Question

3. Problems and Applications Q3 Indicate whether each of the following actions represents foreign direct investment or foreign portfolio investment. Foreign Direct Investment Foreign Portfolio Investment Buying bonds issued by a foreign government Opening up a factory in a foreign country True or False: An individual investor is more likely to engage in foreign direct investment than a corporation.

Answer 1

Answer: Please refer to Explanation

Step-by-step explanation:

Foreign Direct Investment refers to the establishment of a company in a country by a foreign company or the acquisition of a company by a foreign company. The main thing to note is that the foreign company is involved DIRECTLY in the running of the newly established or acquired company.

Foreign Portfolio Investment however, is investing in another country by means of purchasing shares, bonds or other financial instruments from that country.

Therefore we can then classify the above accordingly,

Buying bonds issued by a foreign government. FOREIGN PORTFOLIO INVESTMENT.

Opening up a factory in a foreign country. FOREIGN DIRECT INVESTMENT.

An individual investor is more likely to engage in foreign direct investment than a corporation. FALSE.

Foreign Direct Investment would simply be too expensive for the average individual to engage in. It is way more likely to be a Corperation.