Multiple Choice Questions
1. Shares of several foreign firms are traded in the . markets in the form of
A) ADRs B) ECUs
C) single-country funds D) all of the above
E) none of the above Answer: A Difficulty: Easy
Rationale: American Depository Receipts (ADRs) allow U. S. investors to invest in foreign stocks via transactions on the . stock exchanges. 2.
___________ refers to the possibility of expropriation of assets, changes in tax policy, and the possibility of restrictions on foreign exchange transactions. A) default risk
B) foreign exchange risk C) market risk D) political risk
E) none of the above Answer: D Difficulty: Easy
Rationale: All of the above factors are political in nature, and thus are examples of political risk. 3.
___________ are mutual funds that invest in one country only. A) ADRs B) ECUs
C) single-country funds D) all of the above
E) none of the above Answer: C Difficulty: Easy
Rationale: Mutual funds that invest in the stocks of one country only are called single-country funds.
4. The performance of an internationally diversified portfolio may be affected by
A) country selection B) currency selection C) stock selection D) all of the above
E) none of the above Answer: D Difficulty: Easy
Rationale: All of the above factors may affect the performance of an international portfolio.
5. Over the period 2001-2005, most correlations between the . stock index
and stock-index portfolios of other countries were A) negative
B) positive but less than .9 C) approximately zero D) .9 or above E) none of the above
Answer: B Difficulty: Moderate
Rationale: Correlation coefficients were typically below .9, while correlations between well-diversified U. S. market portfolios were typically above .9. See Table . 6. The ______________ index is a widely used index of . stocks.
A) CBOE B) Dow Jones C) EAFE
D) all of the above E) none of the above Answer: C Difficulty: Easy
Rationale: The Europe, Australia, Far East (EAFE) index computed by Morgan Stanley is a widely used index of . stocks.
7. The ______________ equity market had the highest average local currency return
between 2001 and 2005. A) Russian B) Norwegian C) . D) .
E) none of the above
Answer: A Difficulty: Moderate Rationale: See Table .
8. The ______________ equity market had the highest average . dollar return
between 2001 and 2005. A) Russian B) Finnish C) Columbian D) .
E) none of the above
Answer: C Difficulty: Moderate Rationale: See Table .
9. The ______________ equity market had the highest average . dollar standard
deviation between 2001 and 2005. A) Turkish
B) Finnish C) Indonesian D) .
E) none of the above
Answer: A Difficulty: Moderate Rationale: See Table . 10.
The _____________ equity market had the highest average local currency standard deviation between 2001 and 2005.
A) Turkish B) Finnish C) Indonesian D) .
E) none of the above
Answer: A Difficulty: Moderate Rationale: See Table . 11.
In 2005, the . equity market represented ______________ of the world equity market. A) 19% B) 60% C) 43% D) 39%
E) none of the above
Answer: D Difficulty: Moderate Rationale: See Table . 12.
The straightforward generalization of the simple CAPM to international stocks is problematic because ________________________ .
A) inflation risk perceptions by different investors in different countries will differ as
consumption baskets differ
B) investors in different countries view exchange rate risk from the perspective of
different domestic currencies
C) taxes, transaction costs and capital barriers across countries make it difficult for
investor to hold a world index portfolio D) all of the above E) none of the above. Answer: D Difficulty: Moderate
Rationale: All of the above factors make a broad generalization of the CAPM to international stocks problematic. 13.
The yield on a 1-year bill in the . is 8% and the present exchange rate is 1 pound = U. S. $. If you expect the exchange rate to be 1 pound - U. S. $ a year from now, the return a U. S. investor can expect to earn by investing in . bills is A) % B) 0% C) 8% D) %
E) none of the above
Answer: D Difficulty: Moderate Rationale: r(US) = [1 + r(UK)]F0/E0 - 1; [][] - 1 = %. 14.
Suppose the 1-year risk-free rate of return in the U. S. is 5%. The current exchange rate is 1 pound = U. S. $. The 1-year forward rate is 1 pound = $. What is the minimum yield on a 1-year risk-free security in Britain that would induce a U. S. investor to invest in the British security? A) %
投资学第7版TestBank答案
