Question 1

________ 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

Question 2

Which of the following would NOT be considered a non-tariff barrier to trade?

Accepted Answer

A)  inconsistent customs and administrative entry procedures
B)  unduly stringent or discriminating standards imposed on imports in the name of protecting health, safety, and quality
C)  established import procedures that make importing more difficult
D)  All of the above are non-tariff trade barriers. D

Question 3

Which of the following is NOT true regarding behavioral observations of firms making a decision to invest internationally?

Accepted Answer

A)  MNEs initially invest in countries with a similar "national psychic."
B)  Firms eventually take greater risks in terms of the national psychic of countries in which they invest.
C)  Initial investments tend to be much larger than subsequent ones.
D)  All of the above have been observed. C

Question 4

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 5

________ 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.

Question 6

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

Accepted Answer

The answer of Identify and define the two behavioral theories...

Question 7

________ 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

Question 8

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.

Question 9

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

Question 10

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.

Question 11

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

Question 12

________,also known as macro risks,are political risks that affect the firm at the project or corporate level and originate at the country level.

Accepted Answer

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

Question 13

A/n ________ 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

Question 14

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.

Question 15

Transfer risk concerns mainly the problem of ________.

Accepted Answer

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

Question 16

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

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is NOT a technique for moving blocked funds out of a country?

Accepted Answer

A)  use fronting loans
B)  create unrelated exports
C)  obtain a special dispensation
D)  All of the above are techniques for moving blocked funds.

Question 19

A ________ is a shared ownership in a foreign business.

Accepted Answer

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

Question 20

________ is the ability to exercise effective control over a foreign subsidiary within a country's legal and political environment.

Accepted Answer

A)  Political risk
B)  Portfolio risk
C)  Interest rate risk
D)  Governance risk

Exam 15: Foreign Direct Investment and Political Risk

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

Which of the following would NOT be considered a non-tariff barrier to trade?

Which of the following is NOT true regarding behavioral observations of firms making a decision to invest internationally?

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.

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

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

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

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

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

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

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

________,also known as macro risks,are political risks that affect the firm at the project or corporate level and originate at the country level.

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

Blocked funds are cash flows that

Transfer risk concerns mainly the problem of ________.

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

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

Which of the following is NOT a technique for moving blocked funds out of a country?

A ________ is a shared ownership in a foreign business.

________ is the ability to exercise effective control over a foreign subsidiary within a country's legal and political environment.