Question 1

Terrorism, cyber attacks, and the anti-globalization movement are each examples of ________ risks.

Accepted Answer

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

Question 2

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 3

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 4

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 5

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 6

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 7

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 8

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) minimizing 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) minimizing 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 9

The speed at which inventory moves through a manufacturing process is known as:

Accepted Answer

A) supply chain management. 
B) working capital management. 
C) inventory velocity. 
D) warp speed. 
A) supply chain management. 
B) working capital management. 
C) inventory velocity. 
D) warp speed.

Question 10

Greenfield investments are typically ________ and ________ than cross-border acquisition.

Accepted Answer

A) slower; more uncertain 
B) faster; of greater certainty 
C) slower; of greater certainty 
D) faster; more uncertain 
A) slower; more uncertain 
B) faster; of greater certainty 
C) slower; of greater certainty 
D) faster; more uncertain

Question 11

________ 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

Question 12

Joint ventures are a more common FDI than wholly owned subsidiaries.

Accepted Answer

A) True 
 B)False

Question 13

________ is a type of political risk that OPIC does NOT cover.

Accepted Answer

A) Inconvertibility 
B) Expropriation 
C) War 
D) OPIC covers all of the above. 
A) Inconvertibility 
B) Expropriation 
C) War 
D) OPIC covers all of the above.

Question 14

________ is NOT one of the three main country-specific risks as outlined by your authors.

Accepted Answer

A) Transfer risk 
B) Cultural differences 
C) Thin equity base 
D) Protectionism 
A) Transfer risk 
B) Cultural differences 
C) Thin equity base 
D) Protectionism

Question 15

Forming regional alliances is one way to help mitigate the practice of government protectionism. Which of the following is NOT a regional trade organization formed by government treaty?

Accepted Answer

A) EU 
B) NAFTA 
C) NATO 
D) MERCOSUR 
A) EU 
B) NAFTA 
C) NATO 
D) MERCOSUR

Question 16

A ________ is a shared ownership in a foreign business.

Accepted Answer

A) licensing agreement 
B) greenfield investment 
C) joint venture 
D) wholly-owned affiliate 
A) licensing agreement 
B) greenfield investment 
C) joint venture 
D) wholly-owned affiliate

Question 17

When faced with additional risk from a foreign investment, firms typically account for the additional risk by adjusting the discount rates or by adjusting cash flows.

Accepted Answer

A) True 
 B)False

Question 18

Local partners in a foreign country and in a joint venture with an MNE are likely to make decisions that maximize the value of the subsidiary. Such actions probably will not maximize the value of the entire firm.

Accepted Answer

A) True 
 B)False

Question 19

With licensing the ________ is likely to be lower than with FDI because of lower profits; however, the ________ is likely to be higher due to a greater return per dollar invested.

Accepted Answer

A) IRR; NPV 
B) NPV; IRR 
C) cost of capital; NPV 
D) IRR; cost of capital 
A) IRR; NPV 
B) NPV; IRR 
C) cost of capital; NPV 
D) IRR; cost of capital

Question 20

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Accepted Answer

A) fewer political risks 
B) greater agency costs 
C) lower front-end investment 
D) All of the above are advantages. 
A) fewer political risks 
B) greater agency costs 
C) lower front-end investment 
D) All of the above are advantages.

Terrorism, cyber attacks, and the anti-globalization movement are each examples of ________ risks.

Blocked funds are cash flows that:

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

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

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

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

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.

The speed at which inventory moves through a manufacturing process is known as:

Greenfield investments are typically and than cross-border acquisition.

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

Joint ventures are a more common FDI than wholly owned subsidiaries.

________ is a type of political risk that OPIC does NOT cover.

________ is NOT one of the three main country-specific risks as outlined by your authors.

Forming regional alliances is one way to help mitigate the practice of government protectionism. Which of the following is NOT a regional trade organization formed by government treaty?

A ________ is a shared ownership in a foreign business.

When faced with additional risk from a foreign investment, firms typically account for the additional risk by adjusting the discount rates or by adjusting cash flows.

Local partners in a foreign country and in a joint venture with an MNE are likely to make decisions that maximize the value of the subsidiary. Such actions probably will not maximize the value of the entire firm.

With licensing the is likely to be lower than with FDI because of lower profits; however, the is likely to be higher due to a greater return per dollar invested.

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Multinational Capital Budgeting and Cross-Border Acquisitions

Working Capital Management

International Trade Finance

Filters

Exam 17: Foreign Direct Investment and Political Risk

Terrorism, cyber attacks, and the anti-globalization movement are each examples of ________ risks.

Blocked funds are cash flows that:

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

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

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

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

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.

The speed at which inventory moves through a manufacturing process is known as:

Greenfield investments are typically ________ and ________ than cross-border acquisition.

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

Joint ventures are a more common FDI than wholly owned subsidiaries.

________ is a type of political risk that OPIC does NOT cover.

________ is NOT one of the three main country-specific risks as outlined by your authors.

Forming regional alliances is one way to help mitigate the practice of government protectionism. Which of the following is NOT a regional trade organization formed by government treaty?

A ________ is a shared ownership in a foreign business.

When faced with additional risk from a foreign investment, firms typically account for the additional risk by adjusting the discount rates or by adjusting cash flows.

Local partners in a foreign country and in a joint venture with an MNE are likely to make decisions that maximize the value of the subsidiary. Such actions probably will not maximize the value of the entire firm.

With licensing the ________ is likely to be lower than with FDI because of lower profits; however, the ________ is likely to be higher due to a greater return per dollar invested.

Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Multinational Capital Budgeting and Cross-Border Acquisitions

Working Capital Management

International Trade Finance

Filters

Greenfield investments are typically and than cross-border acquisition.

With licensing the is likely to be lower than with FDI because of lower profits; however, the is likely to be higher due to a greater return per dollar invested.