Question 1

The developed country with the lowest average U.S.dollar equity-market excess return between 2000 and 2009 is

Accepted Answer

A) Japan 
B) Korea 
C) Austria 
D) Ireland 
E) none of the above 
A) Japan 
B) Korea 
C) Austria 
D) Ireland 
E) none of the above D

Question 2

The __________ equity market had the highest average U.S.dollar excess return between 2000 and 2009.

Accepted Answer

A) Russian 
B) Finnish 
C) Columbian 
D) U.S. 
E) none of the above 
A) Russian 
B) Finnish 
C) Columbian 
D) U.S. 
E) none of the above C

Question 3

The __________ equity market had the lowest average local currency excess return between 2000 and 2009.

Accepted Answer

A) Columbian 
B) Ireland 
C) U.K. 
D) U.S. 
E) none of the above 
A) Columbian 
B) Ireland 
C) U.K. 
D) U.S. 
E) none of the above B

Question 4

-Calculate Quantitative's stock selection return contribution.

Accepted Answer

A) 1.0% 
B) -1.0% 
C) 3.0% 
D) 0.25% 
E) none of the above. 
A) 1.0% 
B) -1.0% 
C) 3.0% 
D) 0.25% 
E) none of the above.

Question 5

The developed country with the lowest average local-currency equity-market excess return between 2000 and 2009 is

Accepted Answer

A) Ireland 
B) Korea 
C) U.K. 
D) U.S. 
E) none of the above 
A) Ireland 
B) Korea 
C) U.K. 
D) U.S. 
E) none of the above

Question 6

The __________ equity market had the highest average U.S.dollar standard deviation of excess returns between 2000 and 2009.

Accepted Answer

A) Turkish 
B) Finnish 
C) Indonesian 
D) U.S. 
E) none of the above 
A) Turkish 
B) Finnish 
C) Indonesian 
D) U.S. 
E) none of the above

Question 7

The __________ equity market had the lowest average U.S.dollar standard deviation of excess returns between 2000 and 2009.

Accepted Answer

A) Turkish 
B) U.S. 
C) Indonesian 
D) U.K. 
E) none of the above 
A) Turkish 
B) U.S. 
C) Indonesian 
D) U.K. 
E) none of the above

Question 8

Discuss some of the factors that might be included in a multifactor model of security returns in an international application of arbitrage pricing theory (APT).

Accepted Answer

Some of the factors that might be consid

Question 9

The EAFE is

Accepted Answer

A) the East Asia Foreign Equity index. 
B) the Economic Advisor's Foreign Estimator index. 
C) the European and Asian Foreign Equity index. 
D) the European, Asian, French Equity index. 
E) the European,Australian,Far East index. 
A) the East Asia Foreign Equity index. 
B) the Economic Advisor's Foreign Estimator index. 
C) the European and Asian Foreign Equity index. 
D) the European, Asian, French Equity index. 
E) the European,Australian,Far East index.

Question 10

Suppose the 1-year risk-free rate of return in the U.S.is 5%.The current exchange rate is 1 pound = U.S.$1.60.The 1-year forward rate is 1 pound = $1.57.What is the minimum yield on a 1-year risk-free security in Britain that would induce a U.S.investor to invest in the British security?

Accepted Answer

A) 2.44% 
B) 2.50% 
C) 7.00% 
D) 7.62% 
E) none of the above 
A) 2.44% 
B) 2.50% 
C) 7.00% 
D) 7.62% 
E) none of the above

Question 11

The __________ equity market had the highest average local currency excess return between 2000 and 2009.

Accepted Answer

A) Columbian 
B) Norwegian 
C) U.K. 
D) U.S. 
E) none of the above 
A) Columbian 
B) Norwegian 
C) U.K. 
D) U.S. 
E) none of the above

Question 12

The emerging market country with the lowest average local-currency equity-market excess return between 2000 and 2009 is

Accepted Answer

A) Taiwan 
B) Columbia 
C) Poland 
D) Turkey 
E) none of the above 
A) Taiwan 
B) Columbia 
C) Poland 
D) Turkey 
E) none of the above

Question 13

The __________ equity market had the highest average local currency standard deviation of excess returns between 2000 and 2009.

Accepted Answer

A) Turkish 
B) Finnish 
C) Indonesian 
D) U.S. 
E) none of the above 
A) Turkish 
B) Finnish 
C) Indonesian 
D) U.S. 
E) none of the above

Question 14

-Calculate Quantitative's country selection return contribution.

