Which of the Following Reasons Might Explain Why International Investing

question 48

Multiple Choice

Which of the following reasons might explain why international investing might offer diversification benefits?

• A)Companies operating in different countries will be affected differently by international events such as crop failures, energy prices, wars, tariffs, etc.
• B)Since the introduction of the euro, European and U.S. markets have a tendency to move in the same direction on an annual basis
• C)World markets are highly correlated to the U.S. market since the U.S. is the engine of economic growth around the world
• D)U.S. companies operating in foreign countries automatically provide the investor with diversification against foreign currency fluctuations

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Definitions:

Prior Period Adjustment

A correction of errors in previously issued financial statements to reflect accurate past financial information.

Retained Earnings

Profits that a company has chosen to reinvest in the business rather than distribute to shareholders as dividends.

Earnings Per Share

A financial ratio representing the portion of a company's profit allocated to each outstanding share of common stock.

Net Income

The total earnings of a company after subtracting all expenses and taxes from total revenue, representing the company's profit.