How does the principle of risk diversification

Assignment Help Business Economics

Reference no: EM131166297

We observe financial capital moving in two directions, i.e., funds move from the United Kingdom to the United States at the same time that funds move from the United States to the United Kingdom.

a) Can this be explained by funds seeking the higher rate of return?

b) How does the principle of risk diversification explain this two-way movement of financial capital?

Reference no: EM131166297

Questions Cloud

Supply of shekels in the foreign exchange market : The demand for and supply of shekels in the foreign exchange market is Demand = 30000 – 8000 e Supply = 25000 + 12000 e where the nominal exchange rate is expressed as dollars per shekel. What is the fundamental value of the shekel?

Economy that produces and consumes hot dogs and coca cola : Consider an economy that produces and consumes hot dogs and coca cola. The table below provides the price and quantity data for hot dogs and coca cola for two years, 2005 and 2010.

Which country has higher steady state income per capita : Consider two countries ‘Milkie’ and ‘Cookie’. The two countries have identical per capita production function, y = Ak0.5, with initially the same level of technology, A = 1. Which country has a higher steady state income per capita? Determine the ste..

Standard of living in the long run : Which of the following would be the most helpful in raising Australia’s standard of living in the long run?

How does the principle of risk diversification : We observe financial capital moving in two directions, i.e., funds move from the United Kingdom to the United States at the same time that funds move from the United States to the United Kingdom. Can this be explained by funds seeking the higher rate..

Aggregate production function for an economy : Assume that the aggregate production function for an economy is described by: where 0

Transactions affect the current account balance : How does each of the following transactions affect (1) the current account balance and (2) the capital account balance for Australia? Show that in each case the identity that the trade balance plus net capital inflows equals zero applies.

User Account

All Pages