International Investment: A Comprehensive Guide for Business and Economics Students

Question 1

Which characteristic is fundamental to foreign direct investment (FDI)?

Accepted Answer

Control over foreign operations

Answer

Temporary asset ownership overseas

Answer

Low risk exposure

Answer

Short-term investment period

Question 2

How do Greenfield investments differ from brownfield investments?

Accepted Answer

Greenfield investments involve starting a new operation, while brownfield investments involve acquiring an existing operation

Answer

Greenfield investments are riskier than brownfield investments

Answer

Brownfield investments are larger in scale than Greenfield investments

Question 3

What is the term for the total increase in foreign investment within a country?

Accepted Answer

Capital inflow

Answer

Foreign direct investment

Answer

Current account surplus

Answer

Balance of payments

Question 4

When choosing between joint ventures and wholly-owned subsidiaries as entry strategies for foreign markets, which of the following is a key difference in terms of risk-sharing and control?

Accepted Answer

Joint ventures offer greater risk-sharing, while wholly-owned subsidiaries provide more control.

Answer

Joint ventures provide more control, while wholly-owned subsidiaries offer greater risk-sharing.

Answer

Both joint ventures and wholly-owned subsidiaries offer equal risk-sharing and control.

Answer

The risk-sharing and control aspects are not relevant in the choice between joint ventures and wholly-owned subsidiaries.

Question 5

Which of the following is NOT a common type of international investment vehicle?

Accepted Answer

Banking Investment

Answer

Foreign Direct Investment (FDI)

Answer

Portfolio Investment

Answer

Private Equity Investment

Question 6

What is the primary objective of a joint venture in international business?

Accepted Answer

To establish a new business entity with shared ownership and risk

Answer

To provide financing for an existing business

Answer

To mitigate the risks associated with foreign exchange fluctuations

Answer

To protect intellectual property rights

Question 7

What is the fundamental difference between a portfolio investment and a direct investment?

Accepted Answer

Portfolio investments involve ownership of equity or debt securities, while direct investments involve control over a foreign company

Answer

Direct investments are less risky than portfolio investments

Answer

Portfolio investments involve a passive role, while direct investments involve an active role in management

Answer

There is no meaningful difference between the two

Question 8

What is the World Bank's primary role in international investment?

Accepted Answer

To provide financing and technical assistance to developing countries

Answer

To regulate international trade and investment

Answer

To provide dispute resolution services for international investors

Answer

To promote sustainable development through its investments

Question 9

Which of the following are potential risks associated with international investment?

Accepted Answer

Political risks, economic risks, and currency risks

Answer

Only political risks and economic risks

Answer

Only economic risks and currency risks

Answer

Only political risks and currency risks

Question 10

Identify the most comprehensive approach to mitigating risks associated with international investment:

Accepted Answer

Conducting thorough due diligence, diversifying investments, and employing hedging strategies

Answer

Relying solely on government guarantees

Answer

Avoiding investments in developing countries

Answer

Investing exclusively in countries with stable political systems

Question 11

What is the term used to describe the acquisition of controlling ownership or assets of a foreign firm?

Accepted Answer

Acquisition

Answer

Merger

Answer

Joint venture

Answer

Strategic alliance

Question 12

Which subtopic within this unit focuses on the impact of investment on economic development?

Accepted Answer

Foreign direct investment and economic growth

Answer

Multinational corporations and sustainability

Answer

Investment incentives and trade policies

Answer

Ethics and responsibility in international business

Question 13

Which statement accurately describes the relationship between international investment and job creation?

Accepted Answer

International investment can sometimes lead to both job creation and job losses.

Answer

International investment always leads to job creation.

Answer

International investment never results in job losses.

Answer

International investment typically results in a substantial increase in job creation.

Question 14

Clarified Question: What is the primary purpose of the World Bank's International Finance Corporation (IFC)?

Accepted Answer

Revised Option: Promote economic growth through private sector investment in developing countries

Answer

Revised Option: Regulate international financial markets

Answer

Revised Option: Provide emergency loans to underdeveloped nations

Answer

Revised Option: Facilitate trade negotiations among member countries

Question 15

Clarified Question: Among the ethical considerations for multinational corporations operating overseas, which is a key concern?

Accepted Answer

Revised Option: Upholding human rights

Answer

Revised Option: Adhering to local regulations

Answer

Revised Option: Preserving the environment

Answer

Revised Option: Maximizing shareholder profits

Question 16

Which factor is **least important** in determining a multinational corporation's entry strategy into a foreign market?

