International Investment and Financing: A Comprehensive Guide for Business Administration Students

Question 1

Which of the following is NOT considered a source of international investment?

Accepted Answer

Government grants

Answer

Foreign direct investment

Answer

Portfolio investment

Answer

International lending

Question 2

Which type of international investment involves establishing a new subsidiary or acquiring a controlling stake in a foreign company?

Accepted Answer

Foreign direct investment

Answer

Portfolio investment

Answer

Greenfield investment

Answer

Mergers and acquisitions

Question 3

What is the primary reason investors choose portfolio investment?

Accepted Answer

Diversification of risk

Answer

Control over foreign operations

Answer

Access to new markets

Answer

Technology transfer

Question 4

Which of the following is a type of international lending?

Accepted Answer

Eurobonds

Answer

Foreign direct investment

Answer

Portfolio investment

Answer

Equity financing

Question 5

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

Accepted Answer

Ownership of assets

Answer

Source of funding

Answer

Risk level

Answer

Currency of investment

Question 6

Which US government agency provides support and risk mitigation for companies investing abroad?

Accepted Answer

Overseas Private Investment Corporation

Answer

World Bank

Answer

International Monetary Fund

Answer

Inter-American Development Bank

Question 7

What is the primary mandate of the International Monetary Fund?

Accepted Answer

To promote economic growth and stability

Answer

To promote international trade and investment

Answer

To lend money to countries in need

Answer

To regulate the global financial system

Question 8

Which of the following is NOT a challenge faced by multinational corporations in international investment?

Accepted Answer

Limited market opportunities

Answer

Cultural differences

Answer

Political interference

Answer

Currency fluctuations

Question 9

Which investment option does NOT involve control over assets?

Accepted Answer

Portfolio investment

Answer

Foreign direct investment

Answer

International lending

Answer

Domestic investment

Question 10

What is the purpose of a sovereign wealth fund?

Accepted Answer

To invest a country's excess foreign exchange reserves

Answer

To provide financial assistance to developing countries

Answer

To stabilize the value of a country's currency

Answer

To promote economic development within a country

Question 11

Which of the following is NOT a source of international investment?

Accepted Answer

Domestic investment

Answer

Foreign direct investment

Answer

Portfolio investment

Answer

International lending

Question 12

Which type of international investment involves a company establishing operations in a foreign country?

Accepted Answer

Foreign direct investment

Answer

Portfolio investment

Answer

International lending

Answer

Equity investment

Question 13

Which organization is responsible for facilitating and promoting international trade and investment?

Accepted Answer

World Trade Organization

Answer

World Bank

Answer

International Monetary Fund

Answer

United Nations

Question 14

Which factor is NOT considered when making an international investment decision?

Accepted Answer

Personal preferences

Answer

Political stability

Answer

Economic growth

Answer

Currency exchange rates

Question 15

Which type of investment involves purchasing shares in a foreign company?

Accepted Answer

Equity investment

Answer

Bond investment

Answer

Real estate investment

Answer

Commodities investment

Question 16

Identify the key differences between foreign direct investment and portfolio investment:

Accepted Answer

Foreign direct investment entails control over the invested entity, unlike portfolio investment.

Accepted Answer

Foreign direct investment generally has a longer investment horizon than portfolio investment.

Accepted Answer

Ownership is a primary distinction between foreign direct investment and portfolio investment.

Answer

Risk is not a primary factor that differentiates foreign direct investment from portfolio investment.

Question 17

Which of the following is NOT a primary source of international investment?

Accepted Answer

Domestic investment

Answer

Foreign direct investment

Answer

Portfolio investment

Answer

International lending

Question 18

Which type of investment involves the purchase of stocks and bonds in foreign companies?

Accepted Answer

Portfolio investment

Answer

Foreign direct investment

Answer

International lending

Answer

Private equity investment

Question 19

What is the primary purpose of international lending?

Accepted Answer

To provide financial assistance to developing countries

Answer

To generate profits for investors

Answer

To expand business operations globally

Answer

To reduce foreign exchange risk

Question 20

Which of the following is an advantage of foreign direct investment (FDI) for developing countries?

Accepted Answer

Both increased employment opportunities and improved access to technology

Answer

Increased employment opportunities

Answer

Improved access to technology

Answer

Reduced exports

Question 21

Portfolio investment involves investing in:

Accepted Answer

Financial instruments such as stocks or bonds

Answer

Physical assets such as factories or equipment

Answer

Both physical and financial assets

Answer

Neither physical nor financial assets

Question 22

What is the key objective of foreign direct investment (FDI)?

