CFA Level I · CFA Level I Exam · International Trade
In the balance of payments accounts, a purchase of a foreign company's shares by a domestic investor who obtains a small, non-controlling stake is most likely recorded in the:
The transaction is recorded in the financial account. Purchases of foreign securities, including small portfolio equity stakes, are cross-border financial asset transactions. The current account covers trade and income flows, and the capital account covers capital transfers and non-produced non-financial assets.
- Acurrent account
- Bfinancial accountCorrect
- Ccapital account
Explanation
Cross-border purchases of financial assets, including portfolio equity holdings, are recorded in the financial account. The current account covers goods, services, primary and secondary income. The capital account covers capital transfers and non-produced, non-financial assets, so it is wrong here.
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