Question 1

Insurance purchased to cover the risk of expropriation ____, and will typically cover ____.

Accepted Answer

A)  will be the same for all firms; only a portion of the firm's total exposure. 
B)  will be the same for all firms; all of the firm's total exposure. 
C)  will be dependent on the firm's risk; all of the firm's total exposure. 
D)  will be dependent on the firm's risk; only a portion of the firm's total exposure. 
A)  will be the same for all firms; only a portion of the firm's total exposure. 
B)  will be the same for all firms; all of the firm's total exposure. 
C)  will be dependent on the firm's risk; all of the firm's total exposure. 
D)  will be dependent on the firm's risk; only a portion of the firm's total exposure.

Question 2

Which of the following is not a way in which country risk analysis can be used?

Accepted Answer

A)  to monitor countries where an MNC is currently doing business. 
B)  as a screening device to avoid conducting business in countries with excessive risk. 
C)  to revise an MNC's financing decisions. 
D)  to determine the degree to which the MNC is exposed to exchange rate movements. 
A)  to monitor countries where an MNC is currently doing business. 
B)  as a screening device to avoid conducting business in countries with excessive risk. 
C)  to revise an MNC's financing decisions. 
D)  to determine the degree to which the MNC is exposed to exchange rate movements.

Question 3

A micro-assessment of country risk:

Accepted Answer

A)  is adjusted for the particular business of the firm involved. 
B)  excludes all aspects relevant to a particular firm or project. 
C)  A and B 
D)  none of the above 
A)  is adjusted for the particular business of the firm involved. 
B)  excludes all aspects relevant to a particular firm or project. 
C)  A and B 
D)  none of the above

Question 4

Eurenasia is a country that has frequently been assigned low macro-assessment ratings of country risk in the recent past due to its tendency to war with neighboring nations. MNC A is considering the establishment of a subsidiary to manufacture personal computers, while MNC B is considering the establishment of a subsidiary to manufacture tanks. Which of the two MNCs is likely to be less affected by the low macro-assessment?

Accepted Answer

A)  MNC A. 
B)  MNC B. 
C)  both will be equally affected, since the macro-assessment does not vary. 
D)  none of the above 
A)  MNC A. 
B)  MNC B. 
C)  both will be equally affected, since the macro-assessment does not vary. 
D)  none of the above

Question 5

If an MNC diversifies its operations internationally to reduce its exposure to any individual country's problems, country risk analysis becomes irrelevant.

Accepted Answer

A) True 
 B)False

Question 6

According to the text, country risk analysis has:

Accepted Answer

A)  almost always detected problems before they occur. 
B)  been effectively used in place of capital budgeting to determine whether a project should be accepted. 
C)  been perfected as a result of the development of discriminant analysis. 
D)  none of the above 
A)  almost always detected problems before they occur. 
B)  been effectively used in place of capital budgeting to determine whether a project should be accepted. 
C)  been perfected as a result of the development of discriminant analysis. 
D)  none of the above

Question 7

The weights assigned to factors when assessing country risk should always be higher for the political risk factors than the financial factors.

Accepted Answer

A) True 
 B)False

Question 8

Macro-assessment of country risk refers to an overall risk assessment of a country without consideration of the MNC's business.

Accepted Answer

A) True 
 B)False

Question 9

The ____ involves the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

Accepted Answer

A)  checklist approach 
B)  discriminant analysis 
C)  regression analysis 
D)  Delphi technique 
A)  checklist approach 
B)  discriminant analysis 
C)  regression analysis 
D)  Delphi technique

Question 10

____ involve(s) the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

Accepted Answer

A)  The checklist approach 
B)  The Delphi technique 
C)  Quantitative analysis 
D)  Inspection visits 
A)  The checklist approach 
B)  The Delphi technique 
C)  Quantitative analysis 
D)  Inspection visits

Question 11

The checklist approach:

Accepted Answer

A)  requires several inspections of the country being evaluated. 
B)  requires the use of discriminant analysis to assess country risk. 
C)  requires ratings and weights to be assigned to all factors relevant in assessing country risk. 
D)  involves the collection of independent opinions on country risk. 
A)  requires several inspections of the country being evaluated. 
B)  requires the use of discriminant analysis to assess country risk. 
C)  requires ratings and weights to be assigned to all factors relevant in assessing country risk. 
D)  involves the collection of independent opinions on country risk.

Question 12

Which of the following is not an example of political risk?

Accepted Answer

A)  The Japanese government requires an MNC's subsidiary to install exercise rooms for its employees. 
B)  The Swiss government requires an MNC's subsidiary to install filters in its manufacturing plants to reduce pollution. 
C)  Country X, considered for expansion, frequently goes to war with its neighbors. 
D)  Country Y's government has recently taken over the subsidiary of one of your competitors, another U.S.-based MNC. 
E)  All of the above are examples of political risk. 
A)  The Japanese government requires an MNC's subsidiary to install exercise rooms for its employees. 
B)  The Swiss government requires an MNC's subsidiary to install filters in its manufacturing plants to reduce pollution. 
C)  Country X, considered for expansion, frequently goes to war with its neighbors. 
D)  Country Y's government has recently taken over the subsidiary of one of your competitors, another U.S.-based MNC. 
E)  All of the above are examples of political risk.

