Question 1

Studies examining the influence of industrial structure on foreign equity returns

Accepted Answer

A) conclusively show a connection. 
B) have been inconclusive. 
C) show that industrialized economies outperform lesser developed economies. 
D) none of the above 
A) conclusively show a connection. 
B) have been inconclusive. 
C) show that industrialized economies outperform lesser developed economies. 
D) none of the above B

Question 2

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. D

Question 3

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. D

Question 4

A type of noncontinuous exchange trading system is crowd trading.

Accepted Answer

A) unlike a call market in which there is a common price for all trades, several bilateral trades may take place at different prices in crowd trading. 
B) unlike a continuous market in which there is a common price for all trades, several bilateral trades may take place at different prices. 
C) unlike a call market in which several bilateral trades may take place at different prices there is a common price for all trades in a call market. 
D) none of the above 
A) unlike a call market in which there is a common price for all trades, several bilateral trades may take place at different prices in crowd trading. 
B) unlike a continuous market in which there is a common price for all trades, several bilateral trades may take place at different prices. 
C) unlike a call market in which several bilateral trades may take place at different prices there is a common price for all trades in a call market. 
D) none of the above

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 above 
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 above

Question 6

The Paris Bourse was traditionally a call market. In a call market, an agent of the exchange accumulates, over a period of time, a batch of orders that are periodically executed by written or verbal auction throughout the trading day. Both market and limit orders are handled in this way. The major disadvantage of a call market is that

Accepted Answer

A) traders are not certain about the price at which their orders will transact because bid and ask quotations are not available prior to the call. 
B) traders are not certain about how many shares will be able to sell or buy at the price they quote because order volume is not available prior to the call. 
C) there is a lack of liquidity intercall. 
D) none of the above 
A) traders are not certain about the price at which their orders will transact because bid and ask quotations are not available prior to the call. 
B) traders are not certain about how many shares will be able to sell or buy at the price they quote because order volume is not available prior to the call. 
C) there is a lack of liquidity intercall. 
D) none of the above

Question 7

Which factors fuel the sale of "Yankee" stock offerings?

Accepted Answer

A) Privatization by many Latin American and Eastern European government-owned companies. 
B) The rapid growth in the economies of the developing world. 
C) The expected large demand for new capital by Mexican companies now that NAFTA has been approved. 
D) All of the above 
A) Privatization by many Latin American and Eastern European government-owned companies. 
B) The rapid growth in the economies of the developing world. 
C) The expected large demand for new capital by Mexican companies now that NAFTA has been approved. 
D) All of the above

Question 8

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% gain 
B) 20% gain 
C) 4% loss 
D) 9.6% gain 
E) None of the above 
A) 36% gain 
B) 20% gain 
C) 4% loss 
D) 9.6% gain 
E) None of the above

Question 9

A market-value index

Accepted Answer

A) is calculated such that the proportion of the index a stock represents is determined by its proportion of the total market capitalization of all stocks in the index. 
B) is calculated as the average price of all the stocks in the index that trade that day, one example is the NASDAQ. 
C) is calculated like the DJIA. 
D) none of the above 
A) is calculated such that the proportion of the index a stock represents is determined by its proportion of the total market capitalization of all stocks in the index. 
B) is calculated as the average price of all the stocks in the index that trade that day, one example is the NASDAQ. 
C) is calculated like the DJIA. 
D) none of the above

Question 10

The more concentrated a national stock market is

Accepted Answer

A) the greater opportunity a global investor has to include shares from that county in an internationally diversified portfolio. 
B) the less opportunity a global investor has to include shares from that county in an internationally diversified portfolio. 
C) the broader the investor base across a number of different shares and industries. 
D) none of the above 
A) the greater opportunity a global investor has to include shares from that county in an internationally diversified portfolio. 
B) the less opportunity a global investor has to include shares from that county in an internationally diversified portfolio. 
C) the broader the investor base across a number of different shares and industries. 
D) none of the above

Question 11

Only in the _______ did world investors start to invest sizable amounts in the emerging equity markets, as the economic growth and prospects of the developing countries improved.

Accepted Answer

A) 1960s 
B) 1970s 
C) 1980s 
D) 1990s 
A) 1960s 
B) 1970s 
C) 1980s 
D) 1990s

Question 12

The large exchange markets in the United States are

Accepted Answer

A) agency markets. 
B) call markets. 
C) auction markets. 
D) agency/auction markets. 
A) agency markets. 
B) call markets. 
C) auction markets. 
D) agency/auction markets.

Question 13

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.

