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Exam 25: International Diversification

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Question 1

Multiple Choice

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The __________ equity market had the highest average U.S.dollar excess return between 2000 and 2009.

A) Russian
B) Finnish
C) Columbian
D) U.S.
E) none of the above

F) B) and C)
G) D) and E)

Correct Answer

verified

C

Question 2

Multiple Choice

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The __________ equity market had the highest average local currency excess return between 2000 and 2009.

A) Columbian
B) Norwegian
C) U.K.
D) U.S.
E) none of the above

F) A) and D)
G) C) and D)

Correct Answer

verified

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Question 3

Multiple Choice

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The EAFE is

U.S.investors

The __________ equity market had the lowest average U.S.dollar standard deviation of excess returns between 2000 and 2009.

-Calculate Quantitative's stock selection return contribution.

International investing

The developed country with the lowest average U.S.dollar equity-market excess return between 2000 and 2009 is

Discuss some of the factors that might be included in a multifactor model of security returns in an international application of arbitrage pricing theory (APT).

__________ are mutual funds that invest in one country only.

Suppose the 1-year risk-free rate of return in the U.S.is 4% and the 1-year risk-free rate of return in Britain is 7%.The current exchange rate is 1 pound = U.S.$1.65.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 the British security.

The __________ equity market had the highest average U.S.dollar standard deviation of excess returns between 2000 and 2009.

-Calculate Quantitative's country selection return contribution.

Suppose the 1-year risk-free rate of return in the U.S.is 5%.The current exchange rate is 1 pound = U.S.$1.60.The 1-year forward rate is 1 pound = $1.57.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?

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 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U. S. and Canadian stock markets is 1.5%. -If you invested 50% of your money in the Canadian stock market and 50% in the U.S.stock market,the expected return on your portfolio would be __________.

The __________ equity market had the lowest average local currency excess return between 2000 and 2009.

The emerging market country with the lowest average local-currency equity-market excess return between 2000 and 2009 is

The developed country with the lowest average local-currency equity-market excess return between 2000 and 2009 is

__________ refers to the possibility of expropriation of assets,changes in tax policy,and the possibility of restrictions on foreign exchange transactions.

The __________ equity market had the highest average local currency standard deviation of excess returns between 2000 and 2009.