Question 1

Which of the following is an example of FDI?

Accepted Answer

A)  The purchase of foreign companies. 
B)  The investment in foreign stock markets directly, without going through a broker. 
C)  The purchase of foreign bonds on foreign OTC markets. 
D)  The involvement in licensing agreements. 
A)  The purchase of foreign companies. 
B)  The investment in foreign stock markets directly, without going through a broker. 
C)  The purchase of foreign bonds on foreign OTC markets. 
D)  The involvement in licensing agreements. A

Question 2

Tax policies affect the incentive to engage in FDI and its means of financing for all of these reasons, except that they affect:

Accepted Answer

A)  the profitability of FDI. 
B)  the profitability of FDI relative to domestic investment. 
C)  interest and exchange rates. 
D)  the cost of capital. 
A)  the profitability of FDI. 
B)  the profitability of FDI relative to domestic investment. 
C)  interest and exchange rates. 
D)  the cost of capital. C

Question 3

Which one of the following features is not a feature of tax havens?

Accepted Answer

A)  Zero or only nominal effective tax rates. 
B)  Lack of effective exchange of information. 
C)  Lack of transparency. 
D)  A weak justice system. 
A)  Zero or only nominal effective tax rates. 
B)  Lack of effective exchange of information. 
C)  Lack of transparency. 
D)  A weak justice system. D

Question 4

For the purpose of distinguishing, in the Balance of Payments statistics, between direct investment and portfolio investment the equity threshold used by Australia to imply significant control is:

Accepted Answer

A)  15 per cent. 
B)  10 per cent. 
C)  25 per cent. 
D)  anything, depending on the nature of the project. 
A)  15 per cent. 
B)  10 per cent. 
C)  25 per cent. 
D)  anything, depending on the nature of the project.

Question 5

The location hypothesis explains FDI in terms of:

Accepted Answer

A)  the rates of return on investment. 
B)  firm-specific advantages. 
C)  the immobility of some factors of production. 
D)  the desire to internalise some market transactions. 
A)  the rates of return on investment. 
B)  firm-specific advantages. 
C)  the immobility of some factors of production. 
D)  the desire to internalise some market transactions.

Question 6

A firm will expand overseas by exporting if:

Accepted Answer

A)  there are no internalisation gains. 
B)  there are internalisation gains but locational factors favour domestic expansion. 
C)  there are internalisation gains and locational factors favour foreign expansion. 
D)  any of the given answers depending on the circumstances. 
A)  there are no internalisation gains. 
B)  there are internalisation gains but locational factors favour domestic expansion. 
C)  there are internalisation gains and locational factors favour foreign expansion. 
D)  any of the given answers depending on the circumstances.

Question 7

International capital budgeting is:

Accepted Answer

A)  less complex than in domestic capital budgeting. 
B)  more complex than in domestic capital budgeting. 
C)  involves the estimation of a number of variables. 
D)  more complex than in domestic capital budgeting and involves the estimation of a number of variables. 
A)  less complex than in domestic capital budgeting. 
B)  more complex than in domestic capital budgeting. 
C)  involves the estimation of a number of variables. 
D)  more complex than in domestic capital budgeting and involves the estimation of a number of variables.

Question 8

What was not a determinant of FDI into Australia according to Yang, Groenewold and Tcha (2000)?

Accepted Answer

A)  the higher interest rates on offer in Australia. 
B)  relatively low inflation rates in Australia. 
C)  a stable judiciary system. 
D)  lower industrial disputes. 
A)  the higher interest rates on offer in Australia. 
B)  relatively low inflation rates in Australia. 
C)  a stable judiciary system. 
D)  lower industrial disputes.

Question 9

The internal financing hypothesis is more appropriate for explaining FDI in developing countries

Accepted Answer

A)  in developing countries there often are greater restrictions on the movement of funds. 
B)  inefficient financial markets in developing countries. 
C)  undeveloped financial markets in developing countries. 
D)  all of the given answers. 
A)  in developing countries there often are greater restrictions on the movement of funds. 
B)  inefficient financial markets in developing countries. 
C)  undeveloped financial markets in developing countries. 
D)  all of the given answers.

Question 10

Multinational firms use transfer pricing:

Accepted Answer

A)  to move profit from a high taxing country to a lower taxing country. 
B)  to facilitate internal financing of one subsidiary by another. 
C)  to provide low cost inputs to other subsidiaries within the firm. 
D)  both to move profit from a high taxing country to a lower taxing country and to facilitate internal . financing of one subsidiary by another. 
A)  to move profit from a high taxing country to a lower taxing country. 
B)  to facilitate internal financing of one subsidiary by another. 
C)  to provide low cost inputs to other subsidiaries within the firm. 
D)  both to move profit from a high taxing country to a lower taxing country and to facilitate internal . financing of one subsidiary by another.

