An investment in which of the following represents an direct foreign investment?
I. global mutual fund
II. U.S. multinational firm
III. ADR
IV. foreign security

Question

Quizplus · Accepted Answer

Direct foreign investment involves investing in foreign companies and assets. As a result, a U.S. multinational firm investing in a foreign company represents direct foreign investment. Similarly, investing in foreign securities (such as stocks, bonds) also represents direct foreign investment. Hence, options II and IV are correct. A global mutual fund represents an indirect investment in foreign companies/assets as the fund invests in a portfolio of companies from different countries. An ADR (American Depository Receipt) represents a certificate issued by a U.S. bank that represents a specified number of shares of a foreign stock. It is also an indirect investment and not a direct foreign investment. Therefore, options I and III are not correct.

An Investment in Which of the Following Represents an Direct