Accepted Answer

Company age

Answer

Political stability

Answer

Cultural differences

Answer

Currency exchange rates

Question 17

Clarified Question: Which of the following is not a form of foreign direct investment (FDI)?

Accepted Answer

Revised Option: Portfolio investment (purchasing stocks or bonds of foreign companies)

Answer

Revised Option: Greenfield investment (establishing new operations in a foreign country)

Answer

Revised Option: Mergers and acquisitions (M&A)

Answer

Revised Option: Joint ventures (collaborative business arrangements with foreign entities)

Question 18

Clarified Question: Which international organization's mission is to promote free trade and economic cooperation among its members?

Accepted Answer

Revised Option: World Trade Organization (WTO)

Answer

Revised Option: World Bank (focuses on financial assistance to developing countries)

Answer

Revised Option: International Monetary Fund (IMF) (focuses on macroeconomic stability and international finance)

Answer

Revised Option: United Nations (UN) (broad scope including international peace and security)

Question 19

Clarified Question: Which type of investment involves purchasing ownership in foreign businesses?

Accepted Answer

Revised Option: Direct investment

Answer

Revised Option: Portfolio investment (purchasing stocks or bonds)

Answer

Revised Option: Venture capital

Answer

Revised Option: Private equity

Question 20

Which investment strategy focuses on identifying and investing in companies with the potential for rapid growth?

Accepted Answer

Growth investing

Answer

Value investing

Answer

Income investing

Answer

Speculative investing

Question 21

Which institution plays a key role in providing financial assistance to developing countries for economic development?

Accepted Answer

Development bank

Answer

Multinational bank

Answer

Investment bank

Answer

Credit union

Question 22

What type of foreign direct investment entails acquiring control of an existing foreign company?

Accepted Answer

Mergers and acquisitions

Answer

Greenfield investment

Answer

Joint ventures

Answer

Portfolio investment

Question 23

How does an equity investment differ from a debt investment?

Accepted Answer

Equity investment confers ownership rights, whereas debt investment does not

Answer

Debt investment confers ownership rights, whereas equity investment does not

Answer

Equity investment involves lower risk than debt investment

Answer

Debt investment involves lower risk than equity investment

Question 24

Which organization is responsible for promoting global trade and economic cooperation?

Accepted Answer

World Trade Organization

Answer

World Bank

Answer

International Monetary Fund

Answer

United Nations

Question 25

What is the term used to describe an agreement that establishes rules and regulations for trade between nations?

Accepted Answer

Free trade agreement

Answer

Trade pact

Answer

Trade zone

Answer

Customs union

Question 26

Which of the following is not a commonly used mode of international transport?

Accepted Answer

Satellite

Answer

Air

Answer

Sea

Answer

Road

Question 27

What is the primary role of the foreign exchange market?

Accepted Answer

To facilitate the exchange of currencies between different countries

Answer

To set interest rates for domestic economies

Answer

To regulate the flow of foreign direct investment

Answer

To provide loans to businesses and governments

Question 28

Which of the following is NOT a type of direct investment vehicle in international markets?

Accepted Answer

Portfolio investment

Answer

Greenfield investment

Answer

Mergers and acquisitions (M&A)

Answer

Joint ventures

Question 29

Which factor is NOT typically considered when making international investment decisions?

Accepted Answer

Personal preferences of the investor

Answer

Political stability of the host country

Answer

Economic growth prospects of the host country

Answer

Availability of skilled labor in the host country

Question 30

Which type of FDI involves the complete takeover of an existing foreign company?

Accepted Answer

Merger and Acquisition (M&A)

Answer

Greenfield Investment

Answer

Joint Venture

Answer

Strategic Alliance

Question 31

What is one of the main advantages of portfolio investment?

Accepted Answer

High liquidity and ease of diversification

Answer

Potential for high returns and capital appreciation

Answer

Government guarantees and protection against losses

Answer

Tax benefits and incentives for investors

Question 32

What is the main purpose of a double taxation treaty between countries?

Accepted Answer

To prevent the same income from being taxed in both countries

Answer

To reduce tax rates for foreign investors

Answer

To eliminate all taxes on cross-border business transactions

Answer

To ensure that taxes are paid only in the country where the income is earned

Question 33

What is a key function of the World Bank in promoting international investment?