Accepted Answer

To establish long-term presence in a foreign market

Answer

To generate short-term profits

Answer

To reduce production costs

Answer

To gain access to new technologies

Question 23

Which type of investment is generally more liquid?

Accepted Answer

Portfolio investment

Answer

Foreign direct investment

Answer

Both are equally liquid

Answer

Neither is liquid

Question 24

Political risk refers to the risk that:

Accepted Answer

Host government policies or actions may adversely affect investment returns

Answer

Foreign currency exchange rates may fluctuate

Answer

Natural disasters may damage assets

Answer

Competition from local businesses may reduce profits

Question 25

Which investment type involves the ownership of a physical presence in a foreign country, such as a factory or office?

Accepted Answer

Foreign direct investment (FDI)

Answer

Portfolio investment

Answer

International lending

Answer

Joint venture

Question 26

Portfolio investment offers which key advantage over foreign direct investment?

Accepted Answer

Lower risk

Answer

Higher potential returns

Answer

Greater control over the investment

Answer

Protection against currency fluctuations

Question 27

What is the World Trade Organization's (WTO) primary function in international investment?

Accepted Answer

To regulate international trade

Answer

To provide financing for investment projects

Answer

To promote sustainable investment practices

Answer

To negotiate bilateral trade agreements

Question 28

What is the primary reason for conducting a feasibility study before embarking on an international investment?

Accepted Answer

To evaluate the viability of the project

Answer

To secure financing for the project

Answer

To determine the tax implications of the investment

Answer

To mitigate risks associated with the investment

Question 29

How do international agreements and treaties, such as bilateral investment treaties (BITs) and the World Trade Organization (WTO) agreements, influence the investment climate for businesses?

Accepted Answer

They establish a framework for resolving investment disputes and safeguarding investor rights, fostering a stable and predictable investment environment.

Answer

They mainly focus on trade in goods and services, excluding investment-related matters.

Answer

They impose substantial constraints on foreign investment and limit profit repatriation, impeding investment flows.

Question 30

Which of the following is a primary advantage of foreign direct investment (FDI) for the host country?

Accepted Answer

Increased economic growth, job creation, and transfer of technology

Answer

Reduced inflation

Answer

Lower interest rates

Question 31

Portfolio investment differs from foreign direct investment primarily in that it:

Accepted Answer

Does not involve acquiring a controlling interest in a foreign company

Answer

Is typically more risky

Answer

Involves a longer-term commitment

Question 32

The risk of expropriation is a major concern for foreign investors because it refers to the possibility that:

Accepted Answer

A foreign government may seize foreign-owned assets without compensation

Answer

The foreign government may impose burdensome regulations on foreign businesses

Answer

The value of the investment may decline due to economic or political factors

Question 33

Which of the following is NOT a key factor to consider when evaluating an international investment project?

Accepted Answer

The investor's personal preferences

Answer

The economic climate of the host country

Answer

The legal framework of the host country

Answer

The political stability of the host country

Question 34

The International Monetary Fund (IMF) is an international organization that primarily:

Accepted Answer

Provides financial assistance and advice to countries facing economic crises

Answer

Regulates the global financial system

Answer

Promotes free trade between countries

Question 35

Which of the following is a significant advantage of international portfolio diversification?

Accepted Answer

Reduced risk through exposure to different markets and asset classes

Answer

Lower costs

Answer

Guaranteed higher returns

Answer

Enhanced liquidity

Question 36

Foreign exchange risk refers to the risk that the:

Accepted Answer

Value of one currency may fluctuate relative to another, affecting the value of investments and transactions

Answer

Economic conditions in the foreign country may deteriorate

Answer

Foreign government may restrict the repatriation of profits

Question 37

Which of the following is a primary driver of the growth in international investment?

Accepted Answer

Globalization and technological advancements, facilitating cross-border capital flows and trade

Answer

Lower interest rates

Answer

Government incentives

Answer

Increased investor confidence

Question 38

The World Bank is an international organization primarily engaged in:

Accepted Answer

Providing financial assistance and technical expertise for development projects

Answer

Promoting human rights

Answer

Resolving international conflicts

Question 39

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

Accepted Answer

Indirect portfolio investment

Answer

Greenfield investment

Answer

Export-oriented FDI

Answer

Mergers and acquisitions

Question 40

What is one of the advantages of portfolio investment over foreign direct investment (FDI)?

Accepted Answer

Higher liquidity

Answer

Greater control over investment

Answer

Reduced operational costs

Answer

Lower political risk

Question 41

What is a primary function of the World Bank?

