Question 1

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Accepted Answer

A)  fewer agency costs 
B)  fewer direct advantages from research and development 
C)  a greater risk of losing markets to copycat goods producers 
D)  an inability to exploit R&D as effectively as if also invested abroad 
A)  fewer agency costs 
B)  fewer direct advantages from research and development 
C)  a greater risk of losing markets to copycat goods producers 
D)  an inability to exploit R&D as effectively as if also invested abroad

Question 2

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

Accepted Answer

A)  vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms 
B)  a lumber cutting company subsequently builds a paper mill with blocked funds 
C)  purchase of local money market instruments and short-term loans 
D)  all of the above 
A)  vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms 
B)  a lumber cutting company subsequently builds a paper mill with blocked funds 
C)  purchase of local money market instruments and short-term loans 
D)  all of the above

Question 3

A/n ________ would be an example of an internalization 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 4

Blocked funds are cash flows that

Accepted Answer

A)  come in regular intervals in standardized amounts or blocks. 
B)  have been restricted in transfer out of a local country. 
C)  come from a certain sector or region of the world. 
D)  none of the above. 
A)  come in regular intervals in standardized amounts or blocks. 
B)  have been restricted in transfer out of a local country. 
C)  come from a certain sector or region of the world. 
D)  none of the above.

Question 5

Which of the following is NOT a proactive financial strategy related to the OLI paradigm in explaining FDI?

Accepted Answer

A)  strategies to gain lower global cost of capital 
B)  strategies to reduce global taxation 
C)  strategies to reduce operating and transaction exposure 
D)  All of the above are proactive strategies. 
A)  strategies to gain lower global cost of capital 
B)  strategies to reduce global taxation 
C)  strategies to reduce operating and transaction exposure 
D)  All of the above are proactive strategies.

Question 6

Which of the following is NOT a potential advantage to a cross-border acquisition compared to a Greenfield investment?

Accepted Answer

A)  Market imperfections may under-price local assets and allow the purchase of assets at significant discount. 
B)  Cross-border acquisitions take longer, thus allowing the firm a better understanding of the local market before attempting sales. 
C)  Acquisitions may be a cost-effective way of gaining competitive advantages such as technology or brand names. 
D)  All of the above are advantages of acquisition over green field investment. 
A)  Market imperfections may under-price local assets and allow the purchase of assets at significant discount. 
B)  Cross-border acquisitions take longer, thus allowing the firm a better understanding of the local market before attempting sales. 
C)  Acquisitions may be a cost-effective way of gaining competitive advantages such as technology or brand names. 
D)  All of the above are advantages of acquisition over green field investment.

Question 7

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

Accepted Answer

A)  operator independent. 
B)  owner-specific. 
C)  open-market. 
D)  official designation. 
A)  operator independent. 
B)  owner-specific. 
C)  open-market. 
D)  official designation.

Question 8

Based on the internationalization process, economists observed that firms tended to invest first in countries that were not too far distant in psychic terms. Close psychic distance defined countries with a cultural, legal, and institutional environment similar to the home country.

Accepted Answer

A) True 
 B)False

Question 9

________, also known as micro risks, are political risks that affect the MNE at the project and corporate level but do not originate at the country level.

Accepted Answer

A)  Firm-specific risks 
B)  Country-specific risks 
C)  Global-specific risks 
D)  Transfer risks 
A)  Firm-specific risks 
B)  Country-specific risks 
C)  Global-specific risks 
D)  Transfer risks

Question 10

________ risks are those that affect the MNE at the local or project level, and 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

Question 11

The OLI paradigm is an attempt to create a framework to explain why MNEs choose ________ rather than some other form of international venture.

Accepted Answer

A)  licensing 
B)  joint ventures 
C)  foreign direct investment 
D)  strategic alliances 
A)  licensing 
B)  joint ventures 
C)  foreign direct investment 
D)  strategic alliances

Question 12

________ is the risk that the investor will not be able to convert profits, royalties, or fees into dollars.

Accepted Answer

A)  Inconvertibility 
B)  Expropriation 
C)  Business income risk 
D)  None of the above 
A)  Inconvertibility 
B)  Expropriation 
C)  Business income risk 
D)  None of the above

Question 13

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 14

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 15

Identify and define the two behavioral theories of Foreign Direct Investment as identified by the authors.

Accepted Answer

The behavioral approach to analyzing the

Question 16

An example of economies of scale in financing includes

Accepted Answer

A)  being able to access the Euroequity, Eurobond, and Eurocurrency markets. 
B)  being able to ship product in shiploads or carloads. 
C)  being able to use large-scale plant and equipment. 
D)  all of the above. 
A)  being able to access the Euroequity, Eurobond, and Eurocurrency markets. 
B)  being able to ship product in shiploads or carloads. 
C)  being able to use large-scale plant and equipment. 
D)  all of the above.

Question 17

A/n ________ would be an example of an owner-specific advantage for an MNE.

Accepted Answer

A)  patent 
B)  economy of scale 
C)  economy of scope 
D)  all of the above 
A)  patent 
B)  economy of scale 
C)  economy of scope 
D)  all of the above

Question 18

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

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

A/n ________ would be an example of an internalization advantage for an MNE.

Blocked funds are cash flows that

Which of the following is NOT a proactive financial strategy related to the OLI paradigm in explaining FDI?

Which of the following is NOT a potential advantage to a cross-border acquisition compared to a Greenfield investment?

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

Based on the internationalization process, economists observed that firms tended to invest first in countries that were not too far distant in psychic terms. Close psychic distance defined countries with a cultural, legal, and institutional environment similar to the home country.

________, also known as micro risks, are political risks that affect the MNE at the project and corporate level but do not originate at the country level.

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

The OLI paradigm is an attempt to create a framework to explain why MNEs choose ________ rather than some other form of international venture.

________ is the risk that the investor will not be able to convert profits, royalties, or fees into dollars.

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

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

Identify and define the two behavioral theories of Foreign Direct Investment as identified by the authors.

An example of economies of scale in financing includes

A/n ________ would be an example of an owner-specific advantage for an MNE.

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

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 and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 16: Foreign Direct Investment and Political Risk

Which of the following is an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?

A/n ________ would be an example of an internalization advantage for an MNE.

Blocked funds are cash flows that

Which of the following is NOT a proactive financial strategy related to the OLI paradigm in explaining FDI?

Which of the following is NOT a potential advantage to a cross-border acquisition compared to a Greenfield investment?

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

Based on the internationalization process, economists observed that firms tended to invest first in countries that were not too far distant in psychic terms. Close psychic distance defined countries with a cultural, legal, and institutional environment similar to the home country.

________, also known as micro risks, are political risks that affect the MNE at the project and corporate level but do not originate at the country level.

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

The OLI paradigm is an attempt to create a framework to explain why MNEs choose ________ rather than some other form of international venture.

________ is the risk that the investor will not be able to convert profits, royalties, or fees into dollars.

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

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

Identify and define the two behavioral theories of Foreign Direct Investment as identified by the authors.

An example of economies of scale in financing includes

A/n ________ would be an example of an owner-specific advantage for an MNE.

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

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 and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

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.