FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 19: International Diversification

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

U.S. investors

A) can trade derivative securities based on prices in foreign security markets.
B) cannot trade foreign derivative securities.
C) can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange) indexes of U.K. and European stocks.
D) can trade derivative securities based on prices in foreign security markets and can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange) indexes of U.K. and European stocks.
E) None of the options are correct.

F) C) and E)
G) C) and D)

Correct Answer

verified

Show Answer

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

The straightforward generalization of the simple CAPM to international stocks is problematic because

A) inflation-risk perceptions by different investors in different countries will differ as consumption baskets differ.
B) investors in different countries view exchange-rate risk from the perspective of different domestic currencies.
C) taxes, transaction costs, and capital barriers across countries make it difficult for investors to hold a world-index portfolio.
D) All of the options are correct.
E) None of the options are correct.

F) B) and E)
G) A) and E)

Correct Answer

verified

Show Answer

Question 3

Multiple Choice

Review LaterAdd Note

Which country is the leader in GDP per capita?

The manager of Quantitative International Fund uses EAFE as a benchmark. Last year's performance for the fund and the benchmark were as follows: Calculate Quantitative's stock selection return contribution.

You are a U.S. investor who purchased British securities for 2,000 pounds, one year ago when the British pound cost $1.50. No dividends were paid on the British securities in the past year. Your total return based on U.S. dollars was ________ if the value of the securities is now 2,400 pounds and the pound is worth $1.60.

The manager of Quantitative International Fund uses EAFE as a benchmark. Last year's performance for the fund and the benchmark were as follows: Calculate Quantitative's country selection return contribution.

The manager of Quantitative International Fund uses EAFE as a benchmark. Last year's performance for the fund and the benchmark were as follows: Calculate Quantitative's currency selection return contribution.

Exchange-rate risk

Suppose the 1-year risk-free rate of return in the U.S. is 2% and the 1-year risk-free rate of return in Mexico is 8%. The current exchange rate is 1 peso = U.S. $.051. A 1-year future exchange rate of ________ for the peso would make a U.S. investor indifferent between investing in the U.S. security and investing in the Mexican security.

The ________ index is a widely used index of non-U.S. stocks.

Using local currency returns, the S&P 500 has the highest correlation with

"ADRs" stands for ________, and "WEBS" stands for ________.

Assume there is a fixed exchange rate between the Canadian and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U.S. and Canadian stock markets is 1.5%. If you invested 50% of your money in the Canadian stock market and 50% in the U.S. stock market, the expected return on your portfolio would be

The performance of an internationally-diversified portfolio may be affected by

International investing

Assume there is a fixed exchange rate between the Yen and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 21% and 15%, respectively. The expected return and standard deviation on the Japanese stock market are 13% and 12%, respectively. The covariance of returns between the U.S. and Japanese stock market is 2.5%. If you invested 60% of your money in the Japanese stock market and 40% in the U.S. stock market, the expected return on your portfolio would be

As exchange rates change, they

Assume there is a fixed exchange rate between the Canadian and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U.S. and Canadian stock markets is 1.5%. If you invested 50% of your money in the Canadian stock market and 50% in the U.S. stock market, the expected return on your portfolio would be

When an investor adds international stocks to his or her U.S. stock portfolio,

The present exchange rate is C$ = U.S. $0.78. The 1-year future rate is C$ = U.S. $0.76. The yield on a 1-year U.S. bill is 4%. A yield of ________ on a 1-year Canadian bill will make an investor indifferent between investing in the U.S. bill and the Canadian bill.