In the Context of Foreign Direct Investment, Which of the Following

question 30

Multiple Choice

In the context of foreign direct investment, which of the following statements is true of joint ventures?

• A) They are a controversial means of entering foreign markets.
• B) They are the costliest form of direct investment.
• C) They involve the merger of companies.
• D) They offer management guidance to and financing for franchisees.

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Definitions:

Risk-Free Rate

The return on an investment with no risk of financial loss, often represented by the yield on government securities like U.S. Treasury bonds.

Real Rate

The real rate is the interest rate that has been adjusted for inflation, representing the true cost of borrowing or the real yield on an investment, distinct from the nominal rate.

Expectations Theory

A theory that suggests long-term interest rates reflect the market's expectation for future short-term rates, assuming that investors have no preference for long versus short maturities.

Liquidity Preference Theory

A theory ofthe shape of the yield curve. The curveslopes upward because, all other thing equal, investors prefer shorter, moreliquid investments. They must therefore be induced to lend longer withhigher rates