Question 1

Indirect international investment effectively eliminates problems with:

Accepted Answer

A) taxation by foreign governments. 
B) administration of foreign securities problems. 
C) different cultures and reporting standards. 
D) All of the above 
A) taxation by foreign governments. 
B) administration of foreign securities problems. 
C) different cultures and reporting standards. 
D) All of the above

Question 2

The main advantage of international investment is that foreign markets may be negatively correlated with U.S. and other foreign markets.

Accepted Answer

A) True 
 B)False

Question 3

Russia, China, and Korea have had the biggest increase in market capitalization of all the emerging market countries.

Accepted Answer

A) True 
 B)False

Question 4

The Securities Exchange Commission does not allow mutual funds to own foreign securities in their portfolios.

Accepted Answer

A) True 
 B)False

Question 5

By combining foreign securities with domestic securities, investors increase their portfolio risk because foreign securities are more volatile than United States securities.

Accepted Answer

A) True 
 B)False

Question 6

One of the biggest risks when investing in a foreign security market is the risk of currency exchange fluctuations.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following might be a reason for higher return potential in certain foreign stock markets than in U.S. markets?

Accepted Answer

A) Some small economies have more growth potential because they are starting from a smaller base of GDP 
B) GDP is growing at a faster rate in some countries than in the United States 
C) Many of these foreign economies have older populations that spend a higher percentage of their income than the U.S. population 
D) A and B are valid reasons 
A) Some small economies have more growth potential because they are starting from a smaller base of GDP 
B) GDP is growing at a faster rate in some countries than in the United States 
C) Many of these foreign economies have older populations that spend a higher percentage of their income than the U.S. population 
D) A and B are valid reasons

Question 8

Which of the following reasons might explain why international investing might offer diversification benefits?

Accepted Answer

A) Companies operating in different countries will be affected differently by international events such as crop failures, energy prices, wars, tariffs, etc. 
B) Since the introduction of the euro, European and U.S. markets have a tendency to move in the same direction on an annual basis 
C) World markets are highly correlated to the U.S. market since the U.S. is the engine of economic growth around the world 
D) U.S. companies operating in foreign countries automatically provide the investor with diversification against foreign currency fluctuations 
A) Companies operating in different countries will be affected differently by international events such as crop failures, energy prices, wars, tariffs, etc. 
B) Since the introduction of the euro, European and U.S. markets have a tendency to move in the same direction on an annual basis 
C) World markets are highly correlated to the U.S. market since the U.S. is the engine of economic growth around the world 
D) U.S. companies operating in foreign countries automatically provide the investor with diversification against foreign currency fluctuations

Question 9

The United States equity markets accounted for over 50% of the value of the world equity market at the end of 2009.

Accepted Answer

A) True 
 B)False

Question 10

Assume you invest in the European Equity Market and have a 15% return (quoted in Euros). a) If during this period the euro appreciated by 10% against the dollar, what would be your actual return, translated into United States dollars?
B) What if the euro declined by 10% against the dollar, what would your actual return be, translated into dollars?
C) Recompute the answer based on a 15% decline in the euro against the dollar.

Accepted Answer

A) 26.5%
b) 3.5%
c) 2.25%
Explanation: a

Question 11

a) You invest in the Canadian Equity market and you lose 20% (quoted in Canadian dollars). In the meantime, the United States dollar declines by 5% against the Canadian dollar. What is your percentage gain or loss, translated into dollars? b) If the United States dollar declines by 10% against the Canadian dollar, what would be your percentage gain or loss, translated into dollars?

Accepted Answer

A) 16%
b) 12%
Explanation: a)80% (20% lo

Question 12

At the end of 2005, North America, Asia Pacific, and Europe each accounted for one-third of the world's markets capitalization.

Accepted Answer

A) True 
 B)False

Question 13

An "emerging market" is defined as a market where the country has a small capital market relative to the industrialized world.

Accepted Answer

A) True 
 B)False

Question 14

Due to the lessened risk exposure through effective international portfolio diversification, yield tends to be somewhat lower than on portfolios composed entirely of United States securities.

