Question 1

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

Accepted Answer

A) the Japanese stock market is the most sensitive to world market movements. 
B) the U.S.stock market is the least sensitive to world market movements. 
C) the German stock market is the most sensitive to world market movements,and the Swiss stock market is the least sensitive to world market movements. 
D) none of the options 
A) the Japanese stock market is the most sensitive to world market movements. 
B) the U.S.stock market is the least sensitive to world market movements. 
C) the German stock market is the most sensitive to world market movements,and the Swiss stock market is the least sensitive to world market movements. 
D) none of the options C

Question 2

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

Accepted Answer

E (r_p)= 12% = 1/2 × 8% + 1/2 × 16%

Question 3

The stock market of country A has an expected return of 5 percent,and standard deviation of expected return of 8 percent.The stock market of country B has an expected return of 15 percent and standard deviation of expected return of 10 percent.
Find the expected return of a portfolio with half invested in A and half invested in B.

Accepted Answer

E (r_p)= 10% = 1/2 × 5% + 1/2 × 15%

Question 4

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock using 50 percent margin.One year after investment,the stock pays a £1 dividend,and sells for £54.The interest on the margin loan is 1 percent per year.The margin loan was denominated in pounds.
 $$\begin{array} { l r r } 
&T=0&T=1\
\text { Euro } & 1.60 & 1.60 \
\text { Peund } & 200 & 208
\end{array}$$

Accepted Answer

The key is to calcul

Question 5

With regard to the past performance of U.S.-based closed-end country funds

Accepted Answer

A) most investors who can invest directly in foreign markets without incurring excessive costs are advised to do so. 
B) NAVs offer superior diversification opportunities compared to the CECFs. 
C) most investors who can invest directly in foreign markets without incurring excessive costs are advised to do so,and NAVs offer superior diversification opportunities compared to the CECFs. 
D) none of the options 
A) most investors who can invest directly in foreign markets without incurring excessive costs are advised to do so. 
B) NAVs offer superior diversification opportunities compared to the CECFs. 
C) most investors who can invest directly in foreign markets without incurring excessive costs are advised to do so,and NAVs offer superior diversification opportunities compared to the CECFs. 
D) none of the options

Question 6

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

Accepted Answer

A) shows that the movements of the U.S.stock market account for about 20 percent of the fluctuations of the value of U.S.-based stock mutual funds. 
B) shows that the talent of individual portfolio managers accounts for about 90 percent of the fluctuations of the value of U.S.-based stock mutual funds-luck the other ten percent. 
C) shows that the movements of the U.S.stock market account for about 90 percent of the fluctuations of the value of U.S.-based stock mutual funds. 
D) none of the options 
A) shows that the movements of the U.S.stock market account for about 20 percent of the fluctuations of the value of U.S.-based stock mutual funds. 
B) shows that the talent of individual portfolio managers accounts for about 90 percent of the fluctuations of the value of U.S.-based stock mutual funds-luck the other ten percent. 
C) shows that the movements of the U.S.stock market account for about 90 percent of the fluctuations of the value of U.S.-based stock mutual funds. 
D) none of the options

Question 7

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 percent down and 60 percent 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 percent 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.
 $$\begin{array} { l r r } 
&T=0&T=1 \
\text { Euro } & 1.60 & 1.60 \
\text { Peund } & 200 & 208
\end{array}$$

Accepted Answer

The key is to calculate the cross-exchan

Question 8

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.
 $$\begin{array} { l c c c } 
& \text { Spot Rate } \mathrm { T } = 0 & \text { Spot Rate } \mathrm { T } = 1 & \text { Forward Rate } \
\text { Euro } & \$ 1.6 \mathrm { O } & \$ 1.60 & \$ 1.625 \
\text { Pound } & \$ 2.00 & \$ 2.08 & \$ 2.08
\end{array}$$

Accepted Answer

The key is to calcul

Question 9

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 €0.625 per dollar to €0.6875 per dollar,and he sold $16,000 forward at the forward rate of €0.65 per dollar.

Accepted Answer

Our investor lost all of his m

Question 10

Hedge fund advisors typically receive a "2-plus-twenty" management fee

Accepted Answer

A) meaning 2 percent per year of the assets under management,plus performance fee 20 percent of any capital appreciation. 
B) meaning 2 percent per year of the assets under management,plus performance fee 20 basis points. 
C) meaning 2 percent per year of the assets under management,plus performance fee of 20 percent of the excess return. 
D) meaning 2 percent per year of the assets under management,plus performance fee 20 percent of gross return net of the risk-free rate. 
A) meaning 2 percent per year of the assets under management,plus performance fee 20 percent of any capital appreciation. 
B) meaning 2 percent per year of the assets under management,plus performance fee 20 basis points. 
C) meaning 2 percent per year of the assets under management,plus performance fee of 20 percent of the excess return. 
D) meaning 2 percent per year of the assets under management,plus performance fee 20 percent of gross return net of the risk-free rate.

