Question

Which of the following is an example of U.S. foreign portfolio investment?

1) Investing in a U.S. company's stocks and bonds
2) Buying real estate in the U.S.
3) Importing goods from the U.S.
4) Exporting goods to the U.S.

Answer 1

U.S. foreign portfolio investment is exemplified by purchasing foreign government bonds or depositing funds in foreign banks, characterized by financial investment without managerial control and often having a short-term outlook.

Step-by-step explanation:

An example of U.S. foreign portfolio investment is a U.S. financial investor purchasing bonds issued by a foreign government, such as U.K. government bonds, or depositing money in a foreign bank. Such investments are characterized by the investor supplying domestic currency and demanding foreign currency without assuming any management responsibility in the company they invest in.

In contrast to foreign direct investment (FDI), portfolio investment does not involve purchasing a significant stake (>10%) in a company or taking on managerial roles. Instead, it often has a short-term focus and can be quickly liquidated through simple transactions like a phone call or a few clicks.