Type of international investment.

 International investment as discussed in chapter 1 is divided into two categories: foreign portfolio investment (FPI) and foreign direct investment (FDI).The distinction between the two rests on the question of control: Does the investor seek an active management role in the firm of merely a return from a passive investment?

   Foreign portfolio investment represent passive holding of securities such as foreign stocks bonds ,or other financial assets , none of which entails active management or control of the securities” issuer by the investor .Modern finance theory suggests that foreign portfolio investments will be motivated by attempts to seek an attractive rate of return as well as the risk reduction that can come from geographically diversifying one’s investment portfolio .Sophisticated money managers in new York ,London, Frankfurt, Tokyo and other financial centers are well aware of the advantages of international design securities ,bring  their total holdings of such securities to $6.6 trillion. Foreign official and private investors purchased $$890 billion worth of us. corporate, federal state, and local securities, raising their total holding of such securities to $8.6 trillion.

   Foreign direct investment (FDI) is acquisition of foreign asset for the purpose of controlling for them .U.S. government statisticians define FDI as” ownership or control of 10 percent or more of an enterprise” voting securities or the equivalent interest in an unincorporated business”. FDI may take many forms, including purchase of existing assets in a foreign country, new investment of property, plant, and equipment, and participation in a joint venture with a local partner. Perhaps the most historically significant FDI in the United States was the $24 that Dutch explore Peter Minuet paid local Native Americans Manhattan Island. The result: New York City, one of the world’s leading financial and commercial centrals.