Exam 11: International Banking and Money Market

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%,t he Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

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

Calculate the investor's annual percentage rate of return in terms of the U.S.dollars.

If the investor had sold US$5,half of the principal investment amount at the same time that the stock was purchased,forward at the forward exchange rate of US$0.64/$1.00,the dollar rate of return would be:

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

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

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

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.

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.

The "Sharpe performance measure" (SHP)is:

Which of the following is NOT true about WEBS

Calculate the investor's annual percentage rate of return in Canadian dollars.

Calculate the exchange rate return from a Canadian perspective.

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 three 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?

In May 2003 when the exchange rate was Yen 110/$,Nissan Motor Company invested ¥1,100,000,000 in pure-discount U.S.bonds and liquidated the investment one year later when the exchange rate was Yen 105/$.The Yen rate of return earned on this investment was 10%. a)Calculate the dollar amount that the bonds were sold at. b)Calculate the dollar rate of return of this investment.

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.

Gains from portfolio diversification are largest when

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.

Which of the following statements is true?