Exam 15: International Portfolio Investment

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 pays a $1 dividend,and sells for $54 the exchange rate has changed from €.625 per dollar to €.6875 per dollar,although he sold $16,000 forward at the forward rate of €.65 per dollar.

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 using 50% margin.One year after investment,the stock pays a £1 dividend,and sells for £54.The interest on the margin loan is 1% per year.The margin loan was denominated in pounds. Spot exchange rates at the start and end of the year are shown in the table. =0 =1 euro \ 1.60 \ 1.60 pound \ 2.00 \ 2.08

The stock market of country A has an expected return of 5%, and a standard deviation of expected return of 8%. The stock market of country B has an expected return of 15% and a standard deviation of expected return of 10%. -Find the Global Minimum Variance Portfolio.

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

Advantages of investing in mutual funds known as country funds include:

If the investor hedges the exchange rate risk when investing internationally

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% in terms of yen,calculate the dollar amount that the bonds were sold at.

Studies show that international stock markets tend to move more closely together when the volatility is higher.This finding suggests that

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% down and 60% borrowed.The stock pays a $0.30 quarterly dividend,and after one year the investment sells for $54 the exchange has changed from €.625 per dollar to €.6875 per dollar.The interest on the margin loan is 1% per year.The margin loan is denominated in dollars.

Assume that you have invested $100,000 in Japanese equities.When purchased the stock's price and the exchange rate were ¥100 and ¥100/$1.00 respectively.At selling time,one year after purchase,they were ¥110 and ¥110/$1.00.The dollar rate of return would be:

The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are Country Mean (\%) SD(\%) 1.57 4.87 1.92 7.64 Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

American Depository Receipt (ADRs)represent foreign stocks

Current research suggests that

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 €.625 per dollar to €.6875 per dollar,and he sold $16,000 forward at the forward rate of €.65 per dollar.

The stock market of country A has an expected return of 8%, and standard deviation of expected return of 5%. The stock market of country B has an expected return of 16% and standard deviation of expected return of 10%. -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? No points for guessing.

Emerald Energy is an oil exploration and production company that trades on the London stock market.Assume that when purchased by an international investor the stock's price and the exchange rate were £5 and £0.64/$1.00 respectively.At selling time,one year after purchase,they were £6 and £0.60/$1.00.If the investor had sold £5,the principal investment amount at the same time that the stock was purchased,forward at the forward exchange rate of £0.60/$1.00,the dollar rate of return would be:

Emerald Energy is an oil exploration and production company that trades on the London stock market.Over the past year,the stock has gone from £50 per share to £55,but over the same period,the dollar has depreciated ten percent.Calculate the investor's annual percentage rate of return in terms of the U.S.dollars.

The majority of ADRS

WEBS are