Investors Are Able to Reduce Risks by Diversifying an Investment

question 88

Multiple Choice

Investors are able to reduce risks by diversifying an investment portfolio internationally, and the risk reduction effects would be greater if not for

• A) volatile exchange rates associated with the current floating exchange risk regime.
• B) the different kinds of tax regimes in different countries.
• C) the inaccessibility of foreign stock exchanges to most investors.
• D) the poor quality of many stocks in international start-up firms.

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Definitions:

Cash Flow

The total amount of money being transferred into and out of a business, especially affecting liquidity.

Operating Activities

These activities are directly related to the production, sale, and delivery of a company’s products and services, representing the primary source of revenue and expense in the business.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not included in cash equivalents.