What Is the Difference Between Foreign Direct Investment and Foreign

question 12

Multiple Choice

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

• A)Foreign direct investment involves purchases of foreign stock or bonds by individuals or firms, while foreign portfolio investment involves a firm purchasing or building a facility in a foreign country.
• B)Individuals engage in foreign portfolio investment, but only firms can engage in foreign direct investment.
• C)Foreign direct investment only takes place when governments make official purchases or foreign investments, while foreign portfolio investment takes place when firms, individuals, or the government purchase foreign investments.
• D)Foreign direct investment cannot give a low-income country access to funds and technology it would not otherwise have, but foreign portfolio investment does expand that access.
• E)Foreign direct investment guarantees a future return, but foreign portfolio investment involve a high degree of risk.

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Definitions:

IRA Assets

Assets held within an Individual Retirement Account, including stocks, bonds, CDs, and other investment products, aimed at accumulating tax-advantaged savings for retirement.

Distribution

In finance, it refers to payments made by a fund or company to its shareholders, such as dividends, or the allocation of a company's earnings.

Coverdell Education

An investment tool in the United States that allows families to earn tax-free returns on educational expenses savings.

CESA

Coverdell Education Savings Account, a tax-advantaged investment account in the U.S. designed to encourage savings for education expenses.