Question 14

Many of the small foreign equity markets (e.g. Chile, Sri Lanka)

Accepted Answer

A) have poor liquidity at present. 
B) are very liquid stock markets, since the poor people living there are eager to sell their securities. 
C) have fairly high turnover ratios indicating strong liquidity. 
D) none of the above 
A) have poor liquidity at present. 
B) are very liquid stock markets, since the poor people living there are eager to sell their securities. 
C) have fairly high turnover ratios indicating strong liquidity. 
D) none of the above

Question 15

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 above are advantages 
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 above are advantages

Question 16

In general, Standard & Poor's Emerging Markets Data Base classified a stock market as "emerging" if

Accepted Answer

A) it is located in a low- or middle-income economy as defined by the World Bank. 
B) its investable market capitalization is low relative to its most recent GNI figures. 
C) either a or b 
D) none of the above 
A) it is located in a low- or middle-income economy as defined by the World Bank. 
B) its investable market capitalization is low relative to its most recent GNI figures. 
C) either a or b 
D) none of the above

Question 17

In mutual funds, investment in emerging foreign equity markets

Accepted Answer

A) represents less than one percent of investments in U.S.-based mutual funds. 
B) represents about five percent of investments in U.S.-based mutual funds. 
C) represents more than twenty percent of investments in U.S.-based mutual funds. 
D) declined during the 1990s. 
A) represents less than one percent of investments in U.S.-based mutual funds. 
B) represents about five percent of investments in U.S.-based mutual funds. 
C) represents more than twenty percent of investments in U.S.-based mutual funds. 
D) declined during the 1990s.

Question 18

Which type of trading system is desirable for actively traded issues?

Accepted Answer

A) Continuous trading systems 
B) Call trading systems 
C) Crowd trading systems 
D) None of the above 
A) Continuous trading systems 
B) Call trading systems 
C) Crowd trading systems 
D) None of the above

Question 19

In the London market, Rolls-Royce stock closed at £0.875 per share. On the same day, the British Pound sterling to the U.S. dollar spot exchange rate was £0.6366/$1.00. Rolls Royce trades as an ADR in the OTC market in the United States. Five underlying Rolls-Royce shares are packaged into one ADR. The no-arbitrage U.S. price of one ADR is

Accepted Answer

A) $4.87. 
B) $5.87. 
C) $6.87. 
D) $7.87. 
A) $4.87. 
B) $5.87. 
C) $6.87. 
D) $7.87.

Question 20

Advantages of cross-listing include:

Accepted Answer

A) This decision provides their shareholders with a higher degree of protection than may be available in the home country. 
B) This decision can be a signal of the company's commitment to shareholder rights. 
C) This may make investors both at home and abroad more willing to provide capital and to increase the value of the pre-existing shares. 
D) All of the above 
A) This decision provides their shareholders with a higher degree of protection than may be available in the home country. 
B) This decision can be a signal of the company's commitment to shareholder rights. 
C) This may make investors both at home and abroad more willing to provide capital and to increase the value of the pre-existing shares. 
D) All of the above

Studies examining the influence of industrial structure on foreign equity returns

A liquid stock market

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

A type of noncontinuous exchange trading system is crowd trading.

ADRs

Which factors fuel the sale of "Yankee" stock offerings?

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 market-value index

The more concentrated a national stock market is

Only in the _______ did world investors start to invest sizable amounts in the emerging equity markets, as the economic growth and prospects of the developing countries improved.

The large exchange markets in the United States are

Cross-correlations among major stock markets and exchange markets are

Many of the small foreign equity markets (e.g. Chile, Sri Lanka)

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 general, Standard & Poor's Emerging Markets Data Base classified a stock market as "emerging" if

In mutual funds, investment in emerging foreign equity markets

Which type of trading system is desirable for actively traded issues?

Advantages of cross-listing include:

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

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

Filters

Exam 13: International Equity Markets

Studies examining the influence of industrial structure on foreign equity returns

A liquid stock market

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

A type of noncontinuous exchange trading system is crowd trading.

ADRs

Which factors fuel the sale of "Yankee" stock offerings?

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 market-value index

The more concentrated a national stock market is

Only in the _______ did world investors start to invest sizable amounts in the emerging equity markets, as the economic growth and prospects of the developing countries improved.

The large exchange markets in the United States are

Cross-correlations among major stock markets and exchange markets are

Many of the small foreign equity markets (e.g. Chile, Sri Lanka)

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 general, Standard & Poor's Emerging Markets Data Base classified a stock market as "emerging" if

In mutual funds, investment in emerging foreign equity markets

Which type of trading system is desirable for actively traded issues?

Advantages of cross-listing include:

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

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

Filters