Question 11

The reasons why multinational firms engage in FDI include:

Accepted Answer

A)  to exploit economies of scale. 
B)  to enter higher profit markets. 
C)  to access foreign factors of production. 
D)  all the given answers. 
A)  to exploit economies of scale. 
B)  to enter higher profit markets. 
C)  to access foreign factors of production. 
D)  all the given answers.

Question 12

FDI is perceived by the host countries to:

Accepted Answer

A)  have no impact on the domestic economy. 
B)  be a cause of national problems. 
C)  be a source of economic growth. 
D)  both be a cause of national problems and/or be a source of economic growth. 
A)  have no impact on the domestic economy. 
B)  be a cause of national problems. 
C)  be a source of economic growth. 
D)  both be a cause of national problems and/or be a source of economic growth.

Question 13

In order to account for any variation in the risk associated with the estimated cash flows of a project:

Accepted Answer

A)  the discount rate may be adjusted to reflect a higher degree of associated risk. 
B)  the estimated cash flows may be reduced to reflect a higher degree of associated risk. 
C)  the net present valuation of the project may be supplemented by breakeven and sensitivity analysis. 
D)  all of the given answers. 
A)  the discount rate may be adjusted to reflect a higher degree of associated risk. 
B)  the estimated cash flows may be reduced to reflect a higher degree of associated risk. 
C)  the net present valuation of the project may be supplemented by breakeven and sensitivity analysis. 
D)  all of the given answers.

Question 14

A main shortcoming of the oligopolistic reaction hypothesis of FDI is:

Accepted Answer

A)  that it is based on the assumption of oligopolistic markets which do not exist in reality. 
B)  that it assumes oligopolistic rather than perfect competition. 
C)  its conclusion that FDI is self-limiting. 
D)  that there is no empirical support for it. 
A)  that it is based on the assumption of oligopolistic markets which do not exist in reality. 
B)  that it assumes oligopolistic rather than perfect competition. 
C)  its conclusion that FDI is self-limiting. 
D)  that there is no empirical support for it.

Question 15

Adjusted present value:

Accepted Answer

A)  evaluates the project as if it was all equity financed. 
B)  evaluates the project as if it was all debt financed. 
C)  evaluates the project as if it was all equity financed and then adds the value of side effects, which . are discounted at separate rates reflecting their own systematic risk.
D ) evaluates the project as if it was all debt financed and then adds the value of side effects, which are discounted at separate rates reflecting their own systematic risk. 
A)  evaluates the project as if it was all equity financed. 
B)  evaluates the project as if it was all debt financed. 
C)  evaluates the project as if it was all equity financed and then adds the value of side effects, which . are discounted at separate rates reflecting their own systematic risk.
D ) evaluates the project as if it was all debt financed and then adds the value of side effects, which are discounted at separate rates reflecting their own systematic risk.

Question 16

The arguments for FDI include:

Accepted Answer

A)  FDI flows are less volatile than portfolio investment flows. 
B)  FDI is an important source of funds for developing countries. 
C)  FDI involves the transfer of financial capital, technology and other skills. 
D)  all of the given answers. 
A)  FDI flows are less volatile than portfolio investment flows. 
B)  FDI is an important source of funds for developing countries. 
C)  FDI involves the transfer of financial capital, technology and other skills. 
D)  all of the given answers.

Question 17

The net present value method:

Accepted Answer

A)  takes account of the time value of money. 
B)  measures the absolute financial benefit of a project. 
C)  is the preferred method for evaluating FDI projects. 
D)  both takes account of the time value of money and measures the absolute financial benefit of a project. 
A)  takes account of the time value of money. 
B)  measures the absolute financial benefit of a project. 
C)  is the preferred method for evaluating FDI projects. 
D)  both takes account of the time value of money and measures the absolute financial benefit of a project.

Question 18

The implications of the currency areas hypothesis of FDI is that:

Accepted Answer

A)  firms from countries with strong currencies tend to invest abroad. 
B)  countries with strong currencies tend to be host countries. 
C)  countries with weak currencies tend to be sources of direct investment. 
D)  the pattern of FDI is determined by the level of the real exchange rates relative to then values implied by PPP. 
A)  firms from countries with strong currencies tend to invest abroad. 
B)  countries with strong currencies tend to be host countries. 
C)  countries with weak currencies tend to be sources of direct investment. 
D)  the pattern of FDI is determined by the level of the real exchange rates relative to then values implied by PPP.

