Question 1

Cross-correlations among major stock markets and exchange markets are

Accepted Answer

A) relatively high. 
B) relatively low. 
C) essentially perfect. 
D) practically zero. 
A) relatively high. 
B) relatively low. 
C) essentially perfect. 
D) practically zero. B

Question 2

Calculate the dollar-based percentage return an American would have if he bought a British stock at ₤50 per share and sold it one year later at ₤60.The spot exchange rate one year ago was $1.50 = ₤1 and the spot rate prevailing at the end of the year was $1.20 = ₤1.

Accepted Answer

A) 36 percent gain 
B) 4 percent loss 
C) 9.6 percent gain 
D) none of the options 
A) 36 percent gain 
B) 4 percent loss 
C) 9.6 percent gain 
D) none of the options B

Question 3

A firm may cross-list its share to

Accepted Answer

A) establish a broader investor base for its stock. 
B) establish name recognition in foreign capital markets,thus paving the way for the firm to source new equity and debt capital from investors in different markets. 
C) expose the firm's name to a broader investor and consumer groups. 
D) all of the options 
A) establish a broader investor base for its stock. 
B) establish name recognition in foreign capital markets,thus paving the way for the firm to source new equity and debt capital from investors in different markets. 
C) expose the firm's name to a broader investor and consumer groups. 
D) all of the options D

Question 4

Adler and Simon (1986)examined the exposure of a sample of foreign equity and bond index returns to exchange rate changes.They found that

Accepted Answer

A) changes in exchange rates generally explained a smaller portion of the variability of foreign bond indexes than foreign equity indexes. 
B) changes in exchange rates generally explained none of the variability of foreign bond indexes but completely explained the variability in foreign equity indexes. 
C) changes in exchange rates generally explained a larger portion of the variability of foreign equity indexes than foreign bond indexes. 
D) changes in exchange rates generally explained a larger portion of the variability of foreign bond indexes than foreign equity indexes. 
A) changes in exchange rates generally explained a smaller portion of the variability of foreign bond indexes than foreign equity indexes. 
B) changes in exchange rates generally explained none of the variability of foreign bond indexes but completely explained the variability in foreign equity indexes. 
C) changes in exchange rates generally explained a larger portion of the variability of foreign equity indexes than foreign bond indexes. 
D) changes in exchange rates generally explained a larger portion of the variability of foreign bond indexes than foreign equity indexes.

Question 5

ADRs

Accepted Answer

A) frequently represent a multiple of the underlying shares. 
B) can trade on the NYSE. 
C) can trade on the NASDAQ. 
D) all of the options 
A) frequently represent a multiple of the underlying shares. 
B) can trade on the NYSE. 
C) can trade on the NASDAQ. 
D) all of the options

Question 6

A liquid stock market

Accepted Answer

A) is one in which prices reflect all relevant information quickly. 
B) is one in which prices reflect all publicly available information quickly. 
C) is one in which prices reflect price and volume information quickly. 
D) is one in which investors can buy and sell stocks quickly at close to the current quoted prices. 
A) is one in which prices reflect all relevant information quickly. 
B) is one in which prices reflect all publicly available information quickly. 
C) is one in which prices reflect price and volume information quickly. 
D) is one in which investors can buy and sell stocks quickly at close to the current quoted prices.

Question 7

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Accepted Answer

A) by moving to a better county. 
B) by listing their stocks in countries with strong investor protection. 
C) by voluntarily complying with the provisions of the U.S.Sarbanes-Oxley Act. 
D) having a press conference and promising to be nice to their investors. 
A) by moving to a better county. 
B) by listing their stocks in countries with strong investor protection. 
C) by voluntarily complying with the provisions of the U.S.Sarbanes-Oxley Act. 
D) having a press conference and promising to be nice to their investors.

Question 8

Dealers in an OTC market

Accepted Answer

A) stand ready to buy at the bid and sell at the ask price. 
B) set their own bid and ask prices. 
C) do not charge commissions. 
D) all of the options 
A) stand ready to buy at the bid and sell at the ask price. 
B) set their own bid and ask prices. 
C) do not charge commissions. 
D) all of the options

Question 9

Sponsored ADRs

Accepted Answer

A) are created by a bank at the request of the foreign company that issued the underlying security. 
B) can trade on the NASDAQ. 
C) can trade on the NYSE. 
D) all of the options 
A) are created by a bank at the request of the foreign company that issued the underlying security. 
B) can trade on the NASDAQ. 
C) can trade on the NYSE. 
D) all of the options

Question 10

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price,known as the stop price.When the specified price is reached,your stop order becomes a market order.The advantage of a stop order is that

Accepted Answer

A) you don't have to monitor how a stock is performing on a daily basis. 
B) the stop price can be activated by a short-term fluctuation in a stock's price. 
C) once your stop price is reached,your stop order becomes a market order and the price you receive may be much different from the stop price,especially in a fast-moving market where stock prices can change rapidly. 
D) all of the options 
A) you don't have to monitor how a stock is performing on a daily basis. 
B) the stop price can be activated by a short-term fluctuation in a stock's price. 
C) once your stop price is reached,your stop order becomes a market order and the price you receive may be much different from the stop price,especially in a fast-moving market where stock prices can change rapidly. 
D) all of the options

Question 11

In an agency market,the broker takes the client's order through the agent,who matches it with another public order.Names for the agent are

Accepted Answer

A) official broker. 
B) central broker. 
C) a broker's broker. 
D) all of the options 
A) official broker. 
B) central broker. 
C) a broker's broker. 
D) all of the options

Question 12

The OTC market

Accepted Answer

A) does not accept credit-the dealers "only take cash." 
B) is a dealer market. 
C) includes the NASDAQ in the U.S. 
D) is a dealer market and includes the NASDAQ in the U.S. 
A) does not accept credit-the dealers "only take cash." 
B) is a dealer market. 
C) includes the NASDAQ in the U.S. 
D) is a dealer market and includes the NASDAQ in the U.S.

