Use the following statements to answer this question:
I.The fact that Export Development Corporation of Canada (EDC)provides an insurance against political risk lowers the cost of capital for the firm.
II.Foreign direct investments are priced the same way as domestic investments.

Question

Quizplus · Accepted Answer

Statement I is correct because by providing insurance against political risk, EDC reduces the risk associated with foreign investments, which leads to a lower cost of capital. Statement II is incorrect because foreign direct investments often involve additional risks, such as exchange rate risk and political risk, which may affect their pricing differently than domestic investments.

Use the Following Statements to Answer This Question