Accepted Answer

A) True 
 B)False

Question 15

Specialists in international securities associated with financial management firms provide their expertise primarily to:

Accepted Answer

A) wealthy investors. 
B) institutional investors. 
C) managers of mutual funds. 
D) More than one of the above 
A) wealthy investors. 
B) institutional investors. 
C) managers of mutual funds. 
D) More than one of the above

Question 16

One possible way of achieving international diversification in a portfolio is to invest in foreign firms which trade on United States markets or through ADRs.

Accepted Answer

A) True 
 B)False

Question 17

The market capitalization of developed countries from 2005 to 2009:

Accepted Answer

A) decreased by about $1.6 trillion, or approximately 4.5%. 
B) decreased by about $13 trillion because of the currency crisis in Asia during 1987-98. 
C) was relatively flat because of the U.S. stock market downturn of 2000-2002. 
D) increased by about $13 trillion because of the inclusion of China, Korea, and Russia into the list of developed countries. 
A) decreased by about $1.6 trillion, or approximately 4.5%. 
B) decreased by about $13 trillion because of the currency crisis in Asia during 1987-98. 
C) was relatively flat because of the U.S. stock market downturn of 2000-2002. 
D) increased by about $13 trillion because of the inclusion of China, Korea, and Russia into the list of developed countries.

Question 18

The second largest equity market in the world at the end of 2005 was that of:

Accepted Answer

A) Japan. 
B) the United Kingdom. 
C) the United States. 
D) Germany. 
A) Japan. 
B) the United Kingdom. 
C) the United States. 
D) Germany.

Question 19

An investor can earn a higher return in foreign markets than in the U.S. because:

Accepted Answer

A) a number of countries have superior real GDP growth rates compared to the U.S. 
B) of foreign competitiveness in traditional U.S. products such as automobiles and steel. 
C) of the fact that many nations enjoy a higher savings rate than the United States, which leads to capital formation and potential investment opportunity. 
D) All of the above 
A) a number of countries have superior real GDP growth rates compared to the U.S. 
B) of foreign competitiveness in traditional U.S. products such as automobiles and steel. 
C) of the fact that many nations enjoy a higher savings rate than the United States, which leads to capital formation and potential investment opportunity. 
D) All of the above

Question 20

Multinational corporations are firms that:

Accepted Answer

A) are located in one country and invest in another. 
B) operate in one country and export those goods to other countries. 
C) operate in several countries. 
D) have clients in several countries. 
A) are located in one country and invest in another. 
B) operate in one country and export those goods to other countries. 
C) operate in several countries. 
D) have clients in several countries.

Exam 19: International Securities Markets

Indirect international investment effectively eliminates problems with:

The main advantage of international investment is that foreign markets may be negatively correlated with U.S. and other foreign markets.

Russia, China, and Korea have had the biggest increase in market capitalization of all the emerging market countries.

The Securities Exchange Commission does not allow mutual funds to own foreign securities in their portfolios.

By combining foreign securities with domestic securities, investors increase their portfolio risk because foreign securities are more volatile than United States securities.

One of the biggest risks when investing in a foreign security market is the risk of currency exchange fluctuations.

Which of the following might be a reason for higher return potential in certain foreign stock markets than in U.S. markets?

Which of the following reasons might explain why international investing might offer diversification benefits?

The United States equity markets accounted for over 50% of the value of the world equity market at the end of 2009.

At the end of 2005, North America, Asia Pacific, and Europe each accounted for one-third of the world's markets capitalization.

An "emerging market" is defined as a market where the country has a small capital market relative to the industrialized world.

Due to the lessened risk exposure through effective international portfolio diversification, yield tends to be somewhat lower than on portfolios composed entirely of United States securities.

Specialists in international securities associated with financial management firms provide their expertise primarily to:

One possible way of achieving international diversification in a portfolio is to invest in foreign firms which trade on United States markets or through ADRs.

The market capitalization of developed countries from 2005 to 2009:

The second largest equity market in the world at the end of 2005 was that of:

An investor can earn a higher return in foreign markets than in the U.S. because:

Multinational corporations are firms that:

The Investment Setting

Security Markets

Participating in the Market

Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts

Economic Activity

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

Efficient Markets and Anomalies

Behavioral Finance and Technical Analysis

Bond and Fixed-Income Fundamentals

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

A Comprehensive Analysis for Real Estate Investment Decisions

The Makeup of Institutional Investors

Filters