Question 1

Factors affecting international equity returns are

Accepted Answer

A) macroeconomic variables that influence the overall economy. 
B) exchange rate changes. 
C) the industrial structure of the country. 
D) all of the above 
A) macroeconomic variables that influence the overall economy. 
B) exchange rate changes. 
C) the industrial structure of the country. 
D) all of the above

Question 2

Calculate the dollar-based percentage return an American would have if he bought a German 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 $1.70 = €1.

Accepted Answer

A) 36% gain 
B) 26.47% gain 
C) 4% loss 
D) 9.6% gain 
E) None of the above 
A) 36% gain 
B) 26.47% gain 
C) 4% loss 
D) 9.6% gain 
E) None of the above

Question 3

The smaller the concentration percentage,

Accepted Answer

A) the more concentrated a market is in a few stock issues. 
B) the less concentrated a market is. 
C) the more liquid the secondary stock market is. 
D) none of the above 
A) the more concentrated a market is in a few stock issues. 
B) the less concentrated a market is. 
C) the more liquid the secondary stock market is. 
D) none of the above

Question 4

The smaller the concentration percentage,

Accepted Answer

A) the more concentrated a market is in a few stock issues. 
B) the less concentrated a market is. 
C) the more liquid the secondary stock market is. 
D) none of the above 
A) the more concentrated a market is in a few stock issues. 
B) the less concentrated a market is. 
C) the more liquid the secondary stock market is. 
D) none of the above

Question 5

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as

Accepted Answer

A) the stop price. 
B) the limit price. 
C) the last price. 
D) the sell price 
A) the stop price. 
B) the limit price. 
C) the last price. 
D) the sell price

Question 6

An all-or-none order is a limit order either to buy or to sell a security in which the broker is directed to attempt to fill the entire amount of the order or none of it. An all-or-none order differs from a fill-or-kill order in that

Accepted Answer

A) with an all-or-none order immediate execution is not required. 
B) with an all-or-none order immediate execution is required. 
C) with an all-or-none order oversubscription is allowed-filling the order for more shares. 
D) none of the above 
A) with an all-or-none order immediate execution is not required. 
B) with an all-or-none order immediate execution is required. 
C) with an all-or-none order oversubscription is allowed-filling the order for more shares. 
D) none of the above

Question 7

Investment in foreign equity markets

Accepted Answer

A) is no longer considered a "backwater" in the field of Finance. 
B) became common practice in the 1980s as investors diversified their portfolios. 
C) during the 1980s was largely confined to the developed world. 
D) all of the above 
A) is no longer considered a "backwater" in the field of Finance. 
B) became common practice in the 1980s as investors diversified their portfolios. 
C) during the 1980s was largely confined to the developed world. 
D) all of the above

Question 8

A limit order

Accepted Answer

A) is an instruction from a customer to a broker to buy or sell in at a particular price (or better). 
B) can be a "day order"-that is the order is cancelled if not executed during that day's trading. 
C) can be "good till cancelled". 
D) all of the above 
A) is an instruction from a customer to a broker to buy or sell in at a particular price (or better). 
B) can be a "day order"-that is the order is cancelled if not executed during that day's trading. 
C) can be "good till cancelled". 
D) all of the above

Question 9

The secondary equity markets of the world serve two major purposes. They provide

Accepted Answer

A) marketability and share valuation. 
B) liquidity and price support. 
C) price discovery and arbitrage. 
D) safety and stability. 
A) marketability and share valuation. 
B) liquidity and price support. 
C) price discovery and arbitrage. 
D) safety and stability.