Question 13

In general,if an investment

Accepted Answer

A) has poor liquidity,it should offer investors a liquidity premium. 
B) can be sold fairly quickly at a fair price,it has good liquidity. 
C) has poor liquidity,it should offer investors a liquidity premium.Additionally,if it can be sold fairly quickly at a fair price,it has good liquidity. 
D) none of the options 
A) has poor liquidity,it should offer investors a liquidity premium. 
B) can be sold fairly quickly at a fair price,it has good liquidity. 
C) has poor liquidity,it should offer investors a liquidity premium.Additionally,if it can be sold fairly quickly at a fair price,it has good liquidity. 
D) none of the options

Question 14

The secondary stock markets

Accepted Answer

A) are the markets for "pre-owned" or "used" shares of stock. 
B) provide marketability to shares. 
C) provide price discovery or share valuation. 
D) all of the options 
A) are the markets for "pre-owned" or "used" shares of stock. 
B) provide marketability to shares. 
C) provide price discovery or share valuation. 
D) all of the options

Question 15

In which type of market can liquidity "dry up"?

Accepted Answer

A) A bull market 
B) A bear market 
C) A speculative bubble 
D) A financial panic 
A) A bull market 
B) A bear market 
C) A speculative bubble 
D) A financial panic

Question 16

On the NYSE,limit order prices receive preference in establishing the posted bid and ask prices if they are more favorable than the specialist's.Therefore,

Accepted Answer

A) a specialist must fill a limit order,if possible,from his own account before trading the flow of public orders. 
B) specialists must fill a limit order,if possible,from the flow of public orders before trading for his own account. 
C) a specialist must change his posted bid and ask prices to reflect the available limit orders. 
D) none of the options 
A) a specialist must fill a limit order,if possible,from his own account before trading the flow of public orders. 
B) specialists must fill a limit order,if possible,from the flow of public orders before trading for his own account. 
C) a specialist must change his posted bid and ask prices to reflect the available limit orders. 
D) none of the options

Question 17

A "specialist"

Accepted Answer

A) makes a market by holding an inventory of a particular security,like IBM or Intel. 
B) is a participant on the floor of the exchange,like the NYSE. 
C) has a designated station on the floor of the exchange. 
D) all of the options 
A) makes a market by holding an inventory of a particular security,like IBM or Intel. 
B) is a participant on the floor of the exchange,like the NYSE. 
C) has a designated station on the floor of the exchange. 
D) all of the options

Question 18

The advantages of a market order include the fact that

Accepted Answer

A) you are pretty much guaranteed that your order will be executed. 
B) a market order typically has lower commissions than a limit order. 
C) market orders increase your liquidity. 
D) you are pretty much guaranteed that your order will be executed,and a market order typically has lower commissions than a limit order. 
A) you are pretty much guaranteed that your order will be executed. 
B) a market order typically has lower commissions than a limit order. 
C) market orders increase your liquidity. 
D) you are pretty much guaranteed that your order will be executed,and a market order typically has lower commissions than a limit order.

Question 19

Changes in exchange rates

Accepted Answer

A) explain a larger portion of the variability foreign bond indexes than foreign equity indexes. 
B) do not affect all foreign equity markets equally. 
C) affect dollar-denominated foreign equity returns,but this risk can be hedged. 
D) all of the options 
A) explain a larger portion of the variability foreign bond indexes than foreign equity indexes. 
B) do not affect all foreign equity markets equally. 
C) affect dollar-denominated foreign equity returns,but this risk can be hedged. 
D) all of the options

Question 20

Which investment is likely to be the least liquid?

Accepted Answer

A) A share of publicly traded company trading on the NYSE. 
B) A bond issued by a Fortune 500 company. 
C) A house in a nice part of town. 
D) A share of publicly traded company trading on the NYSE and a bond issued by a Fortune 500 company are equally liquid. 
A) A share of publicly traded company trading on the NYSE. 
B) A bond issued by a Fortune 500 company. 
C) A house in a nice part of town. 
D) A share of publicly traded company trading on the NYSE and a bond issued by a Fortune 500 company are equally liquid.

Exam 13: International Equity Markets

Cross-correlations among major stock markets and exchange markets are

Calculate the dollar-based percentage return an American would have if he bought a British stock at ₤50 per share and sold it one year later at ₤60.The spot exchange rate one year ago was $1.50 = ₤1 and the spot rate prevailing at the end of the year was $1.20 = ₤1.

A firm may cross-list its share to

Adler and Simon (1986)examined the exposure of a sample of foreign equity and bond index returns to exchange rate changes.They found that

ADRs

A liquid stock market

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Dealers in an OTC market

Sponsored ADRs

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price,known as the stop price.When the specified price is reached,your stop order becomes a market order.The advantage of a stop order is that

In an agency market,the broker takes the client's order through the agent,who matches it with another public order.Names for the agent are

The OTC market

In general,if an investment

The secondary stock markets

In which type of market can liquidity "dry up"?

On the NYSE,limit order prices receive preference in establishing the posted bid and ask prices if they are more favorable than the specialist's.Therefore,

A "specialist"

The advantages of a market order include the fact that

Changes in exchange rates

Which investment is likely to be the least liquid?

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

Interest Rate and Currency Swaps

International Portfolio Investment

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

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