Question 19

Which of the following theories of FDI assumes imperfect markets?

Accepted Answer

A)  The differential rates of return hypothesis 
B)  The diversification hypothesis 
C)  The output and market size hypothesis 
D)  The industrial organisation hypothesis 
A)  The differential rates of return hypothesis 
B)  The diversification hypothesis 
C)  The output and market size hypothesis 
D)  The industrial organisation hypothesis

Question 20

The arguments against FDI include:

Accepted Answer

A)  FDI symbolises new colonialism. 
B)  FDI results in a loss of sovereignty and compromises national security. 
C)  Multinational firms form alliances with corrupt elites in developing countries. 
D)  all of the given answers. 
A)  FDI symbolises new colonialism. 
B)  FDI results in a loss of sovereignty and compromises national security. 
C)  Multinational firms form alliances with corrupt elites in developing countries. 
D)  all of the given answers.

Which of the following is an example of FDI?

Tax policies affect the incentive to engage in FDI and its means of financing for all of these reasons, except that they affect:

Which one of the following features is not a feature of tax havens?

For the purpose of distinguishing, in the Balance of Payments statistics, between direct investment and portfolio investment the equity threshold used by Australia to imply significant control is:

The location hypothesis explains FDI in terms of:

A firm will expand overseas by exporting if:

International capital budgeting is:

What was not a determinant of FDI into Australia according to Yang, Groenewold and Tcha (2000)?

The internal financing hypothesis is more appropriate for explaining FDI in developing countries

Multinational firms use transfer pricing:

The reasons why multinational firms engage in FDI include:

FDI is perceived by the host countries to:

In order to account for any variation in the risk associated with the estimated cash flows of a project:

A main shortcoming of the oligopolistic reaction hypothesis of FDI is:

Adjusted present value:

The arguments for FDI include:

The net present value method:

The implications of the currency areas hypothesis of FDI is that:

Which of the following theories of FDI assumes imperfect markets?

The arguments against FDI include:

An Overview

The Foreign Exchange Market

The Balance of Payments and Effective Exchange Rate

Exchange Rate Determination

The International Monetary System and Exchange Rate Arrangements

The Eurocurrency Market and International Banking

International Banking Regulation and Basel Accords

Exchange Rate Forecasting, Technical Analysis and Trading Rules

Currency Futures and Swaps

Currency Options

International Arbitarage

Foreign Exchange Risk and Exposure

Foreign Exchange Risk Management

International Short-Term Financing and Investment

International Long-Term Financing and Investment

Filters

Exam 16: Foreign Direct Investment and International

Which of the following is an example of FDI?

Tax policies affect the incentive to engage in FDI and its means of financing for all of these reasons, except that they affect:

Which one of the following features is not a feature of tax havens?

For the purpose of distinguishing, in the Balance of Payments statistics, between direct investment and portfolio investment the equity threshold used by Australia to imply significant control is:

The location hypothesis explains FDI in terms of:

A firm will expand overseas by exporting if:

International capital budgeting is:

What was not a determinant of FDI into Australia according to Yang, Groenewold and Tcha (2000)?

The internal financing hypothesis is more appropriate for explaining FDI in developing countries

Multinational firms use transfer pricing:

The reasons why multinational firms engage in FDI include:

FDI is perceived by the host countries to:

In order to account for any variation in the risk associated with the estimated cash flows of a project:

A main shortcoming of the oligopolistic reaction hypothesis of FDI is:

Adjusted present value:

The arguments for FDI include:

The net present value method:

The implications of the currency areas hypothesis of FDI is that:

Which of the following theories of FDI assumes imperfect markets?

The arguments against FDI include:

An Overview

The Foreign Exchange Market

The Balance of Payments and Effective Exchange Rate

Exchange Rate Determination

The International Monetary System and Exchange Rate Arrangements

The Eurocurrency Market and International Banking

International Banking Regulation and Basel Accords

Exchange Rate Forecasting, Technical Analysis and Trading Rules

Currency Futures and Swaps

Currency Options

International Arbitarage

Foreign Exchange Risk and Exposure

Foreign Exchange Risk Management

International Short-Term Financing and Investment

International Long-Term Financing and Investment

Filters