What Is the Difference Between Foreign Direct Investment and Foreign

question 114

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 can give a low-income country access to funds and technology it would not otherwise have,but foreign portfolio investment does not expand that access.

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Definitions:

Dividend Yield

A financial index that reveals the proportion of yearly dividends paid out by a company to its stock price.

Annual Percentage Rate

The annual rate charged for borrowing or earned through an investment, accounting for any fees or additional costs associated with the transaction, expressed as a percentage.

Treasury Bill

Short-term, government-issued debt securities that mature in one year or less.

Par

The face value of a bond or other security, which is the amount the issuer promises to repay at maturity.