Question 10

Price discovery in the secondary stock markets

Accepted Answer

A) occurs due to the competitive trading between buyers and sellers, just like on eBay. 
B) is set once a day at the close. 
C) is set by the investment bankers at the IPO. 
D) all of the above 
A) occurs due to the competitive trading between buyers and sellers, just like on eBay. 
B) is set once a day at the close. 
C) is set by the investment bankers at the IPO. 
D) all of the above

Question 11

A measure of liquidity for a stock market is the turnover ratio; defined as

Accepted Answer

A) the ratio of stock market transactions over a period of time divided by the size, or market capitalization, of the stock market. 
B) the ratio the size, or market capitalization, of the stock market divided by the value of the stock market transactions over a period of time. 
C) the ratio of aggregate company sales over a period of time divided by the size, or market capitalization, of the stock market. 
D) none of the above 
A) the ratio of stock market transactions over a period of time divided by the size, or market capitalization, of the stock market. 
B) the ratio the size, or market capitalization, of the stock market divided by the value of the stock market transactions over a period of time. 
C) the ratio of aggregate company sales over a period of time divided by the size, or market capitalization, of the stock market. 
D) none of the above

Question 12

Sponsored ADRs

Accepted Answer

A) are created by a bank at the request of the foreign company that issued the underlying security. 
B) can trade on the NASDAQ. 
C) can trade on the NYSE. 
D) all of the above 
A) are created by a bank at the request of the foreign company that issued the underlying security. 
B) can trade on the NASDAQ. 
C) can trade on the NYSE. 
D) all of the above

Question 13

The over-the-counter (OTC) market is a dealer market. Almost all OTC stocks trade on the National Association of Security Dealers Automated Quotation System (NASDAQ), which is a computer-linked system that shows

Accepted Answer

A) the limit orders of all available counterparties. 
B) the last price at which a security was sold. 
C) the bid (buy) and ask (sell) prices of all dealers in a security. 
D) the bid (sell) and ask (buy) prices of all dealers in a security. 
A) the limit orders of all available counterparties. 
B) the last price at which a security was sold. 
C) the bid (buy) and ask (sell) prices of all dealers in a security. 
D) the bid (sell) and ask (buy) prices of all dealers in a security.

Question 14

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Accepted Answer

A) by moving to a better county. 
B) by listing their stocks in countries with strong investor protection. 
C) by voluntarily complying with the provisions of the U.S. Sarbanes-Oxley Act. 
D) having a press conference and promising to be nice to their investors. 
A) by moving to a better county. 
B) by listing their stocks in countries with strong investor protection. 
C) by voluntarily complying with the provisions of the U.S. Sarbanes-Oxley Act. 
D) having a press conference and promising to be nice to their investors.

Question 15

Dealers in an OTC market

Accepted Answer

A) stand ready to buy at the bid and sell at the ask price. 
B) set their own bid and ask prices. 
C) do not charge commissions. 
D) all of the above 
A) stand ready to buy at the bid and sell at the ask price. 
B) set their own bid and ask prices. 
C) do not charge commissions. 
D) all of the above

Question 16

ADR trades

Accepted Answer

A) clear in three days, just like trades in U.S. shares. 
B) settle only after the trade in the underlying stocks clear, which can take time depending on the clearing practices of the national market. 
C) are price in the currency of the underlying security. 
D) all of the above 
A) clear in three days, just like trades in U.S. shares. 
B) settle only after the trade in the underlying stocks clear, which can take time depending on the clearing practices of the national market. 
C) are price in the currency of the underlying security. 
D) all of the above

Question 17

In 2002, 24 stock markets had concentration ratios of 40 percent or more, 16 had 50 percent or more, and 6 had 60 percent or more. By comparison, in 2006, 27 stock markets had concentration ratios of 40 percent or more, 21 had 50 percent or more, and 11 had 60 percent or more. Thus, one must conclude

Accepted Answer

A) that the number of equity investment opportunities in major stock markets in developed countries has not been improving in recent years. 
B) that the number of equity investment opportunities in emerging stock markets in developing countries has been improving in recent years. 
C) that the number of equity investment opportunities in emerging stock markets in developing countries has not been improving in recent years. 
D) none of the above 
A) that the number of equity investment opportunities in major stock markets in developed countries has not been improving in recent years. 
B) that the number of equity investment opportunities in emerging stock markets in developing countries has been improving in recent years. 
C) that the number of equity investment opportunities in emerging stock markets in developing countries has not been improving in recent years. 
D) none of the above

