Question 1

In the context of investments in securities (stocks and bonds), portfolio risk diversification refers to

Accepted Answer

A) the time-honored adage "Don't put all your eggs in one basket". 
B) investors' ability to reduce portfolio risk by holding securities that are less than perfectly positively correlated. 
C) the fact that the less correlated the securities in a portfolio, the lower the portfolio risk. 
D) all of the above 
A) the time-honored adage "Don't put all your eggs in one basket". 
B) investors' ability to reduce portfolio risk by holding securities that are less than perfectly positively correlated. 
C) the fact that the less correlated the securities in a portfolio, the lower the portfolio risk. 
D) all of the above

Question 2

American Depository Receipt (ADRs) represent foreign stocks

Accepted Answer

A) denominated in U.S. dollars that trade on European stock exchanges. 
B) denominated in U.S. dollars that trade on a U.S. stock exchange. 
C) denominated in a foreign currency that trade on a U.S. stock exchange. 
D) non-registered (bearer) securities. 
A) denominated in U.S. dollars that trade on European stock exchanges. 
B) denominated in U.S. dollars that trade on a U.S. stock exchange. 
C) denominated in a foreign currency that trade on a U.S. stock exchange. 
D) non-registered (bearer) securities.

Question 3

You will get more diversification

Accepted Answer

A) across industries than across countries. 
B) across countries than across industries. 
C) across stocks and bonds than across countries. 
D) none of the above 
A) across industries than across countries. 
B) across countries than across industries. 
C) across stocks and bonds than across countries. 
D) none of the above

Question 4

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.

Accepted Answer

The answer of Calculate the euro-based return an Italian investor...

Question 5

With regard to the past performance of U.S.-based closed end country funds

Accepted Answer

A) most investors who can invest directly in foreign markets without incurring excessive costs are advised to do so. 
B) NAVs offer superior diversification opportunities compared to the CECFs. 
C) both a and b 
D) none of the above 
A) most investors who can invest directly in foreign markets without incurring excessive costs are advised to do so. 
B) NAVs offer superior diversification opportunities compared to the CECFs. 
C) both a and b 
D) none of the above

Question 6

Calculate the euro-based return an Italian investor would have realized by investing €10,000 into a £50 British 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 interest on the margin loan is 1% per year. The margin loan is denominated in pounds.
Spot exchange rates at the start and end of the year are shown in the table.

Accepted Answer

@#IMG-DLM&_TB2454_00 The key is to calculate the c

Question 7

In the graph at right, X and Y represent

Accepted Answer

A) U.S. stocks and international stocks. 
B) international stocks and U.S. stocks. 
C) systematic risk and unsystematic risk. 
D) none of the above 
A) U.S. stocks and international stocks. 
B) international stocks and U.S. stocks. 
C) systematic risk and unsystematic risk. 
D) none of the above

Question 8

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.

Accepted Answer

The answer of Calculate the euro-based return an Italian investor...

Question 9

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.

Accepted Answer

A) 3.5% 
B) -.01% 
C) 0% 
D) There is not enough information to compute the investor's annual percentage rate of return in terms of the U.S. dollars. 
A) 3.5% 
B) -.01% 
C) 0% 
D) There is not enough information to compute the investor's annual percentage rate of return in terms of the U.S. dollars.

Question 10

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 is can be completely hedged. 
D) both a and b 
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 is can be completely hedged. 
D) both a and b

Question 11

The record of investing in U.S.-based MNCs

Accepted Answer

A) shows that the share prices of U.S.-based MNCs behave much like those of domestic firms, without providing effective international diversification. 
B) shows that the share prices of U.S.-based MNCs behave much differently than those of domestic firms, providing effective international diversification. 
C) shows that the share prices of U.S.-based MNCs behave much like the currency returns of their foreign markets. 
D) none of the above 
A) shows that the share prices of U.S.-based MNCs behave much like those of domestic firms, without providing effective international diversification. 
B) shows that the share prices of U.S.-based MNCs behave much differently than those of domestic firms, providing effective international diversification. 
C) shows that the share prices of U.S.-based MNCs behave much like the currency returns of their foreign markets. 
D) none of the above

Question 12

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, regardless of home country, if they hedge their risk with currency futures contracts. 
D) none of the above 
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, regardless of home country, if they hedge their risk with currency futures contracts. 
D) none of the above

Question 13

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

Accepted Answer

A) the Japanese stock market is the most sensitive to world market movements. 
B) the U.S. stock market is the least sensitive to world market movements. 
C) both a and b 
D) none of the above 
A) the Japanese stock market is the most sensitive to world market movements. 
B) the U.S. stock market is the least sensitive to world market movements. 
C) both a and b 
D) none of the above

Question 14

A zero-coupon British bond promises to pay £100,000 in five years. The current exchange rate is $2.00 = £1.00 and inflation is forecast at 3% in the U.S. and 2% in the U.K. per year for the next five years. The appropriate discount rate for a bond of this risk would be 10% if it paid in dollars. What is the appropriate price of the bond?

Accepted Answer

A) £62,092.13 = $124,184.26 
B) £65,196.13 = $130,392.26 
C) none of the above 
A) £62,092.13 = $124,184.26 
B) £65,196.13 = $130,392.26 
C) none of the above

Question 15

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.

Accepted Answer

The answer of Is it reasonable to conclude that your...

Question 16

Systematic risk is

Accepted Answer

A) nondiversifiable risk. 
B) the risk that remains even after investors fully diversify their portfolio holdings. 
C) both a and b 
D) none of the above 
A) nondiversifiable risk. 
B) the risk that remains even after investors fully diversify their portfolio holdings. 
C) both a and b 
D) none of the above

Question 17

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.

Accepted Answer

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

Question 18

With regard to the past price performance of closed end mutual funds

Accepted Answer

A) most funds have traded at both a premium and a discount to NAV. 
B) most funds trade on a stock exchange just like a publicly traded corporation. 
C) suggests the risk-return characteristics can be quite different from those of the securities underlying the fund. 
D) all of the above 
A) most funds have traded at both a premium and a discount to NAV. 
B) most funds trade on a stock exchange just like a publicly traded corporation. 
C) suggests the risk-return characteristics can be quite different from those of the securities underlying the fund. 
D) all of the above

Question 19

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.
Spot exchange rates at the start and end of the year are shown in the table.

Accepted Answer

@#IMG-DLM&_TB2454_00 The key is to calcu

Question 20

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 above 
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 above

In the context of investments in securities (stocks and bonds), portfolio risk diversification refers to

American Depository Receipt (ADRs) represent foreign stocks

You will get more diversification

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.

With regard to the past performance of U.S.-based closed end country funds

In the graph at right, X and Y represent

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.

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

The record of investing in U.S.-based MNCs

With regard to the OIP,

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

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.

Systematic risk is

With regard to the past price performance of closed end mutual funds

A closed end mutual fund

Globalization and the Multinational Firm

International Monetary System

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

In the context of investments in securities (stocks and bonds), portfolio risk diversification refers to

American Depository Receipt (ADRs) represent foreign stocks

You will get more diversification

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.

With regard to the past performance of U.S.-based closed end country funds

In the graph at right, X and Y represent

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.

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

The record of investing in U.S.-based MNCs

With regard to the OIP,

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

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.

Systematic risk is

With regard to the past price performance of closed end mutual funds

A closed end mutual fund

Globalization and the Multinational Firm

International Monetary System

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