Question 1

Which of the following is a true statement?

Accepted Answer

A) Generally, exchange rate volatility is greater than bond market volatility. 
B) When investing in international bonds, it is essential to control exchange risk to enhance the efficiency of international bond portfolios. 
C) The real-world evidence suggests that investing in Swiss bonds largely amounts to investing in Swiss currency. 
D) All of the above 
A) Generally, exchange rate volatility is greater than bond market volatility. 
B) When investing in international bonds, it is essential to control exchange risk to enhance the efficiency of international bond portfolios. 
C) The real-world evidence suggests that investing in Swiss bonds largely amounts to investing in Swiss currency. 
D) All of the above

Question 2

The record of investing in U.S.-based international mutual funds

Accepted Answer

A) suggests that it is a bad idea-the costs outweigh the benefits for U.S.investors. 
B) without exception, they have higher returns than the U.S.market (as proxied by the S&P 500 index) and slightly lower risk. 
C) suggests that for the most part, they have higher returns than the U.S.market (as proxied by the S&P 500 index) but with slightly higher risk. 
D) none of the above 
A) suggests that it is a bad idea-the costs outweigh the benefits for U.S.investors. 
B) without exception, they have higher returns than the U.S.market (as proxied by the S&P 500 index) and slightly lower risk. 
C) suggests that for the most part, they have higher returns than the U.S.market (as proxied by the S&P 500 index) but with slightly higher risk. 
D) none of the above

Question 3

The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are   Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

Accepted Answer

A) SHP(X) = 0.271, rank = 1, and SHP(Y) = 0.219, rank = 2 
B) SHP(X) = 0.271, rank = 2, and SHP(Y) = 0.219, rank = 1 
C) SHP(X) = 18.84, rank = 1, and SHP(Y) = 23.04, rank = 2 
D) SHP(X) = 23.04, rank = 2, and SHP(Y) = 18.84, rank = 1 
A) SHP(X) = 0.271, rank = 1, and SHP(Y) = 0.219, rank = 2 
B) SHP(X) = 0.271, rank = 2, and SHP(Y) = 0.219, rank = 1 
C) SHP(X) = 18.84, rank = 1, and SHP(Y) = 23.04, rank = 2 
D) SHP(X) = 23.04, rank = 2, and SHP(Y) = 18.84, rank = 1

Question 4

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.

Accepted Answer

The answer of Calculate the euro-based return an Italian investor...

Question 5

Emerald Energy is an oil exploration and production company that trades on the London stock market.Over the past year,the stock has gone from £50 per share to £55,but over the same period,the dollar has depreciated ten percent.Calculate the investor's annual percentage rate of return in terms of the U.S.dollars.

Accepted Answer

A) 3.5% 
B) -.01% 
C) 0% 
D) There is not enough information to compute the investor's annual percentage rate of return in terms of the U.S.dollars. 
A) 3.5% 
B) -.01% 
C) 0% 
D) There is not enough information to compute the investor's annual percentage rate of return in terms of the U.S.dollars.

Question 6

The less correlated the securities in a portfolio,

Accepted Answer

A) the lower the portfolio risk. 
B) the higher the portfolio risk. 
C) the lower the unsystematic risk. 
D) the higher the diversifiable risk. 
A) the lower the portfolio risk. 
B) the higher the portfolio risk. 
C) the lower the unsystematic risk. 
D) the higher the diversifiable risk.

Question 7

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.One year after investment,the stock has no value since the firm is bankrupt.Meanwhile the exchange rate has changed from €.625 per dollar to €.6875 per dollar,and he sold $16,000 forward at the forward rate of €.65 per dollar.

Accepted Answer

Our investor lost al

Question 8

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock on margin with only 40% down and 60% borrowed.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54.The interest on the margin loan is 1% per year.The margin loan is denominated in pounds.
Spot exchange rates at the start and end of the year are shown in the table.

Accepted Answer

The key is to calculate the cross exchan

Question 9

Current research suggests that

Accepted Answer

A) investors can get more diversification with shares of domestic, large-cap stocks. 
B) investors can get more diversification with shares of domestic, small-cap stocks. 
C) investors can get more diversification with shares of foreign, large-cap stocks. 
D) investors can get more diversification with shares of foreign, small-cap stocks. 
A) investors can get more diversification with shares of domestic, large-cap stocks. 
B) investors can get more diversification with shares of domestic, small-cap stocks. 
C) investors can get more diversification with shares of foreign, large-cap stocks. 
D) investors can get more diversification with shares of foreign, small-cap stocks.

Question 10

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%.
-If you think it is on the efficient frontier,why do you think this? EITHER WAY,YOUR ANSWER SHOULD INCLUDE VERIFICATION.

Accepted Answer

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

Question 11

The "Sharpe performance measure" (SHP)is

Accepted Answer

A) a "risk-adjusted" performance measure. 
B) the excess return (above and beyond the risk-free interest rate) per standard deviation risk. 
C) the sensitivity level of a national market to world market movements. 
D) both a) and b) 
A) a "risk-adjusted" performance measure. 
B) the excess return (above and beyond the risk-free interest rate) per standard deviation risk. 
C) the sensitivity level of a national market to world market movements. 
D) both a) and b)

Question 12

Bema Gold is an exploration and production company that trades on the Toronto stock exchange.Assume that when purchased by an international investor the stock's price and the exchange rate were CAD5 and CAD1.0/USD0.72 respectively.At selling time,one year after the purchase date,they were CAD6 and CAD1.0/USD1.0.Calculate the investor's annual percentage rate of return in terms of the U.S.dollars if the investor had sold CAD5,the principal investment amount at the same time that the stock was purchased,forward at the forward exchange rate of CAD1/USD.80.

Accepted Answer

A) -13.60% 
B) 66.67% 
C) 38.89% 
D) 28.00% 
A) -13.60% 
B) 66.67% 
C) 38.89% 
D) 28.00%

Question 13

American Depository Receipt (ADRs)represent foreign stocks

Accepted Answer

A) denominated in U.S.dollars that trade on European stock exchanges. 
B) denominated in U.S.dollars that trade on a U.S.stock exchange. 
C) denominated in a foreign currency that trade on a U.S.stock exchange. 
D) non-registered (bearer) securities. 
A) denominated in U.S.dollars that trade on European stock exchanges. 
B) denominated in U.S.dollars that trade on a U.S.stock exchange. 
C) denominated in a foreign currency that trade on a U.S.stock exchange. 
D) non-registered (bearer) securities.

Question 14

Bema Gold is an exploration and production company that trades on the Toronto stock exchange.Assume that when purchased by an international investor the stock's price and the exchange rate were CAD5 and CAD1.0/USD0.72 respectively.At selling time,one year after the purchase date,they were CAD6 and CAD1.0/USD1.0.Calculate the investor's annual percentage rate of return in terms of the U.S.dollars.

Accepted Answer

A) -13.60% 
B) 66.67% 
C) 38.89% 
D) 28.00% 
A) -13.60% 
B) 66.67% 
C) 38.89% 
D) 28.00%

Question 15

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

Accepted Answer

A) they can substantially enhance the efficiency of international bond portfolios. 
B) they can substantially enhance the efficiency of international stock portfolios. 
C) the risk of investing in foreign stock markets is can be completely hedged. 
D) both a) and b) 
A) they can substantially enhance the efficiency of international bond portfolios. 
B) they can substantially enhance the efficiency of international stock portfolios. 
C) the risk of investing in foreign stock markets is can be completely hedged. 
D) both a) and b)

Question 16

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 £8,800 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 calculate the cr

Question 17

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.If the investor had sold ¥10,000,000 forward at the forward exchange rate of ¥105/$1.00 the dollar rate of return would be:

Accepted Answer

A) -27.27% 
B) 4.32% 
C) 28.00% 
D) -9.09% 
A) -27.27% 
B) 4.32% 
C) 28.00% 
D) -9.09%

Question 18

With regard to the OIP,

Accepted Answer

A) the optimal international portfolio contains investments from every country. 
B) the OIP has more return and less risk for all investors. 
C) the composition of the optimal international portfolio changes according to IRP. 
D) none of the above 
A) the optimal international portfolio contains investments from every country. 
B) the OIP has more return and less risk for all investors. 
C) the composition of the optimal international portfolio changes according to IRP. 
D) none of the above

Question 19

Under the investment dollar premium system,

Accepted Answer

A) U.K.residents received a premium over the prevailing commercial exchange rate when they sold foreign securities and repatriated the funds to the U.K. 
B) U.K.residents had to pay a premium over the prevailing commercial exchange rate when they bought foreign currencies to invest in foreign securities. 
C) none of the above 
A) U.K.residents received a premium over the prevailing commercial exchange rate when they sold foreign securities and repatriated the funds to the U.K. 
B) U.K.residents had to pay a premium over the prevailing commercial exchange rate when they bought foreign currencies to invest in foreign securities. 
C) none of the above

Question 20

You invested $100,000 in British equities.The stock's price was £50 and the exchange rate was £0.50/$1.00.At selling time,one year after purchase,they were £45 and £0.60/$1.00.Assume the investor sold £50,000 forward at the forward exchange rate of £0.55/$1.00.The dollar rate of return would be:

Accepted Answer

A) -27.27% 
B) 1.09% 
C) 28.00% 
D) -9.09% 
A) -27.27% 
B) 1.09% 
C) 28.00% 
D) -9.09%

Which of the following is a true statement?

The record of investing in U.S.-based international mutual funds

The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

The less correlated the securities in a portfolio,

Current research suggests that

The "Sharpe performance measure" (SHP)is

American Depository Receipt (ADRs)represent foreign stocks

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

With regard to the OIP,

Under the investment dollar premium system,

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

Which of the following is a true statement?

The record of investing in U.S.-based international mutual funds

The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

The less correlated the securities in a portfolio,

Current research suggests that

The "Sharpe performance measure" (SHP)is

American Depository Receipt (ADRs)represent foreign stocks

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

With regard to the OIP,

Under the investment dollar premium system,

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