Accepted Answer

A) 12.5% 
B) -12.5% 
C) 11.25% 
D) -1.25% 
E) 1.25% 
A) 12.5% 
B) -12.5% 
C) 11.25% 
D) -1.25% 
E) 1.25%

Question 15

International investing

Accepted Answer

A) cannot be measured against a passive benchmark,such as the S&P 500. 
B) can be measured against a widely used index of non-U.S.stocks,the EAFE index (Europe,Australia,Far East). 
C) can be measured against international indexes. 
D) B and C. 
E) none of the above. 
A) cannot be measured against a passive benchmark,such as the S&P 500. 
B) can be measured against a widely used index of non-U.S.stocks,the EAFE index (Europe,Australia,Far East). 
C) can be measured against international indexes. 
D) B and C. 
E) none of the above.

Question 16

Assume there is a fixed exchange rate between the Canadian and U. S. dollar. The expected return and standard deviation of return on the U. S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U. S. and Canadian stock markets is 1.5%.
-If you invested 50% of your money in the Canadian stock market and 50% in the U.S.stock market,the expected return on your portfolio would be __________.

Accepted Answer

A) 12.0% 
B) 12.5% 
C) 13.0% 
D) 15.5% 
E) none of the above 
A) 12.0% 
B) 12.5% 
C) 13.0% 
D) 15.5% 
E) none of the above

Question 17

__________ refers to the possibility of expropriation of assets,changes in tax policy,and the possibility of restrictions on foreign exchange transactions.

Accepted Answer

A) Default risk 
B) Foreign exchange risk 
C) Market risk 
D) Political risk 
E) None of the above 
A) Default risk 
B) Foreign exchange risk 
C) Market risk 
D) Political risk 
E) None of the above

Question 18

__________ are mutual funds that invest in one country only.

Accepted Answer

A) ADRs 
B) ECUs 
C) Single-country funds 
D) all of the above 
E) none of the above 
A) ADRs 
B) ECUs 
C) Single-country funds 
D) all of the above 
E) none of the above

Question 19

U.S.investors

Accepted Answer

A) can trade derivative securities based on prices in foreign security markets. 
B) cannot trade foreign derivative securities. 
C) can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange)indexes of U.K.and European stocks. 
D) A and C. 
E) none of the above. 
A) can trade derivative securities based on prices in foreign security markets. 
B) cannot trade foreign derivative securities. 
C) can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange)indexes of U.K.and European stocks. 
D) A and C. 
E) none of the above.

Question 20

Suppose the 1-year risk-free rate of return in the U.S.is 4% and the 1-year risk-free rate of return in Britain is 7%.The current exchange rate is 1 pound = U.S.$1.65.A 1-year future exchange rate of __________ for the pound would make a U.S.investor indifferent between investing in the U.S.security and investing the British security.

Accepted Answer

A) 1.6037 
B) 2.0411 
C) 1.7500 
D) 2.3369 
E) none of the above 
A) 1.6037 
B) 2.0411 
C) 1.7500 
D) 2.3369 
E) none of the above

Exam 25: International Diversification

The developed country with the lowest average U.S.dollar equity-market excess return between 2000 and 2009 is

The __________ equity market had the highest average U.S.dollar excess return between 2000 and 2009.

The __________ equity market had the lowest average local currency excess return between 2000 and 2009.

-Calculate Quantitative's stock selection return contribution.

The developed country with the lowest average local-currency equity-market excess return between 2000 and 2009 is

The __________ equity market had the highest average U.S.dollar standard deviation of excess returns between 2000 and 2009.

The __________ equity market had the lowest average U.S.dollar standard deviation of excess returns between 2000 and 2009.

Discuss some of the factors that might be included in a multifactor model of security returns in an international application of arbitrage pricing theory (APT).

The EAFE is

Suppose the 1-year risk-free rate of return in the U.S.is 5%.The current exchange rate is 1 pound = U.S.$1.60.The 1-year forward rate is 1 pound = $1.57.What is the minimum yield on a 1-year risk-free security in Britain that would induce a U.S.investor to invest in the British security?

The __________ equity market had the highest average local currency excess return between 2000 and 2009.

The emerging market country with the lowest average local-currency equity-market excess return between 2000 and 2009 is

The __________ equity market had the highest average local currency standard deviation of excess returns between 2000 and 2009.

-Calculate Quantitative's country selection return contribution.

International investing

__________ refers to the possibility of expropriation of assets,changes in tax policy,and the possibility of restrictions on foreign exchange transactions.

__________ are mutual funds that invest in one country only.

U.S.investors

The Investment Environment

Asset Classes and Financial Instruments

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Portfolio Performance Evaluation

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

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