WBCS.LIVE practice question

Which among the following is termed ‘Hot Money’ ?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. FII
  2. FDI
  3. ADR
  4. GDR

Correct answer and explanation

Correct answer: FII

Explanation: ✅ Correct Answer: A) FII 📚 Explanation: Foreign Institutional Investment (FII) is termed 'Hot Money' because it consists of short-term portfolio capital that can move rapidly in and out of a country's financial markets. Investors quickly move these funds to chase higher short-term returns. Unlike Foreign Direct Investment (FDI), FII does not involve long-term physical assets like factories. This makes it highly volatile and sensitive to changes in global interest rates.