MBA 620 Final Exam Actual Exam
MBA 620 FINAL EXAM ACTUAL EXAM NEWEST 2025/2026
COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |BRAND NEW VERSION!!
Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian
pound (EGP). 25% of the MNC's funds are Taiwan dollars and 75% are pounds. The
standard deviation of exchange movements is 7% for Taiwan dollars and 5% for
pounds. The correlation coefficient between movements in the value of the
Taiwan dollar and the pound is .7. Based on this information, the standard
deviation of this two-currency portfolio is approximately: - Correct Answer-5.13%.
Procedural and documentation requirements imposed by the foreign government
are referred to as: - Correct Answer-"Red Tape" barriers.
Which of the following is not a cost-related motive of direct foreign investment? -
Correct Answer-International diversification.
To diversify internationally for the purpose of reducing risk, which strategy is
appropriate? - Correct Answer-Establish subsidiaries in markets whose business
cycles differ from those where existing subsidiaries are based.
A country with high unemployment could best increase its employment by: -
Correct Answer-encouraging foreign firms to establish subsidiaries that produce
products local firms do not produce.
1|Page
, MBA 620 Final Exam Actual Exam
The ____ a project's variability in cash flows, and the ____ the positive correlation
between the project's cash flow and the MNC's cash flow, the lower the risk of the
project. - Correct Answer-lower; lower
____ is not a cost-related motive for direct foreign investment. - Correct Answer-
Exploiting monopolistic advantages
The ____ the correlation in project returns is over time, the ____ will be the
project portfolio risk as measured by the portfolio variance. - Correct Answer-
lower; lower
____ is not a revenue-related motive for direct foreign investment. - Correct
Answer-Fully benefiting from economies of scale
To use foreign factors of production, an MNC should: - Correct Answer-establish a
subsidiary in a market that has relatively low costs of labor or land.
When a firm perceives that a foreign currency is ____, the firm may attempt direct
foreign investment in that country, as the initial outlay should be relatively ____. -
Correct Answer-undervalued; low
____ is not a political risk factor. - Correct Answer-High interest rates in a foreign
country
Which of the following is not a technique to assess country risk? - Correct Answer-
Gamma technique.
2|Page
, MBA 620 Final Exam Actual Exam
Perhaps the most appropriate method for incorporating forms of country risk in a
capital budgeting analysis is to estimate how the ____ would be affected by each
form of risk. - Correct Answer-cash flows
Which of the following is not a form of financial risk? - Correct Answer-Blockage of
fund transfers
____ is (are) not a form of political risk. - Correct Answer-Exchange rate
movements
When quantifying country risk: - Correct Answer-weights should be assigned to
the political and financial factors according to their perceived importance.
The most important variable in determining a country's degree of overall country
risk: - Correct Answer-may often vary with the country of concern.
A ____ currency may ____ the volume of products imported by the country and
therefore reduce the country's production and national income. - Correct Answer-
strong; increase
When using ____, funds are typically tied up for a significant period of time. -
Correct Answer-covered interest arbitrage
You just received a gift from a friend consisting of 1,000 Thai baht, which you
would like to exchange for Australian dollars (A$). You observe that exchange rate
3|Page
MBA 620 FINAL EXAM ACTUAL EXAM NEWEST 2025/2026
COMPLETE QUESTIONS AND CORRECT DETAILED ANSWERS
(VERIFIED ANSWERS) |BRAND NEW VERSION!!
Consider an MNC that is exposed to the Taiwan dollar (TWD) and the Egyptian
pound (EGP). 25% of the MNC's funds are Taiwan dollars and 75% are pounds. The
standard deviation of exchange movements is 7% for Taiwan dollars and 5% for
pounds. The correlation coefficient between movements in the value of the
Taiwan dollar and the pound is .7. Based on this information, the standard
deviation of this two-currency portfolio is approximately: - Correct Answer-5.13%.
Procedural and documentation requirements imposed by the foreign government
are referred to as: - Correct Answer-"Red Tape" barriers.
Which of the following is not a cost-related motive of direct foreign investment? -
Correct Answer-International diversification.
To diversify internationally for the purpose of reducing risk, which strategy is
appropriate? - Correct Answer-Establish subsidiaries in markets whose business
cycles differ from those where existing subsidiaries are based.
A country with high unemployment could best increase its employment by: -
Correct Answer-encouraging foreign firms to establish subsidiaries that produce
products local firms do not produce.
1|Page
, MBA 620 Final Exam Actual Exam
The ____ a project's variability in cash flows, and the ____ the positive correlation
between the project's cash flow and the MNC's cash flow, the lower the risk of the
project. - Correct Answer-lower; lower
____ is not a cost-related motive for direct foreign investment. - Correct Answer-
Exploiting monopolistic advantages
The ____ the correlation in project returns is over time, the ____ will be the
project portfolio risk as measured by the portfolio variance. - Correct Answer-
lower; lower
____ is not a revenue-related motive for direct foreign investment. - Correct
Answer-Fully benefiting from economies of scale
To use foreign factors of production, an MNC should: - Correct Answer-establish a
subsidiary in a market that has relatively low costs of labor or land.
When a firm perceives that a foreign currency is ____, the firm may attempt direct
foreign investment in that country, as the initial outlay should be relatively ____. -
Correct Answer-undervalued; low
____ is not a political risk factor. - Correct Answer-High interest rates in a foreign
country
Which of the following is not a technique to assess country risk? - Correct Answer-
Gamma technique.
2|Page
, MBA 620 Final Exam Actual Exam
Perhaps the most appropriate method for incorporating forms of country risk in a
capital budgeting analysis is to estimate how the ____ would be affected by each
form of risk. - Correct Answer-cash flows
Which of the following is not a form of financial risk? - Correct Answer-Blockage of
fund transfers
____ is (are) not a form of political risk. - Correct Answer-Exchange rate
movements
When quantifying country risk: - Correct Answer-weights should be assigned to
the political and financial factors according to their perceived importance.
The most important variable in determining a country's degree of overall country
risk: - Correct Answer-may often vary with the country of concern.
A ____ currency may ____ the volume of products imported by the country and
therefore reduce the country's production and national income. - Correct Answer-
strong; increase
When using ____, funds are typically tied up for a significant period of time. -
Correct Answer-covered interest arbitrage
You just received a gift from a friend consisting of 1,000 Thai baht, which you
would like to exchange for Australian dollars (A$). You observe that exchange rate
3|Page
