The total operating risk of a foreign investment could be greater than the risk of a similar domestic investment, and yet the investment could have a lower required return than a similar domestic investment.

Question

Quizplus · Accepted Answer

This is because the foreign investment may provide additional benefits such as diversification of currency and political risk, tax benefits, or potential higher growth opportunities. These factors could lead to a lower required return for the foreign investment despite facing higher operating risks.

The Total Operating Risk of a Foreign Investment Could Be