Question 18

During the 1980s, cross-border equity investment was largely confined

Accepted Answer

A) to the equity markets of developed countries. 
B) to the emerging equity markets. 
C) to the equity markets of the former Soviet Union. 
D) none of the above 
A) to the equity markets of developed countries. 
B) to the emerging equity markets. 
C) to the equity markets of the former Soviet Union. 
D) none of the above

Question 19

A crowd of floor traders on the NYSE

Accepted Answer

A) may arrive at a more favorable price for their clients "inside" the specialist's bid and ask quotes. 
B) are obliged to execute their trades through a specialist. 
C) are allowed to "front run" their own trades ahead of customer trades. 
D) all of the above 
A) may arrive at a more favorable price for their clients "inside" the specialist's bid and ask quotes. 
B) are obliged to execute their trades through a specialist. 
C) are allowed to "front run" their own trades ahead of customer trades. 
D) all of the above

Question 20

In the Frankfurt market, Aldi stock closed at €5 per share. On the same day, the euro U.S. dollar spot exchange rate was €.625/$1.00. Aldi trades as an ADR in the OTC market in the United States. Five underlying Aldi shares are packaged into one ADR. The no-arbitrage U.S. price of one ADR is

Accepted Answer

A) €25.00. 
B) $15.625. 
C) $40. 
D) None of the above. 
A) €25.00. 
B) $15.625. 
C) $40. 
D) None of the above.

Factors affecting international equity returns are

Calculate the dollar-based percentage return an American would have if he bought a German 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 $1.70 = €1.

The smaller the concentration percentage,

The smaller the concentration percentage,

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as

An all-or-none order is a limit order either to buy or to sell a security in which the broker is directed to attempt to fill the entire amount of the order or none of it. An all-or-none order differs from a fill-or-kill order in that

Investment in foreign equity markets

A limit order

The secondary equity markets of the world serve two major purposes. They provide

Price discovery in the secondary stock markets

A measure of liquidity for a stock market is the turnover ratio; defined as

Sponsored ADRs

The over-the-counter (OTC) market is a dealer market. Almost all OTC stocks trade on the National Association of Security Dealers Automated Quotation System (NASDAQ), which is a computer-linked system that shows

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Dealers in an OTC market

ADR trades

During the 1980s, cross-border equity investment was largely confined

A crowd of floor traders on the NYSE

In the Frankfurt market, Aldi stock closed at €5 per share. On the same day, the euro U.S. dollar spot exchange rate was €.625/$1.00. Aldi trades as an ADR in the OTC market in the United States. Five underlying Aldi shares are packaged into one ADR. The no-arbitrage U.S. price of one ADR is

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

Factors affecting international equity returns are

Calculate the dollar-based percentage return an American would have if he bought a German 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 $1.70 = €1.

The smaller the concentration percentage,

The smaller the concentration percentage,

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as

An all-or-none order is a limit order either to buy or to sell a security in which the broker is directed to attempt to fill the entire amount of the order or none of it. An all-or-none order differs from a fill-or-kill order in that

Investment in foreign equity markets

A limit order

The secondary equity markets of the world serve two major purposes. They provide

Price discovery in the secondary stock markets

A measure of liquidity for a stock market is the turnover ratio; defined as

Sponsored ADRs

The over-the-counter (OTC) market is a dealer market. Almost all OTC stocks trade on the National Association of Security Dealers Automated Quotation System (NASDAQ), which is a computer-linked system that shows

Companies domiciled in countries with weak investor protection can reduce agency costs between shareholders and management

Dealers in an OTC market

ADR trades

During the 1980s, cross-border equity investment was largely confined

A crowd of floor traders on the NYSE

In the Frankfurt market, Aldi stock closed at €5 per share. On the same day, the euro U.S. dollar spot exchange rate was €.625/$1.00. Aldi trades as an ADR in the OTC market in the United States. Five underlying Aldi shares are packaged into one ADR. The no-arbitrage U.S. price of one ADR is

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