Exam 25: International Diversification

You are managing a portfolio that consists of U.S.equities.You have prepared a presentation to use when you discuss the possibility of adding international stocks to your client's portfolio. - Draw a graph that shows the risk of the portfolio relative to the number of stocks held in the portfolio. - When your client arrives,he is surprised at your suggestion that he add international stocks,but is willing to listen to your statements to justify your recommendations.State two reasons why he should consider the international stocks and briefly explain each.

In 2009,the U.S.equity market represented __________ of the world equity market.

WEBS portfolios

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

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

Using the S&P500 portfolio as a proxy of the market portfolio

The major concern that has been raised with respect to the weighting of countries within the EAFE index is

Over the period 2000-2009,most correlations between the U.S.stock index and stock-index portfolios of other countries were

When an investor adds international stocks to her U.S.stock portfolio

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

The present exchange rate is C$ = U.S.$0.78.The one year future rate is C$ = U.S.$0.76.The yield on a 1-year U.S.bill is 4%.A yield of __________ on a 1-year Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

The __________ index is a widely used index of non-U.S.stocks.