Accepted Answer

Provides financial assistance to developing countries

Answer

Regulates cross-border investment flows

Answer

Promotes free trade among member countries

Answer

Ensures the stability of the international financial system

Question 42

What is the primary objective of the International Monetary Fund (IMF)?

Accepted Answer

To promote international monetary cooperation

Answer

To promote free trade among member countries

Answer

To regulate global financial markets

Answer

To provide financial assistance to developing countries

Question 43

Which of the following is a benefit of using project finance in international investment?

Accepted Answer

Non-recourse financing

Answer

Faster approval process

Answer

Lower interest rates

Answer

Higher equity returns

Question 44

What is the purpose of the Basel Accords?

Accepted Answer

To establish international standards for bank capital requirements

Answer

To regulate cross-border investment flows

Answer

To ensure the stability of the international financial system

Answer

To provide financial assistance to developing countries

Question 45

**Which of the following is a crucial benefit associated with foreign direct investment (FDI)?**

Accepted Answer

Facilitating access to new markets and customer segments.

Answer

Countering fluctuations in domestic economic growth.

Answer

Mitigating the risks associated with foreign exchange fluctuations.

Answer

Ensuring guaranteed returns on investment endeavors.

Question 46

**What is the primary objective of portfolio investment?**

Accepted Answer

Generating income and capital gains.

Answer

Acquiring control over foreign enterprises.

Answer

Transferring technology and specialized knowledge.

Answer

Promoting economic progress in developing nations.

Question 47

**What is the fundamental difference between a syndicated loan and a direct loan?**

Accepted Answer

A syndicated loan involves multiple lenders, while a direct loan involves a single lender.

Answer

Syndicated loans typically have higher interest rates compared to direct loans.

Question 48

**What is the primary function of the World Bank in the context of international investment and financing?**

Accepted Answer

Providing financial assistance in the form of loans and grants to developing nations for infrastructure and economic development projects.

Answer

Establishing and enforcing international accounting and reporting standards.

Answer

Regulating international trade and investment activities.

Question 49

**Identify a potential disadvantage associated with international investment.**

Accepted Answer

Exposure to currency risk and potential financial losses due to exchange rate fluctuations.

Answer

Fostering innovation and technology transfer across borders.

Answer

Diversifying investment portfolios to mitigate risks.

Answer

Stimulating economic growth and development in developing countries.

Question 50

A company invests in a foreign subsidiary to gain control over its operations. This is an example of:

Accepted Answer

Foreign Direct Investment (FDI)

Answer

Foreign Exchange Trading

Answer

International Lending

Answer

Portfolio Investment

Question 51

Which of the following is NOT a typical risk associated with international investment?

Accepted Answer

Lower interest rates in foreign markets

Answer

Regulatory differences

Answer

Currency fluctuations

Answer

Political instability

Question 52

A company purchases bonds issued by a foreign government. This is an example of:

Accepted Answer

Portfolio Investment

Answer

Trade Finance

Answer

Foreign Direct Investment (FDI)

Answer

International Lending

Question 53

Which of the following is a key benefit of international lending for developing countries?

Accepted Answer

Access to capital for infrastructure development

Answer

Increased trade barriers

Answer

Reduced government debt

Answer

Lower interest rates

Question 54

A company uses a forward contract to hedge against potential losses due to currency fluctuations. This is an example of:

Accepted Answer

Risk Management

Answer

Investment Strategy

Answer

Market Research

Answer

Financial Engineering

Question 55

Which of the following is a key consideration when choosing an investment strategy for international markets?

Accepted Answer

Economic and political stability of the target country

Answer

Availability of high-speed internet

Answer

Number of competing companies in the market

Question 56

What is the main purpose of the International Monetary Fund (IMF)?

Accepted Answer

To promote international monetary cooperation and financial stability

Answer

To regulate international trade

Answer

To provide loans to developing countries for infrastructure development

Question 57

A company uses a letter of credit to ensure payment for goods exported to a foreign buyer. This is an example of:

Accepted Answer

Trade Finance

Answer

Foreign Direct Investment (FDI)

Answer

Portfolio Investment

Question 58

Which of the following is NOT a typical source of funding for international investment?

Accepted Answer

Personal savings accounts

Answer

Bonds

Answer

Bank loans

Answer

Equity financing

Question 59

A company uses a currency swap to hedge against exchange rate risk. This is an example of:

Accepted Answer

Derivative Instruments

Answer

Investment Banking

Answer

International Accounting

Answer

Securities Trading