Question 13

When determining whether a particular proposed project in a foreign country is feasible:

Accepted Answer

A)  a country risk rating can adequately substitute for a capital budgeting analysis. 
B)  country risk analysis should be incorporated within the capital budgeting analysis. 
C)  the effect of country risk on sales revenue is more important than the effect on cash flows. 
D)  the project with the highest country risk rating (lowest country risk) should be accepted. 
E)  B and D 
A)  a country risk rating can adequately substitute for a capital budgeting analysis. 
B)  country risk analysis should be incorporated within the capital budgeting analysis. 
C)  the effect of country risk on sales revenue is more important than the effect on cash flows. 
D)  the project with the highest country risk rating (lowest country risk) should be accepted. 
E)  B and D

Question 14

Country risk analysis is important because it:

Accepted Answer

A)  focuses on whether to hedge contractual transactions. 
B)  focuses on the competitor firms in its industry. 
C)  can be used to improve the analysis used to make long-term investing decisions. 
D)  all of the above 
A)  focuses on whether to hedge contractual transactions. 
B)  focuses on the competitor firms in its industry. 
C)  can be used to improve the analysis used to make long-term investing decisions. 
D)  all of the above

Question 15

Country risk can affect an MNC's cash flows but cannot affect its cost of capital.

Accepted Answer

A) True 
 B)False

Question 16

Country risk assessment should be used when:

Accepted Answer

A)  determining whether to establish a subsidiary in a foreign country. 
B)  determining whether to continue business in a foreign country. 
C)  A and B 
D)  none of the above 
A)  determining whether to establish a subsidiary in a foreign country. 
B)  determining whether to continue business in a foreign country. 
C)  A and B 
D)  none of the above

Question 17

Delphi analysis examines the financial and political factors of various countries and attempts to identify which factors help to distinguish between tolerable-risk and intolerable-risk countries.

Accepted Answer

A) True 
 B)False

Question 18

A mild form of political risk is a tendency of residents to purchase only:

Accepted Answer

A)  imported products. 
B)  locally produced products. 
C)  products produced by MNCs. 
D)  none of the above 
A)  imported products. 
B)  locally produced products. 
C)  products produced by MNCs. 
D)  none of the above

Question 19

Which of the following is probably the best method of incorporating country risk into a capital budgeting analysis?

Accepted Answer

A)  Adjusting the discount rate upward 
B)  Adjusting the input variables to estimate the sensitivity of the project's NPV 
C)  Adjusting the political risk rating to obtain a more favorable NPV 
D)  Country risk should be ignored in capital budgeting, since it is a subjective analysis. 
A)  Adjusting the discount rate upward 
B)  Adjusting the input variables to estimate the sensitivity of the project's NPV 
C)  Adjusting the political risk rating to obtain a more favorable NPV 
D)  Country risk should be ignored in capital budgeting, since it is a subjective analysis.

Question 20

An MNC considers direct foreign investment in Germany. It is mainly concerned with the subsidiary's ability to generate sufficient sales there. The country risk characteristic that would best address this concern is:

Accepted Answer

A)  the host government's tax rates charged on remitted earnings. 
B)  the possibility of blocked funds. 
C)  the state of the economy in Germany. 
D)  the possibility of a withholding tax imposed by the German government. 
A)  the host government's tax rates charged on remitted earnings. 
B)  the possibility of blocked funds. 
C)  the state of the economy in Germany. 
D)  the possibility of a withholding tax imposed by the German government.

Insurance purchased to cover the risk of expropriation , and will typically cover .

Which of the following is not a way in which country risk analysis can be used?

A micro-assessment of country risk:

If an MNC diversifies its operations internationally to reduce its exposure to any individual country's problems, country risk analysis becomes irrelevant.

According to the text, country risk analysis has:

The weights assigned to factors when assessing country risk should always be higher for the political risk factors than the financial factors.

Macro-assessment of country risk refers to an overall risk assessment of a country without consideration of the MNC's business.

The ____ involves the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

____ involve(s) the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

The checklist approach:

Which of the following is not an example of political risk?

When determining whether a particular proposed project in a foreign country is feasible:

Country risk analysis is important because it:

Country risk can affect an MNC's cash flows but cannot affect its cost of capital.

Country risk assessment should be used when:

Delphi analysis examines the financial and political factors of various countries and attempts to identify which factors help to distinguish between tolerable-risk and intolerable-risk countries.

A mild form of political risk is a tendency of residents to purchase only:

Which of the following is probably the best method of incorporating country risk into a capital budgeting analysis?

An MNC considers direct foreign investment in Germany. It is mainly concerned with the subsidiary's ability to generate sufficient sales there. The country risk characteristic that would best address this concern is:

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Exam 16: Country Risk Analysis

Insurance purchased to cover the risk of expropriation ____, and will typically cover ____.

Which of the following is not a way in which country risk analysis can be used?

A micro-assessment of country risk:

If an MNC diversifies its operations internationally to reduce its exposure to any individual country's problems, country risk analysis becomes irrelevant.

According to the text, country risk analysis has:

The weights assigned to factors when assessing country risk should always be higher for the political risk factors than the financial factors.

Macro-assessment of country risk refers to an overall risk assessment of a country without consideration of the MNC's business.

The ____ involves the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

____ involve(s) the collection of independent opinions on country risk without group discussion by the assessors who provide these opinions.

The checklist approach:

Which of the following is not an example of political risk?

When determining whether a particular proposed project in a foreign country is feasible:

Country risk analysis is important because it:

Country risk can affect an MNC's cash flows but cannot affect its cost of capital.

Country risk assessment should be used when:

Delphi analysis examines the financial and political factors of various countries and attempts to identify which factors help to distinguish between tolerable-risk and intolerable-risk countries.

A mild form of political risk is a tendency of residents to purchase only:

Which of the following is probably the best method of incorporating country risk into a capital budgeting analysis?

An MNC considers direct foreign investment in Germany. It is mainly concerned with the subsidiary's ability to generate sufficient sales there. The country risk characteristic that would best address this concern is:

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

Insurance purchased to cover the risk of expropriation , and will typically cover .