Exam 11: International Portfolio Investment

The "Sharpe performance measure" (SHP)is:

In abbreviation ADR,letter D stands for:

A US investor bought shares in ABC Inc.on the Frankfurt Stock Exchange 2 years ago for EUR 10,000.The exchange rate at that time was EUR 1.20/USD.Currently,the shares are worth EUR 11,000 and the exchange rate is EUR 0.80/$.Calculate the investor's annual percentage rate of return in terms of the U.S.dollars.

Exchange rate fluctuations contribute to the risk of foreign investment through the following possible channels: (i)- the volatility of the investment due to the volatility of the exchange rate. (ii)- the contribution of the cross-product term. (iii)- its covariance with the local market returns. Which of the following contributes and accounts for most of the volatility?

To evaluate the gains from holding international portfolios over purely domestic portfolios we can use:

The realized dollar returns for a U.S.resident investing in a foreign market will depend on the return in the foreign market as well as on the exchange rate fluctuations between the dollar and the foreign currency. Calculate the variance of the monthly rate of return in dollar terms,if the variance of the foreign market's return (in terms of its own currency)is 1.14,the variance between the U.S.dollar and the foreign currency is 17.64,the covariance is 2.34,and the contribution of the cross-product term is 0.04.(Do not round intermediate calculations)

Talisman Energy is an oil exploration and production company headquartered in Calgary that trades on the New York Stock Exchange. At time of purchase by a Canadian investor the stock's price and the exchange rate were US$10 and US$0.64/C$1.00 respectively. One year later, the investor sold the shares for US$9.50 and the exchange rate was US$0.70/C$1.00. -Calculate the investor's annual percentage rate of return in terms of the U.S.dollars.

Which of the following statements is true about the OIP?

Gains from portfolio diversification are largest when:

Which of the following statements is true?

Emerald Energy is an oil exploration and production company that trades on the London stock market. Assume that when purchased by an international investor the stock's price and the exchange rate were £5 and £0.64/$1.00 respectively. At selling time, one year after the purchase date, they were £6 and £0.60/$1.00. Accessibility: Keyboard Navigation -If the investor had sold £5,the principal investment amount at the same time that the stock was purchased,forward at the forward exchange rate of £0.60/$1.00,the dollar rate of return would be: (Do not round intermediate calculations.)

In May 1995 when the exchange rate was 80 yen per dollar,Japan Life Insurance Company invested ¥800,000,000 in pure-discount U.S.bonds.The investment was liquidated one year later when the exchange rate was 110 yen per dollar.If the rate of return earned on this investment was 46% in terms of yen,calculate the dollar amount that the bonds were sold at:(Round your final answer to nearest thousand dollar)

Investors can use of the following to diversify their portfolios internationally except:

Which of the following is NOT true about WEBS?

A Canadian investor holds the British market portfolio.Calculate the variance of the monthly rate of return in Canadian dollar terms,if the variance of the British market return is 2,the variance between the U.S.dollar and the foreign currency is 20,the covariance is -2.34,and the contribution of the cross-product term is 0.06.

A Canadian investor buys shares in DaimlerChrysler on the New York Stock Exchange when the stock's price and the exchange rate were US$40 and US$0.70/C$ respectively.One year later the investor sells the shares for US$41 and the exchange rate is US$0.80/$. a)Calculate the investor's annual percentage rate of return in terms of the U.S.dollars. b)Calculate the investor's annual percentage rate of return in Canadian dollars.

A US investor bought shares in ABC Inc.on the Frankfurt Stock Exchange 2 years ago for EUR 10,000.The exchange rate at that time was EUR 1.20/USD.Currently,the shares are worth EUR 11,000 and the exchange rate is EUR 0.80/$.The investor had sold EUR 10,000 (the principal investment amount at the same time that the stock was purchased)forward at the forward exchange rate of EUR 1.15/$.What is the dollar rate of return? Assume that the unhedged portion of the investment is exchanged at the current exchange rate.

Which of the following is not a potential explanation for the home bias in portfolio holdings?

Emerald Energy is an oil exploration and production company that trades on the London stock market. Assume that when purchased by an international investor the stock's price and the exchange rate were £5 and £0.64/$1.00 respectively. At selling time, one year after the purchase date, they were £6 and £0.60/$1.00. Accessibility: Keyboard Navigation -Calculate the investor's annual percentage rate of return in terms of the U.S.dollars. (Do not round intermediate calculations.)

In the context of investments in securities (stocks and bonds),portfolio risk diversification refers to: