Question 1

With regard to the OIP,

Accepted Answer

A) the composition of the optimal international portfolio is identical for all investors,regardless of home country. 
B) the OIP has more return and less risk for all investors,regardless of home country. 
C) the composition of the optimal international portfolio is identical for all investors of a particular country,whether or not they hedge their risk with currency futures contracts. 
D) none of the options 
A) the composition of the optimal international portfolio is identical for all investors,regardless of home country. 
B) the OIP has more return and less risk for all investors,regardless of home country. 
C) the composition of the optimal international portfolio is identical for all investors of a particular country,whether or not they hedge their risk with currency futures contracts. 
D) none of the options

Question 2

In May 1995 when the exchange rate was 80 yen per dollar,Japan Life Insurance Company invested ¥800,000,000 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 percent in terms of yen,calculate the dollar amount that the bonds were sold at.

Accepted Answer

A) $10,618,000 
B) $10,720,000 
C) $14,600,000 
D) none of the options 
A) $10,618,000 
B) $10,720,000 
C) $14,600,000 
D) none of the options

Question 3

For those investors who desire international equity exposure,WEBS

Accepted Answer

A) may well serve as a major alternative to such traditional tools as international mutual funds,ADRs and closed-end country funds. 
B) are probably overpriced relative to international mutual funds,ADRs and closed-end country funds. 
C) would provide no international equity exposure since they are pools of bonds. 
D) none of the options 
A) may well serve as a major alternative to such traditional tools as international mutual funds,ADRs and closed-end country funds. 
B) are probably overpriced relative to international mutual funds,ADRs and closed-end country funds. 
C) would provide no international equity exposure since they are pools of bonds. 
D) none of the options

Question 4

Foreign equities as a proportion of U.S.investors' portfolio wealth rose from about 1 percent in the early 1980s to about ________ by 2015.

Accepted Answer

A) 10 percent 
B) 27 percent 
C) 33 percent 
D) 67 percent 
A) 10 percent 
B) 27 percent 
C) 33 percent 
D) 67 percent

Question 5

WEBS are

Accepted Answer

A) World Equity Benchmark Shares. 
B) exchange-traded open-end country funds designed to closely track foreign stock market indexes. 
C) World Equity Benchmark Shares,and may be described as exchange-traded open-end country funds designed to closely track foreign stock market indexes. 
D) none of the options 
A) World Equity Benchmark Shares. 
B) exchange-traded open-end country funds designed to closely track foreign stock market indexes. 
C) World Equity Benchmark Shares,and may be described as exchange-traded open-end country funds designed to closely track foreign stock market indexes. 
D) none of the options

Question 6

Consider a simple exchange risk hedging strategy in which the U.S.dollar based investor sells the expected foreign currency proceeds of a risky investment forward.Although the expected foreign investment proceeds will be converted into U.S.dollars at the known forward exchange rate under this strategy,the unexpected foreign investment proceeds

Accepted Answer

A) will have to be converted into U.S.dollars at the uncertain forward spot exchange rate. 
B) will have to be converted into U.S.dollars at the uncertain future spot exchange rate. 
C) will have to be converted into U.S.dollars at the uncertain swap exchange rate. 
D) none of the options 
A) will have to be converted into U.S.dollars at the uncertain forward spot exchange rate. 
B) will have to be converted into U.S.dollars at the uncertain future spot exchange rate. 
C) will have to be converted into U.S.dollars at the uncertain swap exchange rate. 
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 American stock using 50 percent margin.One year after investment,the stock pays a $1 dividend,and sells for $54 the exchange has changed from €0.625 per dollar to €0.6875 per dollar.The interest on the margin loan is 1 percent per year.The margin loan was denominated in dollars.

Accepted Answer

Our investor's initial endowment is $16,

Question 8

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a $50 American 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 exchange has changed from €0.625 per dollar to €0.6875 per dollar.The interest on the margin loan is 1 percent per year.The margin loan is denominated in dollars.

Accepted Answer

Our investor's initial endowment is $16,

Question 9

The majority of ADRS

Accepted Answer

A) are from such developed countries as Australia and Japan. 
B) are from developing nations. 
C) are from emerging markets. 
D) are from both developing nations and emerging markets. 
A) are from such developed countries as Australia and Japan. 
B) are from developing nations. 
C) are from emerging markets. 
D) are from both developing nations and emerging markets.

Question 10

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 11

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 options 
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 options

Question 12

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.

Question 13

If the investor hedges the exchange rate risk when investing internationally

Accepted Answer

A) the risk-return efficiency is likely to be superior. 
B) the expected return to the U.S.dollar investor is approximately the same whether the investor hedges the exchange rate risk in the investment,or remains unhedged. 
C) to the extent that the investor establishes an effective hedge to eliminate exchange rate uncertainty,the risk will be reduced. 
D) all of the options 
A) the risk-return efficiency is likely to be superior. 
B) the expected return to the U.S.dollar investor is approximately the same whether the investor hedges the exchange rate risk in the investment,or remains unhedged. 
C) to the extent that the investor establishes an effective hedge to eliminate exchange rate uncertainty,the risk will be reduced. 
D) all of the options

Question 14

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) international bond portfolios outperform domestic bond portfolios,and also dominate domestic stock portfolios in terms of risk-return efficiency. 
D) none of the options 
A) international bond portfolios outperform domestic bond portfolios. 
B) international bond portfolios dominate domestic stock portfolios in terms of risk-return efficiency. 
C) international bond portfolios outperform domestic bond portfolios,and also dominate domestic stock portfolios in terms of risk-return efficiency. 
D) none of the options

Question 15

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.
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 16

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 options 
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 options

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.Calculate the standard deviation of expected return of the portfolio in the last question.

Accepted Answer

σ²_p = (W_Aσ_A)² + (W_Bσ_B)² + 2W_Aσ_AW_Bσ_BP_AB σ²_p =(1

Question 18

A closed-end mutual fund

Accepted Answer

A) invests in bonds of a particular maturity,when they mature,the fund closes. 
B) trades on a stock exchange just like a publicly traded corporation. 
C) always trades at Net Asset Value. 
D) all of the options 
A) invests in bonds of a particular maturity,when they mature,the fund closes. 
B) trades on a stock exchange just like a publicly traded corporation. 
C) always trades at Net Asset Value. 
D) all of the options

Question 19

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 can be completely hedged. 
D) they can substantially enhance the efficiency of international bond and stock portfolios. 
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 can be completely hedged. 
D) they can substantially enhance the efficiency of international bond and stock portfolios.

Question 20

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

Accepted Answer

The key is to calculate the cr

With regard to the OIP,

For those investors who desire international equity exposure,WEBS

Foreign equities as a proportion of U.S.investors' portfolio wealth rose from about 1 percent in the early 1980s to about ________ by 2015.

WEBS are

The majority of ADRS

Compared with bond markets

A fully diversified U.S.portfolio is about

If the investor hedges the exchange rate risk when investing internationally

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

Systematic risk

A closed-end mutual fund

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

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 the OIP,

For those investors who desire international equity exposure,WEBS

Foreign equities as a proportion of U.S.investors' portfolio wealth rose from about 1 percent in the early 1980s to about ________ by 2015.

WEBS are

The majority of ADRS

Compared with bond markets

A fully diversified U.S.portfolio is about

If the investor hedges the exchange rate risk when investing internationally

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

Systematic risk

A closed-end mutual fund

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

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