prospects of a foreign investment.

Accepted Answer

A)  Adjusting the discount rate 
B)  Adjusting the cash flows 
C)  Conducting sensitively and scenarios analysis 
D)  All of the above 
A)  Adjusting the discount rate 
B)  Adjusting the cash flows 
C)  Conducting sensitively and scenarios analysis 
D)  All of the above

Question 20

Business risk can be measured through sensitivity analysis but from only the project viewpoint.

Accepted Answer

A) True 
 B)False

Exam 18: Political Risk Assessment and Management

OPIC stands for

________ industries are NOT typically "protected" by government policy.

A country can react to the potential for blocked funds prior to making an investment, during operations, or by investing in the local country in assets than maintain their value.

An alternative strategy to engaging in bribery in international investments include:

Governance risk due to goal conflict between an MNE and its host government is the main political ________ risk.

Sovereign risk is the danger

The possibility of suffering harm or loss, or a course involving uncertain danger or hazard is a definition of ________.

Which of the following is NOT an example of a subjective measure gathered by institutional researchers?

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

Government authorities are more likely to allow subsidiary repayment of a loan to a large international bank than to a parent firm because

Transfer risk concerns mainly the problem of ________.

Of the following, which would NOT be considered an issue for an investment agreement prior to investing in a foreign country?

Which of the following are NOT among the leaders in the world's anti-globalization movement?

What are blocked funds? List and explain two of the three methods the authors list in this chapter for dealing with blocked funds.

Negotiations under the General Agreement on Tariffs and Trade (GATT) have NOT had much impact on reducing the level of tariffs over the last several decades.

Which of the following is NOT an example of a country-specific risk?

Adjusting the discount rate to account for increased political risk is almost always the best possible way to account for risk.

________ is an acceptable method of adjusting for risk when analyzing the prospects of a foreign investment.

Business risk can be measured through sensitivity analysis but from only the project viewpoint.

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Exchange Rate Determination and Forecasting

Foreign Currency Derivatives

Transaction Exposure

Operating Exposure

Translation Exposure

Global Cost and Availability of Capital

Sourcing Equity Capital Globally

Financial Structure and International Debt

Interest Rate and Currency Swaps

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Strategy

Multinational Capital Budgeting

International Trade Finance

Multinational Tax Management

Working Capital Management

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