Question 1

The performance of an internationally diversified portfolio may be affected by

Accepted Answer

A)  country selection 
B)  currency selection 
C)  stock selection 
D)  all of these 
E)  none of these 
A)  country selection 
B)  currency selection 
C)  stock selection 
D)  all of these 
E)  none of these D

Question 2

Shares of several foreign firms are traded in the U.S.markets in the form of

Accepted Answer

A)  ADRs 
B)  ECUs 
C)  single-country funds 
D)  all of these 
E)  none of these 
A)  ADRs 
B)  ECUs 
C)  single-country funds 
D)  all of these 
E)  none of these A

Question 3

Discuss some of the accounting comparability problems involved in international investing.

Accepted Answer

Some of the major accounting comparability problems in international investing are:
(A)Depreciation.Canada allows firms to use different depreciation methods for financial reporting and tax purposes.The use of dual statements is uncommon in other countries.
(B)Reserves.Canada standards generally allow lower discretionary reserves for possible losses,resulting in higher reported earnings than other countries.
(C)Consolidation.Accounting practices in some countries do not call for all subsidiaries to be consolidated in the corporation's income statement.
(D)Taxes.Taxes may be reported as either paid or accrued.
(E)P/E ratios.There may different practices for calculating the number of shares used to calculate the P/E ratios.For example,firms may use end-of-year shares,year-average shares,or beginning-of-year shares.

Question 4

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 standard deviation of return of your portfolio would be _________.

Accepted Answer

A)  12.53% 
B)  15.21% 
C)  17.50% 
D)  18.75% 
E)  none of these 
A)  12.53% 
B)  15.21% 
C)  17.50% 
D)  18.75% 
E)  none of these

Question 5

Foreign index funds such as WEBS may be more useful as diversification tools than closed-end funds or ADRS because

Accepted Answer

A)  they have similar expense ratios to open-end country funds. 
B)  they are well-diversified and continuously priced. 
C)  they sell at a discount to net asset value. 
D)  they are actively managed. 
E)  all of these. 
A)  they have similar expense ratios to open-end country funds. 
B)  they are well-diversified and continuously priced. 
C)  they sell at a discount to net asset value. 
D)  they are actively managed. 
E)  all of these.

Question 6

Suppose the 1-year risk-free rate of return in Canada is 4% and the 1-year risk-free rate of return in Britain is 7%.The current exchange rate is 1 pound = C $1.65.A 1-year future exchange rate of __________ for the pound would make a Canadian investor indifferent between investing in the Canadian security and investing the British security.

Accepted Answer

A)  1.6037 
B)  2.0411 
C)  1.7500 
D)  2.3369 
E)  none of these 
A)  1.6037 
B)  2.0411 
C)  1.7500 
D)  2.3369 
E)  none of these

Question 7

The present exchange rate is C$= U.S.$1.05.The one year future rate is C$= U.S.$1.04.The yield on a 1-year U.S.bill is 3%.A yield of __________ on a 1-year __________ Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

Accepted Answer

A)  .24% 
B)  .96% 
C)  2.02% 
D)  4.00% 
E)  none of these 
A)  .24% 
B)  .96% 
C)  2.02% 
D)  4.00% 
E)  none of these

Question 8

Discuss performance evaluation of international portfolio managers in terms of potential sources of abnormal returns.

Accepted Answer

The following factors may be measured to

Question 9

__________ refers to the possibility of expropriation of assets,changes in tax policy,and the possibility of restrictions on foreign exchange transactions.

Accepted Answer

A)  default risk 
B)  foreign exchange risk 
C)  market risk 
D)  political risk 
E)  none of these 
A)  default risk 
B)  foreign exchange risk 
C)  market risk 
D)  political risk 
E)  none of these

Question 10

Calculate Da Gama's currency selection return contribution.

