Question

When individual investors become aware of overseas investment opportunities and are willing to diversify their portfolios internationally:

a. They trade one market imperfection, information asymmetry, for another, exchange rate risk.
b. They benefit from an expanded opportunity set.
c. They should not bother to read or to understand the prospectus, since its probably written in a foreign language
d. They should invest only in dollars or euros.

Answer 1

The correct answer is B

Step-by-step explanation:

Overseas investment states that the Indian companies or person could invest directly or straight away their funds into the foreign country in subject to the Laws of Indian Taxation.

It could be done with the Hedge funds or where the companies have the direct interest on the investments.

And if the individual investor is aware of the opportunities of the overseas investment, then they are willing to diversify as they will be benefited from the expanded set of opportunity.

Answer 2

b. They benefit from an expanded opportunity set.

Step-by-step explanation:

Recently, financial market have become highly integrated, which help investor to diversify their portfolios internationally.

International portfolio help the investor to focus on foreign market´s securities to invest, it add exposure of portfolio to the growing and developed market. As firm is going global to expand opportunity set, so that it can earn more benefit out of diversified market, similarly, investor are going global by diversifying their investment opportunity.