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Chapter 16 Country Risk Analysis 1. A macro-assessment of country risk: A) is adjusted for the particular business of the firm involved. B) excludes all aspects relevant to a particular firm or project. C) A and B D) none of the above ANSWER: B 2. A micro-assessment of country risk: A) is adjusted for the particular business of the firm involved. B) excludes all aspects relevant to a particular firm or project. C) A and B D) none of the above ANSWER: A 3. The Delphi technique: A) is a method of purchasing information about inspections of the country being evaluated. B) requires the use of discriminant analysis to assess country risk. C) involves the collection of independent opinions on country risk. D) none of the above ANSWER: C 4. The checklist approach: A) requires several inspections of the country being evaluated. B) requires the use of discriminant analysis to assess country risk. C) requires ratings and weights to be assigned to all factors relevant in assessing country risk. D) involves the collection of independent opinions on country risk. ANSWER: C 30 31 International Financial Management 5. The most important variable in determining a countrys degree of overall country risk: A) is political risk. B) is financial risk. C) is the probability of a host government takeover. D) may often vary with the country of concern. ANSWER: D 6. According to the text, country risk analysis has: A) almost always detected problems before they occur. B) been effectively used in place of capital budgeting to determine whether a project should be accepted. C) been perfected as a result of the development of discriminant analysis. D) none of the above ANSWER: D 7. To best reduce exposure to a host government takeover, a subsidiary could: A) use a long-run profit perspective for business in that country. B) hire people from its own country if the host government does not cooperate. C) attempt to obtain supplies from its parent. D) borrow funds from its parent rather than from the host countrys creditors. ANSWER: C 8. Insurance purchased to cover the risk of expropriation __________, and will typically cover __________. A) will be the same for all firms; only a portion of the firms total exposure. B) will be the same for all firms; all of the firms total exposure. C) will be dependent on the firms risk; all of the firms total exposure. D) will be dependent on the firms risk; only a portion of the firms total exposure. ANSWER: D 9. Country risk assessment should be used when: A) determining whether to establish a subsidiary in a foreign country. B) determining whether to continue business in a foreign country. C) A and B D) none of the above ANSWER: C Chapter 16: Country Risk Analysis 32 10. When determining whether a particular proposed project in a foreign country is feasible: A) a country risk rating can adequately substitute for a capital budgeting analysis.... View Full Document

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