1. Private investments /or acquisition of property rights/

1. Long-term investments(bonds, shares, patents, copyrights)

1. direct investments

2. portfolio investments.

2. Short-term investments (to be redeemed within a year or less).

2. Government investments/or acquisition of property rights/.

Mainly portfolio investments and short-or long-term loans.

As can be seen from the table the opposition "long-term vs. shortterm" is based on the term of redemption, the opposition "private vs. government" stresses the type of investor while the opposition "portfolio vs. direct" focuses on the nature of the investment itself.

Foreign Portfolio Investments

Investment flows are cash flows associated with purchase and sale of both fixed assets and business interest. In return for cash investors acquire shares or bonds that guarantee their property rights and interest. The price of a share is determined by two key characteristics: risk and return. Each financial decision must be viewed in terms of expected risk, expected return and their combined impact on share price.

In the most basic sense risk can be defined as the chance of financial loss, associated with a given asset. Assets that have greater chances of loss are viewed as more risky than those with lesser chances of loss. In other words, the more certain return from an asset, the less the risk. The return on an investment is measured as the total gain or loss experienced on behalf of the owner over a given period of time.

To minimize risk or to maximize return it is advisable to create a portfolio of assets. A portfolio is a collection or group of assets. The return on a portfolio is calculated as an average of returns on the individual assets from which it is formed. To develop an efficient portfolio of assets that is to minimize the total risk and maximize the total return one must apply the concept of risk diversification. Diversification means combining or adding to the portfolio assets that have a negative (or low positive) correlation. When we expand the portfolio by acquiring new assets (securities) the total portfolio risk declines due to the effects of diversification and approaches the limit. Research has shown that most of the benefits of diversification (in terms of risk reduction) can be gained by forming portfolios containing 15 to 20 randomly selected securities.

Portfolio investments are very common in international finance. They include short-term credit bills (to be redeemed within a year or less), crediting or buying assets in foreign business.

What makes investors lend money abroad? Let us assume that there exist a country A that has abundant financial wealth and unattractive investment opportunities, and a country B with limited financial wealth and abundant opportunities to capital investments. If all investments are made within the national borders, creditors in the country A should agree to the low annual rate of return, say 2%, due to the competition in the financial sector, while deficit of capital in the country B pushed the level of annual rate of return up to say 8% due to the competition for credits. If all barriers to financial flows are eliminated the creditors in the country A and those who demand credits in the country B will have strong incentives to cooperate, So credits will flow to the country B, where annual rate of return is considerably higher. Both countries will mutually benefit: the GDP in the country A will increase due to the possibility to invest its financial resources abroad at higher annual rate, while the availability of more production capital will allow the country B to increase its output. Thus portfolio investments based on higher rates of return abroad are advantageous for the world economy as a whole.

Білет № 9 incoterms

Multimodal (Door-to-Door) transport is wide-spread in shipping now. It involves a transfer of the goods from one mode of transport to another.

Traditionally the ship’s rail was considered the critical point of responsibility, that is when all risks of loss or damage are transferred from one party to the other. Now it is no longer the ship’s rail but the port terminal which may be such a point. In sea port areas the goods are put into containers

The latest edition of Incoterms contains more than a dozen commercial terms. The most important of them are the following:

EXW (Ex works). The seller places the goods at the disposal of the buyer at the factory, mill, warehouse, etc. The buyer bears all charges and risks from the time the goods have been placed at his disposal. He pays the Price, bears the expenses of customs duties and taxes, of freight and insurance. He pays for the documents that he may need (certificate of origin, consular fees, etc.).

FOB (Free on board - named port of shipment). The seller places the goods on board a ship at a port of shipment named in the sales contract. The buyer bears the risk of loss of or damage to the goods from the time the goods have passed the ship's rail. The buyer must charter a ship or reserve the necessary space on board a ship and inform the seller about it. The buyer will bear all the expenses and charges of the freight, insurance, etc.

There are variations of this term. FOA (FOB airport - named airport of departure) is essentially the same as FOB, except that the word 'board' here is not to be taken literally. FOR or FOT (Free on rail or truck) are used when the goods are to be carried by rail. (Truck here means railway wagon.)

CIF (Cost, insurance and freight - named port of destination). The seller arranges the delivery of the goods to the named port of destination and pays the freight charges. He must also provide for marine insurance, but the buyer bears the risk of loss of or damage to the goods from the time the goods have passed the ship's rail in the port of shipment. The seller must also provide all the necessary documents needed for the exportation of the goods (certificate of origin, consular invoice, etc.) and has to bear the cost of all the charges that have to be paid for them.

C&F (C+F, CandF, CFR) is essentially the same as CIF, except that it

does not include insurance.

DCP (Freight or carriage paid to named point of destination). Like C+F, DCP means that the seller pays the freight for the carriage of the goods to the point of destination. The buyer bears the risk from the time the goods have been placed in the custody of the first carrier (not at the ship's rail). DCP is used in all kinds of transport, including ferries, containers and

trucks.

CIP (Freight or carriage and insurance paid to named point of destination). It is the same as DCP, except that the seller must provide for transport and insurance against the risk of loss of or damage to the goods during the carriage EXS (Ex ship - named port of destination). The seller must make the goods available to the buyer on board the ship at the destination named in the contract. The seller bears the full cost and risk of bringing the goods there. The buyer bears the charges for the certificate of origin or consular invoice. He provides for the unloading of the goods and bears all customs duties and charges.