Accepted Answer

A)  +20% 
B)  -5% 
C)  +15% 
D)  +5% 
E)  -10%
EAFE: (.30)(10%)+ (.10)(-10%)+ (.60)(30%)= 20% appreciation;Da Gama: (.25)(10%)+ (.25)(-10%)+ (.50)(30%)= 15% appreciation;Loss of 5% relative to EAFE. 
A)  +20% 
B)  -5% 
C)  +15% 
D)  +5% 
E)  -10%
EAFE: (.30)(10%)+ (.10)(-10%)+ (.60)(30%)= 20% appreciation;Da Gama: (.25)(10%)+ (.25)(-10%)+ (.50)(30%)= 15% appreciation;Loss of 5% relative to EAFE.

Question 11

The yield on a 1-year bill in the U.K.is 1.5% and the present exchange rate is 1 pound = C $1.60.If you expect the exchange rate to be 1 pound-C $1.50 a year from now,the return a Canadian investor can expect to earn by investing in U.K.bills is

Accepted Answer

A)  -6.25% 
B)  -4.84% 
C)  0% 
D)  8.27% 
E)  none of these 
A)  -6.25% 
B)  -4.84% 
C)  0% 
D)  8.27% 
E)  none of these

Question 12

In 2007,the Canadian equity market represented __________ of the world equity market.

Accepted Answer

A)  2.7% 
B)  2.9% 
C)  3.5% 
D)  4.7% 
E)  none of these 
A)  2.7% 
B)  2.9% 
C)  3.5% 
D)  4.7% 
E)  none of these

Question 13

You are a Canadian 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 Canadian dollars was __________ if the value of the securities is now 2,400 pounds and the pound is worth $1.60.

Accepted Answer

A)  16.7% 
B)  20.0% 
C)  28.0% 
D)  40.0% 
E)  none of these 
A)  16.7% 
B)  20.0% 
C)  28.0% 
D)  40.0% 
E)  none of these

Question 14

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 _________.

Accepted Answer

A)  12.0% 
B)  12.5% 
C)  13.0% 
D)  15.5% 
E)  none of these 
A)  12.0% 
B)  12.5% 
C)  13.0% 
D)  15.5% 
E)  none of these

Question 15

Of developed countries,the __________ equity market had the highest beta with the U.S.index between 1999 and 2008.

Accepted Answer

A)  Japanese 
B)  German 
C)  U.K. 
D)  Canadian 
E)  none of these 
A)  Japanese 
B)  German 
C)  U.K. 
D)  Canadian 
E)  none of these

Question 16

According to Datastream,the __________ equity market had the highest average return in 2009 in U.S.dollars.

Accepted Answer

A)  Canadian 
B)  Australian 
C)  Russian 
D)  Brazilian 
E)  none of these 
A)  Canadian 
B)  Australian 
C)  Russian 
D)  Brazilian 
E)  none of these

Question 17

In 1998,the largest proportion of market capitalization in the EAFE index was represented by ___________;by 2007 this country's proportion had __________:

Accepted Answer

A)  the United Kingdom,risen 
B)  Germany,risen 
C)  Japan,fallen 
D)  Australia,fallen 
E)  the United States,fallen 
A)  the United Kingdom,risen 
B)  Germany,risen 
C)  Japan,fallen 
D)  Australia,fallen 
E)  the United States,fallen

Question 18

Home bias refers to

Accepted Answer

A)  the tendency to vacation in your home country instead of traveling abroad. 
B)  the tendency to believe that your home country is better than other countries. 
C)  the tendency to give preferential treatment to people from your home country. 
D)  the tendency to overweight investments in your home country. 
E)  none of these 
A)  the tendency to vacation in your home country instead of traveling abroad. 
B)  the tendency to believe that your home country is better than other countries. 
C)  the tendency to give preferential treatment to people from your home country. 
D)  the tendency to overweight investments in your home country. 
E)  none of these

Question 19

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

Accepted Answer

A)  CBOE 
B)  Dow Jones 
C)  EAFE 
D)  all of these 
E)  none of these 
A)  CBOE 
B)  Dow Jones 
C)  EAFE 
D)  all of these 
E)  none of these

Question 20

"ADRs" stands for ___________ and "WEBS" stands for ___________.

