prashantsahni

The country of Galdavia recently moved from being classified as an emerging market to a developed market. Its return over the last year was 40% in local currency terms and 30% in dollar terms. The country of Tinia is still classified as an emerging market. Its return over the last year was 42% in local currency terms and 28% in dollar terms. Which of the following statements regarding Galdavia and Tinia is CORRECT?

A) Galdavia will more easily raise capital due to its higher returns in U.S. dollars.

B) Galdavia will more easily raise capital due to its classification as a developed market.

C) Tinia will more easily raise capital due to its higher returns in local currency.

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When a country moves from being classified as an emerging market to a developed market, the country should raise capital more easily because developed countries’ stocks have more liquidity. With more capital access, Galdavia’s growth should increase.