Question 1

A fully diversified U.S.portfolio is about

Accepted Answer

A) 75 percent as risky as a typical individual stock. 
B) 27 percent as risky as a typical individual stock. 
C) 12 percent as risky as a typical individual stock. 
D) Half as risky as a fully diversified international portfolio. 
A) 75 percent as risky as a typical individual stock. 
B) 27 percent as risky as a typical individual stock. 
C) 12 percent as risky as a typical individual stock. 
D) Half as risky as a fully diversified international portfolio. B

Question 2

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

Accepted Answer

A) the time-honored adage "Don't put all your eggs in one basket". 
B) investors' ability to reduce portfolio risk by holding securities that are less than perfectly positively correlated. 
C) the fact that the less correlated the securities in a portfolio, the lower the portfolio risk. 
D) all of the above 
A) the time-honored adage "Don't put all your eggs in one basket". 
B) investors' ability to reduce portfolio risk by holding securities that are less than perfectly positively correlated. 
C) the fact that the less correlated the securities in a portfolio, the lower the portfolio risk. 
D) all of the above D

Question 3

Compared with bond markets

Accepted Answer

A) the risk of investing in foreign stock markets is, to a lesser degree, attributable to exchange rate uncertainty. 
B) the risk of investing in foreign stock markets is, to a much greater degree, attributable to exchange rate uncertainty. 
C) exchange risk is lower than default risk and interest rate risk. 
D) all of the above 
A) the risk of investing in foreign stock markets is, to a lesser degree, attributable to exchange rate uncertainty. 
B) the risk of investing in foreign stock markets is, to a much greater degree, attributable to exchange rate uncertainty. 
C) exchange risk is lower than default risk and interest rate risk. 
D) all of the above A

Question 4

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.

Accepted Answer

A) 21.16 
B) 23.50 
C) 26.89 
D) 28.65 
A) 21.16 
B) 23.50 
C) 26.89 
D) 28.65

Question 5

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock using 50% margin.One year after investment,the stock pays a $1 dividend,and sells for $54 the exchange has changed from €.625 per dollar to €.6875 per dollar.The interest on the margin loan is 1% per year.The margin loan was denominated in dollars.

Accepted Answer

Our investor's initial endowment is $16,

Question 6

The stock market of country A has an expected return of 5%, and a standard deviation of expected return of 8%. The stock market of country B has an expected return of 15% and a standard deviation of expected return of 10%.
-Find the Global Minimum Variance Portfolio.

Accepted Answer

The answer of The stock market of country A has...

Question 7

Systematic risk is

Accepted Answer

A) nondiversifiable risk. 
B) the risk that remains even after investors fully diversify their portfolio holdings. 
C) both a) and b) 
D) none of the above 
A) nondiversifiable risk. 
B) the risk that remains even after investors fully diversify their portfolio holdings. 
C) both a) and b) 
D) none of the above

Question 8

Advantages of investing in mutual funds known as country funds include:

Accepted Answer

A) Speculation in a single foreign market at minimum cost. 
B) Using them as building blocks of a personal international portfolio. 
C) Diversification into emerging markets that are otherwise practically inaccessible. 
D) All of the above 
A) Speculation in a single foreign market at minimum cost. 
B) Using them as building blocks of a personal international portfolio. 
C) Diversification into emerging markets that are otherwise practically inaccessible. 
D) All of the above

Question 9

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.One year after investment,the stock pays a £1 dividend,and sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound,although he sold £10,000 forward at the forward rate of €1.28 per pound.
Spot exchange rates at the start and end of the year are shown in the table.

Accepted Answer

The key is to calcul

Question 10

Recent studies show that when investors control exchange risk by using currency forward contracts to hedge

Accepted Answer

A) international bond portfolios outperform domestic bond portfolios. 
B) international bond portfolios dominate domestic stock portfolios in terms of risk-return efficiency. 
C) both a) and b) 
D) none of the above 
A) international bond portfolios outperform domestic bond portfolios. 
B) international bond portfolios dominate domestic stock portfolios in terms of risk-return efficiency. 
C) both a) and b) 
D) none of the above

Question 11

Systematic risk

Accepted Answer

A) is also known as non-diversifiable risk. 
B) is market risk. 
C) refers to the risk that remains even after investors fully diversify their portfolio holdings. 
D) all of the above 
A) is also known as non-diversifiable risk. 
B) is market risk. 
C) refers to the risk that remains even after investors fully diversify their portfolio holdings. 
D) all of the above

Question 12

Regarding the mechanics of international portfolio diversification,which statement is true?

Accepted Answer

A) Security returns are much less correlated across countries than within a county. 
B) Security returns are more correlated across countries than within a county. 
C) Security returns are about as equally correlated across countries as they are within a county. 
D) None of the above 
A) Security returns are much less correlated across countries than within a county. 
B) Security returns are more correlated across countries than within a county. 
C) Security returns are about as equally correlated across countries as they are within a county. 
D) None of the above

Question 13

Assume that you have invested $100,000 in Japanese equities.When purchased the stock's price and the exchange rate were ¥100 and ¥100/$1.00 respectively.At selling time,one year after purchase,they were ¥110 and ¥110/$1.00.The dollar rate of return would be:

Accepted Answer

A) 0% 
B) 4.32% 
C) 28.00% 
D) -9.09% 
A) 0% 
B) 4.32% 
C) 28.00% 
D) -9.09%

Question 14

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.One year after investment,the stock pays a £1 dividend,and sells for £54.Spot exchange rates at the start and end of the year are shown in the table.