DAF (Delivered at frontier). This term is used when the goods are carried by rail or by road. The seller places the goods at the buyer's disposal at the frontier but before the "customs border.” The buyer bears all the costs and risks from the time the goods have been placed at his disposal (customs duties and charges, certificate of origin, etc.).

DDP (Delivered, duty paid—named place of destination in the country of importation). Ex works means the seller's minimum obligation, DDP— when followed by words naming the buyer's premises-means the seller's maximum obligation. This term is also called FRANCO.

Бшет № 11 INFLATION

Most people associate inflation with price increases on specific goods and services. Inflation is an increase in the average level of prices, not a change in any specific price. We first determine the average price of all output (the average price level) then look for changes in that average. A rise in the average price is referred to as inflation.

The average price level may fall as well as rise. A decline in average prices (a deflation) occurs when price decreases on some goods and services outweigh price increases on all others. Because inflation and deflation are measured in terms of average price levels, it is possible for individual prices to rise or fall continuously without changing the average price level. Nominal income is the amount of money you receive in a particular time period. Real income is the purchasing power of that money, as measured by the quantity of goods and services you can buy. If the amount of money you receive every year is always the same, your nominal income doesn't change — but your real income will rise or fall with price changes.

The most common measure of inflation is the Consumer Price Index (CPI). As its name suggests, the CPI is a mechanism for measuring changes in the average price of consumer goods and services. Inflation Rate is the annual rate of increase in the average price level. Price stability is the absence of significant changes in the average price level; officially defined as a rate of inflation of less than 3 percent.

The most familiar form of inflation is called demand-pull inflation. The name suggests that demand is pulling the price level. If the demand for goods and services rises faster than production, there simply won't be enough goods and services to go around. Cost-push inflation is an increase in the price level initiated by an increase in the cost of production. In 1979, for example, the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of oil. For domestic producers, this action meant a significant increase in the cost of producing goods and services.

Білет № 12 Insurance

Trading has always been a risky business. In old times very often the ships sent on long voyages never returned to port. A rich merchant could become a poor man overnight if his ship laden with cargo was lost at sea. Robbers attacked the caravans and took the merchants’ money and goods. Even today accidents, fire or theft may damage the goods and cause losses for the buyer or seller. In order to avoid these accidents today it is natural to insure the shipment of goods against these risks.

All sensible businessmen now insure goods for the full value. The idea of insurance is to obtain indemnity in case of damage or loss. Insurance is against risk. Insurance is one of the aids to trade, allowing risks to be taken without fear of disastrous loss. Without adequate insurance many enterprises would be too risky to undertake. It is essential that all goods for export be covered by insurance at every stage of transportation.

While the goods are in a warehouse, the insurance covers the risk of fire, burglary, etc. As soon as the goods are in transit they are insured against pilferage, damage by water, breakage or leakage. Other risks may also be covered. The insured is better protected if his goods are insured against all risks /a.a.r./. The goods may be also covered against general or particular average. In the insurance business the word ‘average’ means loss. Particular average refers to risks affecting only one shipper’s consignment. General average refers to a loss incurred by one consignor shared by all the other consignors who use the same vessel on the same voyage.

In a foreign trade transaction the terms of the contract of sale will indicate whether the costs of insurance will be paid by the seller or the buyer. The document that gives the details of what the insured party has to pay or what the insurance company will do if the goods are damaged or lost is called the insurance policy. The insurance policy forms part of the shipping documents. The amount of the insurance charges, insurance premium, will depend on the value of the goods insured and the risk involved.

In the old days when there were yet no insurance companies a merchant who wanted to insure the voyage of a ship would ask various other merchants how much they would pay him if his ship was lost. These other merchants would write their names and the amount accepted under the details of the contract. As for example. Merchant X wanted to insure his ship for five hundred thousand pounds. He went to merchant A who signed for twenty thousand pounds, to merchant В who signed for thirty thousand and so on until he was fully covered. Merchants А, В, C, etc. were called the underwriters, a word which is still used today.

Lloyds of London is an association of underwriters best known for marine insurance. It originated as a group of underwriters who met at a London coffee house owned by Edward Lloyd, who had a reputation for obtaining up-to-date information about shipping movements. Merchants and shipowners met to arrange insurance for ships and their cargoes and in 1680 Lloyds of London was formed. Although marine insurance still accounts for over 40 per cent of Lloyds business, it now covers many different risks. It was the first insurer of cover for burglary, car or planes. As well as insurance, Lloyds provides a comprehensive shipping information service. The Shipping Index records the movements of ships throughout the world, showing where they are, which port they were at last and where they are going to.

Principles of insurance

All insurance is governed by certain principles.

1. A person can only insure an event which will cause a personal or monetary loss.

2. Person taking out insurance must not tell lies or omit to mention relevant facts which might affect the insurer’s decision about whether to issue a policy or what premium to charge.

If a claim is made the insured person should be restored to the same position he or she was in before the event. Nobody can make a profit out of insurance. No one must encourage damage in order to get money.