Exam 25: International Diversification

The present exchange rate is C$ = U.S. $0.78. The 1-year future rate is C$ = U.S. $0.75. The yield on a 1-year U.S. bill is 5%. A yield of __________ on a 1-year Canadian bill will make investor indifferent between investing in the U.S. bill and the Canadian bill.

Over the period 2011-2016, most correlations between the U.S. stock index and stock-index portfolios of other countries were

Home bias refers to

Suppose the 1-year risk-free rate of return in the U.S. is 4.5% and the 1-year risk-free rate of return in Britain is 7.7%. The current exchange rate is 1 pound = U.S. $1.60. A 1-year future exchange rate of __________ for the pound would make a U.S. investor indifferent between investing in the U.S. security and investing in the British security.

The interest rate on a 1-year Canadian security is 7.8%. The current exchange rate is C$ = US $0.79. The 1-year forward rate is C$ = US $0.77. The return (denominated in U.S. $) that a U.S. investor can earn by investing in the Canadian security is

The yield on a 1-year bill in the U.K. is 7%, and the present exchange rate is 1 pound = U.S. $1.65. If you expect the exchange rate to be 1 pound = U.S. $1.45 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is

"ADRs" stands for ___________, and "WEBS" stands for ____________.

The manager of Quantitative International Fund uses EAFE as a benchmark. Last year's performance for the fund and the benchmark were as follows: Eur Aus FE EAFE Welght 0.30 0.10 0.60 Return on Equity Index 10\% 5\% 15\% Currency Aplication / 10\% -10\% 30\% Quantitative's Welght 0.25 0.25 0.50 Manager's Return 9\% 8\% 16\% Calculate Quantitative's stock selection return contribution.