Accepted Answer

Providing financial assistance and loans to developing countries

Answer

Establishing global investment policies and regulations

Answer

Resolving trade disputes between countries

Answer

Monitoring and reporting on global economic trends

Question 34

Which industry is considered highly globalized due to its extensive international operations and interconnectedness?

Accepted Answer

Technology industry

Answer

Automotive industry

Answer

Healthcare industry

Answer

Education industry

Question 35

Which of the following is NOT a type of international investment vehicle?

Accepted Answer

Equity Financing

Answer

Foreign Direct Investment (FDI)

Answer

Portfolio Investment

Answer

Joint Ventures

Question 36

How do international trade agreements promote international investment?

Accepted Answer

By fulfilling all of the above functions

Answer

By establishing clear rules and regulations

Answer

By reducing trade barriers and tariffs

Answer

By providing dispute resolution mechanisms

Question 37

What is the term used to describe the transfer of capital across borders in search of higher returns?

Accepted Answer

International investment

Answer

Foreign direct investment

Answer

Portfolio investment

Answer

Cross-border investment

Question 38

Portfolio investment offers the advantage of:

Accepted Answer

Both B and C

Answer

Higher potential returns

Answer

Diversification of risk

Answer

Ease of entry and exit

Question 39

The process by which a foreign company acquires majority ownership of a domestic company is known as:

Accepted Answer

Acquisition

Answer

Joint venture

Answer

Merger

Answer

Strategic alliance

Question 40

Which of the following is a potential benefit of international investment for a domestic economy?

Accepted Answer

Diversification of investment portfolio

Answer

Tax exemption

Answer

Guaranteed high returns

Answer

Reduced currency risk

Question 41

Which of the following is a potential risk associated with international investment?

Accepted Answer

Political instability

Answer

Strong economic growth

Answer

Favorable exchange rates

Answer

Cultural similarities

Question 42

Which of the following is a notable trend in the global investment landscape?

Accepted Answer

Increased investment in emerging markets

Answer

Decreased investment in developed countries

Answer

No significant trends

Answer

Elimination of foreign exchange risk

Question 43

Which of the following strategies can help mitigate political risk in international investment?

Accepted Answer

Investment insurance

Answer

Investing solely in countries with democratic governments

Answer

Reliance solely on local government guarantees

Answer

Ignoring political stability concerns

Question 44

Which of the following is a characteristic of foreign direct investment (FDI)?

Accepted Answer

It involves long-term investment and control over foreign operations.

Answer

Investment solely through intermediaries

Answer

Short-term investment in foreign securities

Answer

Investment with no control over foreign operations

Question 45

Which of the following is a potential benefit of portfolio investment for a foreign investor?

Accepted Answer

Diversification of assets

Answer

Guaranteed profits

Answer

Tax advantages

Answer

Control over foreign operations

Question 46

Which of the following is NOT a type of foreign direct investment (FDI)?

Accepted Answer

Portfolio investment

Answer

Mergers and acquisitions (M&A)

Answer

Joint ventures

Answer

Establishment of a new subsidiary

Question 47

What is the difference between a portfolio investment and a foreign direct investment?

Accepted Answer

Foreign direct investment implies partial or full ownership and control, while portfolio investment does not.

Answer

Portfolio investment is typically long-term investment, while foreign direct investment is short-term.

Answer

Portfolio investments involve equity ownership, while foreign direct investments do not.

Question 48

What is the purpose of a double taxation treaty?

Accepted Answer

To avoid individuals or businesses paying tax on the same income in multiple countries.

Answer

To protect intellectual property rights.

Answer

To encourage investment between two countries.

Question 49

Which of the following is a benefit of international trade?

Accepted Answer

It can lead to lower consumer prices.

Answer

It can lead to job losses in certain industries.

Answer

It can increase dependence on foreign suppliers.

Question 50

What is a key role of the World Trade Organization (WTO)?

Accepted Answer

To negotiate and enforce trade agreements.

Answer

To promote intellectual property protection.

Answer

To provide financial assistance to developing countries.

Question 51

What is the difference between a tariff and a quota?

Accepted Answer

Tariffs impose a tax on imported goods while quotas limit the quantity of goods that can be imported.

Answer

Quotas impose a tax on exported goods while tariffs limit the quantity of goods that can be exported.

Question 52

What is the purpose of a free trade agreement (FTA)?

Accepted Answer

To reduce or eliminate trade barriers and facilitate trade between countries.

Answer

To protect domestic industries from foreign competition.

Answer

To increase tariffs and quotas.