An important drawback of a purely domestic capital market is that the ____.

Question

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The cost of capital tends to be higher in a purely domestic capital market due to limited access to investment opportunities and a smaller pool of investors, compared to a global market where investors have access to more diversified portfolios and lower costs of capital. Options A, B, and C are not accurate drawbacks of a purely domestic capital market. Investors in a domestic market can still receive government protection, have access to less risky investments, and benefit from regulatory mechanisms.

An Important Drawback of a Purely Domestic Capital Market Is