Why Is Investing in Foreign Companies an Effective Way to Diversify

question 27

Multiple Choice

Why is investing in foreign companies an effective way to diversify an individual's investment portfolio?

• A)Foreign economies are stronger than the U.S.economy.
• B)Foreign stocks are less risky than the stocks of U.S.corporations.
• C)Stock returns of companies in foreign companies are highly correlated with stock returns of U.S.companies.
• D)Returns on foreign company stocks do not always change in the same direction as returns on U.S.stocks.

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Definitions:

Ajax's Profits

The earnings acquired by Ajax, a fictional or specific enterprise, after deducting all costs associated with its operations.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players' strategies remain unchanged, indicating a stable state of gameplay.

Profits-Payoff Table

A financial tool used to display potential profits or losses of various outcomes based on a set of assumptions or strategies.

Duopoly

A market structure dominated by two firms, each having significant control over the market price and influencing competition dynamics.