Multinational Financial Management by Alan Shapiro: Country Risk Analysis

959 WordsSep 7, 20154 Pages
CHAPTER 6 Country Risk Analysis EASY (definitional) 6.1 The degree of political risk faced by a firm operating in a foreign country a) can be determined by using a political risk index b) depends on the benefits provided by the firm c) both a and b d) depends on how the firm has structured its operations Ans: d Section: Measuring political risk Level: Easy 6.2 One good indicator of political risk is a) the seriousness of capital flight b) the level of local interest rates c) the level of local tax rates d) a large middle class population Ans: a Section: Capital flight Level: Easy 6.3 Capital flight occurs for several reasons, most of which have to do with a) government regulations on interest rates b) high taxes on…show more content…
a) currency controls b) privatization of public utilities c) changes in tax or labor laws d) regulatory restrictions Ans: b Section: Measuring political risk Level: Difficult 6.17 Which one of the following is NOT a measure of political instability? a) the number of political parties in one nation b) frequency of changes of government c) the level of violence d) conflicts with neighboring states Ans: a Section: Measuring political risk Level: Difficult 6.18 Which of the following foreign investments would be least subject to expropriation? a) an oil well in an LDC that is providing needed foreign exchange b) a coffee plantation that is producing beans for export c) an assembly plant for automobiles located in an LDC d) a tire making plant in an LDC that is substituting for tire imports Ans: c Section: Key indicators of country risk Level: Difficult 6.19 A U.S. company whose foreign property has

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