Accepted Answer

A)  Additional Dollar Returns;Weekly Equity and Bond Survey 
B)  Additional Daily Returns;World Equity and Bond Survey 
C)  American Dollar Returns;World Equity and Bond Statistics 
D)  American Depository Receipts;World Equity Benchmark Shares 
E)  Adjusted Dollar Returns;Weighted Equity Benchmark Shares 
A)  Additional Dollar Returns;Weekly Equity and Bond Survey 
B)  Additional Daily Returns;World Equity and Bond Survey 
C)  American Dollar Returns;World Equity and Bond Statistics 
D)  American Depository Receipts;World Equity Benchmark Shares 
E)  Adjusted Dollar Returns;Weighted Equity Benchmark Shares

The performance of an internationally diversified portfolio may be affected by

Shares of several foreign firms are traded in the U.S.markets in the form of

Discuss some of the accounting comparability problems involved in international investing.

Foreign index funds such as WEBS may be more useful as diversification tools than closed-end funds or ADRS because

The present exchange rate is C$= U.S.$1.05.The one year future rate is C$= U.S.$1.04.The yield on a 1-year U.S.bill is 3%.A yield of on a 1-year Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

Discuss performance evaluation of international portfolio managers in terms of potential sources of abnormal returns.

__________ refers to the possibility of expropriation of assets,changes in tax policy,and the possibility of restrictions on foreign exchange transactions.

Calculate Da Gama's currency selection return contribution.

The yield on a 1-year bill in the U.K.is 1.5% and the present exchange rate is 1 pound = C $1.60.If you expect the exchange rate to be 1 pound-C $1.50 a year from now,the return a Canadian investor can expect to earn by investing in U.K.bills is

In 2007,the Canadian equity market represented __________ of the world equity market.

Of developed countries,the __________ equity market had the highest beta with the U.S.index between 1999 and 2008.

According to Datastream,the __________ equity market had the highest average return in 2009 in U.S.dollars.

In 1998,the largest proportion of market capitalization in the EAFE index was represented by _;by 2007 this country's proportion had :

Home bias refers to

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

"ADRs" stands for _ and "WEBS" stands for _.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

Filters

Exam 23: International Finance and Investments: Understanding Foreign Markets and Risks

The performance of an internationally diversified portfolio may be affected by

Shares of several foreign firms are traded in the U.S.markets in the form of

Discuss some of the accounting comparability problems involved in international investing.

Foreign index funds such as WEBS may be more useful as diversification tools than closed-end funds or ADRS because

The present exchange rate is C$= U.S.$1.05.The one year future rate is C$= U.S.$1.04.The yield on a 1-year U.S.bill is 3%.A yield of __________ on a 1-year __________ Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

Discuss performance evaluation of international portfolio managers in terms of potential sources of abnormal returns.

__________ refers to the possibility of expropriation of assets,changes in tax policy,and the possibility of restrictions on foreign exchange transactions.

Calculate Da Gama's currency selection return contribution.

The yield on a 1-year bill in the U.K.is 1.5% and the present exchange rate is 1 pound = C $1.60.If you expect the exchange rate to be 1 pound-C $1.50 a year from now,the return a Canadian investor can expect to earn by investing in U.K.bills is

In 2007,the Canadian equity market represented __________ of the world equity market.

Of developed countries,the __________ equity market had the highest beta with the U.S.index between 1999 and 2008.

According to Datastream,the __________ equity market had the highest average return in 2009 in U.S.dollars.

In 1998,the largest proportion of market capitalization in the EAFE index was represented by ___________;by 2007 this country's proportion had __________:

Home bias refers to

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

"ADRs" stands for ___________ and "WEBS" stands for ___________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Bond Prices and Yield

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Performance Evaluation and Active Portfolio Management

Globalization and International Investing

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Mutual Fund: Objectives, Types, NAV, Turnover Ratio, and More

Filters

The present exchange rate is C$= U.S.$1.05.The one year future rate is C$= U.S.$1.04.The yield on a 1-year U.S.bill is 3%.A yield of on a 1-year Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

In 1998,the largest proportion of market capitalization in the EAFE index was represented by _;by 2007 this country's proportion had :

"ADRs" stands for _ and "WEBS" stands for _.