When economic conditions of two countries are ____, then a firm would ____ its risk by operating in both countries instead of concentrating just in one.
A) highly correlated; reduce
B) not highly correlated; not reduce
C) not highly correlated; reduce
D) none of the above

Question

Quizplus · Accepted Answer

When economic conditions of two countries are not highly correlated, it means that the economic conditions of one country are not directly influencing the economic conditions of the other country. Thus, a firm would reduce its risk by operating in both countries instead of concentrating just in one. This is because if there is an economic downturn in one country, the firm's business in the other country would not be affected as much, and hence, the firm's overall risk exposure would be reduced.

When Economic Conditions of Two Countries Are ____, Then a Firm