Accepted Answer

The key is to calcul

Question 15

The "Sharpe performance measure" (SHP)is

Accepted Answer

A)    
B)    
C)    
D) none of the above 
A)    
B)    
C)    
D) none of the above

Question 16

The stock market of country A has an expected return of 8%, and standard deviation of expected return of 5%. The stock market of country B has an expected return of 16% and standard deviation of expected return of 10%.
-Find the expected return of a portfolio with half invested in A and half invested in B.

Accepted Answer

The answer of The stock market of country A has...

Question 17

A zero-coupon Japanese bond promises to pay ¥1,200,000 in five years.The current exchange rate is $1.00 = ¥100 and inflation is forecast at 3% in the U.S.and 2% in Japan per year for the next five years.The appropriate discount rate for a bond of this risk would be 10% if it paid in dollars.What is the appropriate price of the bond?

Accepted Answer

A) ¥782,353.60 = $7,823.54 
B) ¥745,105.60 = $7,451.06 
C) none of the above 
A) ¥782,353.60 = $7,823.54 
B) ¥745,105.60 = $7,451.06 
C) none of the above

Question 18

U.S.-based mutual funds known as country funds.

Accepted Answer

A) Invest in the government securities of different sovereign governments, giving risk-free portfolios effective exchange rate diversification. 
B) Invests exclusively in stocks of a single country. 
C) Invests exclusively in government securities of a single country. 
D) None of the above 
A) Invest in the government securities of different sovereign governments, giving risk-free portfolios effective exchange rate diversification. 
B) Invests exclusively in stocks of a single country. 
C) Invests exclusively in government securities of a single country. 
D) None of the above

Question 19

The record of investing in U.S.-based MNCs

Accepted Answer

A) shows that the share prices of U.S.-based MNCs behave much like those of domestic firms, without providing effective international diversification. 
B) shows that the share prices of U.S.-based MNCs behave much differently than those of domestic firms, providing effective international diversification. 
C) shows that the share prices of U.S.-based MNCs behave much like the currency returns of their foreign markets. 
D) none of the above 
A) shows that the share prices of U.S.-based MNCs behave much like those of domestic firms, without providing effective international diversification. 
B) shows that the share prices of U.S.-based MNCs behave much differently than those of domestic firms, providing effective international diversification. 
C) shows that the share prices of U.S.-based MNCs behave much like the currency returns of their foreign markets. 
D) none of the above

Question 20

The stock market of country A has an expected return of 5%, and standard deviation of expected return of 8%. The stock market of country B has an expected return of 15% and standard deviation of expected return of 10%.
-Assume that the correlation of expected return between A and B is negative 1.Calculate the standard deviation of expected return of the portfolio in the last question.

Accepted Answer

The answer of The stock market of country A has...

A fully diversified U.S.portfolio is about

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

Compared with bond markets

The stock market of country A has an expected return of 5%, and a standard deviation of expected return of 8%. The stock market of country B has an expected return of 15% and a standard deviation of expected return of 10%. -Find the Global Minimum Variance Portfolio.

Systematic risk is

Advantages of investing in mutual funds known as country funds include:

Recent studies show that when investors control exchange risk by using currency forward contracts to hedge

Systematic risk

Regarding the mechanics of international portfolio diversification,which statement is true?

Assume that you have invested $100,000 in Japanese equities.When purchased the stock's price and the exchange rate were ¥100 and ¥100/$1.00 respectively.At selling time,one year after purchase,they were ¥110 and ¥110/$1.00.The dollar rate of return would be:

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.One year after investment,the stock pays a £1 dividend,and sells for £54.Spot exchange rates at the start and end of the year are shown in the table.

The "Sharpe performance measure" (SHP)is

U.S.-based mutual funds known as country funds.

The record of investing in U.S.-based MNCs

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 15: International Portfolio Investment

A fully diversified U.S.portfolio is about

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

Compared with bond markets

The stock market of country A has an expected return of 5%, and a standard deviation of expected return of 8%. The stock market of country B has an expected return of 15% and a standard deviation of expected return of 10%. -Find the Global Minimum Variance Portfolio.

Systematic risk is

Advantages of investing in mutual funds known as country funds include:

Recent studies show that when investors control exchange risk by using currency forward contracts to hedge

Systematic risk

Regarding the mechanics of international portfolio diversification,which statement is true?

Assume that you have invested $100,000 in Japanese equities.When purchased the stock's price and the exchange rate were ¥100 and ¥100/$1.00 respectively.At selling time,one year after purchase,they were ¥110 and ¥110/$1.00.The dollar rate of return would be:

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.One year after investment,the stock pays a £1 dividend,and sells for £54.Spot exchange rates at the start and end of the year are shown in the table.

The "Sharpe performance measure" (SHP)is

U.S.-based mutual funds known as country funds.

The record of investing in U.S.-based MNCs

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters