Question

which of the following is an example of foreign portfolio investment?a. a naturalized u.s. citizen, who was born in mexico and lives in the u.s., buys stock in ford motor company, and ford uses the proceeds to build a new auto plant. b. mazda builds a new auto plant in alabama. c. mazda buys stock in ford motor company, and ford uses the proceeds to build a new auto plant in michigan. d. ford motor company builds a new auto plant in michigan. e. none of the answer choices are an example of foreign portfolio investment.

Answer 1

The correct example of foreign portfolio investment from the given options is (c), where Mazda, a foreign company, buys stock in Ford Motor Company without taking on a managerial role.

Step-by-step explanation:

An example of foreign portfolio investment (FPI) occurs when an investor buys a financial asset, such as stocks or bonds, in a foreign country, but does not take on an active management role in the company. FPI usually represents an ownership of less than ten percent of a company's shares and is pursued with a short-term focus. Given the choices provided:

• (a) represents a domestic investment since it involves investment within the same country, not foreign investment.
• (b) is an example of foreign direct investment (FDI), where a company physically invests in buildings, machines, or other tangible assets in a foreign country.
• (c) is the correct example of FPI, where Mazda, a foreign company, buys stock in Ford Motor Company.
• (d) represents a domestic expansion of the Ford Motor Company and does not involve any foreign investor.
• (e) is incorrect as (c) is an example of FPI.