Question

Indicate whether each of the following actions represents foreign direct investment or foreign portfolio investment. Foreign Direct Investment Foreign Portfolio Investment Opening a retail store in a foreign country Buying bonds issued by a foreign government True or False: An individual investor is more likely to engage in foreign direct investment than a corporation. True False

Answer 1

Answer:

Foreign Direct Investment - Opening a retail store in a foreign country

Foreign Portfolio Investment  - Buying bonds issued by a foreign government

false

Explanation:

Foreign direct investment can be described as when a firm or an individual in one country makes an investment in a business interest in another country.

Foreign direct investment usually takes two form :

1. the investor sets up a business in the foreign country
2. the investor acquires foreign assets in the foreign country.

An example is when a US firm establishes a new business in another country.

foreign direct investment usually requires a lot of active management. As a result, an individual might not have the capacity or resources to effectively manage an FDI when compared with a corporation

Foreign Portfolio Investment is when an investor in one country purchases financial assets in another country.

For example, a resident of the US purchases bonds in Ghana