Exam 19: Globalization and International Investing

The dollar per euro spot rate is 1.2 when an importer of French wines places an order.6 months later,when she takes delivery,the spot rate is 1.3 dollars per euro.If her original invoice was for 30,000 euro,what is her gain or loss due to exchange rate risk?

EAFE stands for _______.

_____ has the largest number of listed corporations among developed markets.

All exchange rates are expressed as units of foreign currency that can be purchased with one U.S. dollar. Answer the following questions about decomposing the manager's performance. -Which stock market has the largest weight in the EAFE index?

Passive investors with well-diversified international portfolios _________.

You are a U.S.investor who purchased British securities for 3,500 pounds one year ago when the British pound cost $1.35.No dividends were paid on the British securities in the past year.Your total return based in U.S.dollars was __________ if the value of the securities is now 4,200 pounds and the pound is worth $1.15.

A U.S.insurance firm must pay €75,000 in 6 months.The spot exchange rate is $1.32 per euro and in 6 months the exchange rate is expected to be $1.35.The 6 month forward rate is currently $1.36 per euro.If the insurer's goal is to limit its risk should the insurer hedge this transaction? If so how?

According to the International Country Risk Guide in 2008,which of the following countries was the riskiest according to the current composite risk rating?

Investor portfolios are notoriously over weighted in home country stocks.This is commonly called ________.

Among the factors explaining the return on a stock,_______ factors are generally most important while _______ factors are generally least important.

The risk free rate in the US is 2.5% and the risk free rate in Europe is 3.2%.If the spot rate of dollars per euro is 1.32,what is the likely forward rate in terms of dollars per euro?

Suppose a U.S. investor wishes to invest in a British firm currently selling for ₤50 per share. The investor has $7,000 to invest and the current exchange rate is $1.40/₤. -After one year,the exchange rate is unchanged and the share price is ₤55.What is the dollar-denominated return?

Assume there is a fixed exchange rate between the Canadian and U.S.dollar.The expected return and standard deviation of return on the U.S.stock market are 10% and 15% respectively.The expected return and standard deviation of return on the Canadian stock market are 12% and 16% respectively.The covariance of returns between the U.S.and Canadian stock markets is .012.If you invested 50% of your money in the Canadian stock market and 50% in the U.S.stock market,the standard deviation of return on your portfolio would be __________.

Corruption is a(n)_________ risk variable.

It appears from empirical work that exchange rate risk is ____________.

All exchange rates are expressed as units of foreign currency that can be purchased with one U.S. dollar. Answer the following questions about decomposing the manager's performance. -What is the difference in return of the manager's portfolio due to stock selection?

The risk free rate in the US is 4.0% and the risk free rate in Japan is 1.2%.If the spot rate of yen to dollars is 105,what is the likely yen per dollar forward rate?

WEBS are _____________.

The yen per dollar spot rate is 104.The yen per dollar forward rate is 107.If the US risk free rate is 2.4%,what is the likely yen risk free rate?

The annual standard deviation of an asset's returns is 15%.What is the standard deviation of the average annual return on a five year investment in this asset,assuming there is no serial correlation in the returns?