If a Nation Diversifies Its Capital Portfolio So That It

question 88

Multiple Choice

If a nation diversifies its capital portfolio so that it owns some foreign capital and foreigners own a percentage of the nation's capital, then:

• A) domestic returns will be lower.
• B) domestic returns will be higher.
• C) domestic returns will equal international returns.
• D) the nation will earn an average return, and its consumption will remain stable in the event of output shocks.

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Definitions:

Specific Asset

An identifiable and tangible asset owned by a company, often critical to its operations or unique in nature, usually with specific investment criteria.

Swap Contract

A swap contract is a financial derivative agreement between two parties to exchange sequences of cash flows for a set period of time.

Specified Cash Flows

Designated or pre-determined amounts of cash inflow or outflow expected to occur on specific dates in the future.

Specified Intervals

Predetermined or agreed periods at which certain actions are taken or conditions are reviewed, often used in finance with payments or interest calculations.