Consider the following: A foreign automobile company builds a manufacturing plant in Tennessee and European investors buy U.S. Treasury Bonds.
A) Both activities would be considered direct investment.
B) Both activities would be considered portfolio investment.
C) The auto manufacturer in engaging in portfolio investment, and the European investors are engaged in direct investing.
D) The auto manufacturer in engaging in direct investment, and the European investors are engaged in portfolio investing.

Question

Quizplus · Accepted Answer

The foreign automobile company building a manufacturing plant in Tennessee would be considered a direct investment, as it involves a foreign entity establishing a physical presence and actively managing operations in the United States. On the other hand, European investors buying U.S. Treasury Bonds would be considered portfolio investment, as it involves passive investment in financial instruments without a direct management role in a U.S. company or operation. Therefore, the correct answer is D, where the automobile manufacturer is engaging in direct investment and the European investors are engaged in portfolio investment.

Consider the Following: a Foreign Automobile Company Builds a Manufacturing