Describe a transaction/scenario in which a portfolio investment leads to a positive net capital outflows (NCO>0).

Solutions

Expert Solution

Net capital outflow means The Net fund which is invested in international country. Net capital outflows takes two forms: foreign direct investment, and portfolio investment

=>positive net capital outflow means domestic people buy more foreign Assets than Foreigner buy domestic assets. portfolio investment means investment in Equity debt and financial instruments which is diversified the risk.

*Here the Transaction for Net positive capital outflow :-

Suppose indian boy named Ali investment in the USA securities of $20000 Bonds , $40000 equity and $5000 in cash. whereas The USA boy names Alan invested in Indian securities of $300000 bonds , $60000 equity and $6000 in cash. so the positive Net positive capital outflow For USA :-

= total investment in portfolio by domestic people - total investment in portfolio by foreigner

= $ 366000- $ 245000

= $121000

=> so here the capital outflow is positive e.i NCO >0

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Investment is related to the interest rate, while net capital outflow (NCO) is related...

Investment is ________ related to the interest rate, while net capital outflow (NCO) is ________ related to the interest rate. positively; negatively positively; positively negatively; negatively negatively; positively Using the information in the table shown, what is the inflation rate in 2014? Year CPI 2012 121.7 2013 122.8 2014 125.2 2015 126.6 2016 128.4 - 1 % None of the above It cannot be calculated without knowing the base year. 0.9 % As new goods and services become available: the...

A company estimates the following net cash inflows and outflows for a capital investment project that...

A company estimates the following net cash inflows and outflows for a capital investment project that is currently under consideration. year Cash flow 0 (575,000) 1 45,800 2 99,000 3 104,300 4 118,700 5 130,400 6 129,000 7 116,500 8 77,200 9 55,000 10 12,500 Calculate the ARR and NPV of the project.

17. What is Net capital outflow (NCO) what is the equality of Net Exports (NX) and...

17. What is Net capital outflow (NCO) what is the equality of Net Exports (NX) and Net Capital Outflow?

Studies indicate that net exports and net capital outflows tend to be equal. a) Why do...

Studies indicate that net exports and net capital outflows tend to be equal. a) Why do net exports and net capital outflows tend to be equal? How does an increase in the price level change interest rates? b) How does this change in interest rates lead to changes in investment and net exports?

3. Which statement is consistent with negative net exports? a. Net capital outflow is positive,...

3. Which statement is consistent with negative net exports? a. Net capital outflow is positive, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. b. Net capital outflow is positive, so Canadian assets bought by foreigners are greater than foreign assets bought by Canadians. c. Net capital outflow is negative, so foreign assets bought by Canadians are greater than Canadian assets bought by foreigners. d. Net capital outflow is negative, so...

Describe the components of the capital and financial accounts: Direct investment & portfolio investments.

Explain the relationship between net capital outflows and a nation’s trade balance. Explain whether most (not...

Explain the relationship between net capital outflows and a nation’s trade balance. Explain whether most (not Peter Navarro) economists consider a trade deficit to be an issue for the United States and why. Explain what purchasing power parity (PPP) implies about the relationship between nominal exchange rates and price levels. Explain whether PPP accurately portrays the current relationship nominal exchange rates and price levels across nations and why.

1. If a US company has net cash outflows in a foreign currency, which of the...

1. If a US company has net cash outflows in a foreign currency, which of the following is false? (A) The US company would benefit from a drop-in value of the foreign currency. (B) The US company would benefit from an increase in value of the foreign currency. (C) The US company would suffer a loss from a decrease in value of the foreign currency. (D) The appreciation or depreciation of the foreign currency would be irrelevant. ......... 2 A...

You are evaluating a capital project with a Net Investment of $400,000, which includes an increase...

You are evaluating a capital project with a Net Investment of $400,000, which includes an increase in net working capital of $16,000. The project has a life of 12 years with an expected salvage value of $3,000. The project will be depreciated via simplified straight-line depreciation. Revenues are expected to increase by $90,000 per year and operating expenses by $8,000 per year. The firm's marginal tax rate is 40 percent and the cost of capital for this project is 15%....

You are evaluating a capital project with a Net Investment of $800,000, which includes an increase...

You are evaluating a capital project with a Net Investment of $800,000, which includes an increase in net working capital of $8,000. The project has a life of 20 years with an expected salvage value of $100,000. The project will be depreciated via simplified straight-line depreciation. Revenues are expected to increase by $120,000 per year and operating expenses by $14,000 per year. The firm's marginal tax rate is 40 percent and the cost of capital for this project is 12%....

Subjects