Question 11

You will get more diversification

Accepted Answer

A) across industries than across countries. 
B) across countries than across industries. 
C) across stocks and bonds than across countries. 
D) none of the options 
A) across industries than across countries. 
B) across countries than across industries. 
C) across stocks and bonds than across countries. 
D) none of the options

Question 12

A zero-coupon British bond promises to pay £100,000 in five years.The current exchange rate is $2.00 = £1.00 and inflation is forecast at 3 percent in the U.S.and 2 percent in the U.K.per year for the next five years.The appropriate discount rate for a bond of this risk would be 10 percent if it paid in dollars.What is the appropriate price of the bond?

Accepted Answer

A) £62,092.13 = $124,184.26 
B) £65,196.13 = $130,392.26 
C) £60,000 = $120,000 
D) none of the options 
A) £62,092.13 = $124,184.26 
B) £65,196.13 = $130,392.26 
C) £60,000 = $120,000 
D) none of the options

Question 13

The "world beta" measures the

Accepted Answer

A) unsystematic risk. 
B) sensitivity of returns on a security to world market movements. 
C) risk-adjusted performance. 
D) risk of default and bankruptcy. 
A) unsystematic risk. 
B) sensitivity of returns on a security to world market movements. 
C) risk-adjusted performance. 
D) risk of default and bankruptcy.

Question 14

With regard to the past price performance of closed-end mutual funds

Accepted Answer

A) most funds have traded at both a premium and a discount to NAV. 
B) most funds trade on a stock exchange just like a publicly traded corporation. 
C) suggests the risk-return characteristics can be quite different from those of the securities underlying the fund. 
D) all of the options 
A) most funds have traded at both a premium and a discount to NAV. 
B) most funds trade on a stock exchange just like a publicly traded corporation. 
C) suggests the risk-return characteristics can be quite different from those of the securities underlying the fund. 
D) all of the options

Question 15

Suppose you are a euro-based investor who just sold Microsoft shares that you had bought six months ago.You had invested €10,000 to buy Microsoft shares for $120 per share; the exchange rate was $1.55 per euro.You sold the stock for $135 per share and converted the dollar proceeds into euro at the exchange rate of $1.50 per euro.Compute the rate of return on your investment in euro terms.

Accepted Answer

A) 12.50 percent 
B) 16.25 percent 
C) 28.00 percent 
D) −9.09 percent 
A) 12.50 percent 
B) 16.25 percent 
C) 28.00 percent 
D) −9.09 percent

Question 16

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54.
 $$\begin{array} { l r r } 
&T=0&T=1 \
\text { Euro } & 1.60 & 1.60 \
\text { Peund } & 200 & 208
\end{array}$$

Accepted Answer

The key is to calcul

Question 17

The stock market of country A has an expected return of 8 percent,and standard deviation of expected return of 5 percent.The stock market of country B has an expected return of 16 percent and standard deviation of expected return of 10 percent.
Assume that the correlation of expected return between A and B is negative 1.
Is it reasonable to conclude that your portfolio is on the efficient frontier? If not,then prove your point by finding just one portfolio weighting between A and B that offers more return with less risk.If you think it is on the efficient frontier,why do you think this?

Accepted Answer

With a 60-40 portfolio (both ways)you ge

Question 18

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound.

Accepted Answer

HPR = = @#LAT-DLM& @#LAT-DLM&

Question 19

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.The stock pays a $0.30 quarterly dividend,and after one year the investment sells for $54 the exchange has changed from €0.625 per dollar to €0.6875 per dollar.

Accepted Answer

Our investor can buy

Question 20

With regard to the past price performance of U.S.-based closed-end country funds,

Accepted Answer

A) most CECFs behave more like U.S.securities than their corresponding NAVs. 
B) most CECFs have track records nearly identical to their currency returns. 
C) most CECFs have stock betas of around zero when measured against the S&P 500. 
D) none of the options 
A) most CECFs behave more like U.S.securities than their corresponding NAVs. 
B) most CECFs have track records nearly identical to their currency returns. 
C) most CECFs have stock betas of around zero when measured against the S&P 500. 
D) none of the options

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

With regard to the past performance of U.S.-based closed-end country funds

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

Hedge fund advisors typically receive a "2-plus-twenty" management fee

You will get more diversification

The "world beta" measures the

With regard to the past price performance of closed-end mutual funds

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54. T=0 T=1 Euro 1.60 1.60 Peund 200 208

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound.

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.The stock pays a $0.30 quarterly dividend,and after one year the investment sells for $54 the exchange has changed from €0.625 per dollar to €0.6875 per dollar.

With regard to the past price performance of U.S.-based closed-end country funds,

International Monetary System

Globalization and the Multinational Firm

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

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

With regard to the past performance of U.S.-based closed-end country funds

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

Hedge fund advisors typically receive a "2-plus-twenty" management fee

You will get more diversification

The "world beta" measures the

With regard to the past price performance of closed-end mutual funds

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54. T=0 T=1 Euro 1.60 1.60 Peund 200 208

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British stock.The stock pays a £0.30 quarterly dividend,and after one year the investment sells for £54 the exchange rate has changed from €1.25 per pound to €1.30 per pound.

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American stock.The stock pays a $0.30 quarterly dividend,and after one year the investment sells for $54 the exchange has changed from €0.625 per dollar to €0.6875 per dollar.

With regard to the past price performance of U.S.-based closed-end country funds,

International Monetary System

Globalization and the Multinational Firm

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