投资学第7版TestBank答案.docx

投资学第7版TestBank答案.docx

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投资学第7版TestBank答案

MultipleChoiceQuestions

1.Sharesofseveralforeignfirmsaretradedinthe.marketsintheformof

A）ADRs

B）ECUs

C）single-countryfunds

D）alloftheabove

E）noneoftheaboveAnswer:

ADifficulty:

Easy

Rationale:

AmericanDepositoryReceipts（ADRs）allowU.S.investorstoinvestinforeignstocksviatransactionsonthe.stockexchanges.

2.referstothepossibilityofexpropriationofassets,changes

intaxpolicy,andthepossibilityofrestrictionsonforeignexchangetransactions.

A）defaultrisk

B）foreignexchangerisk

C）marketrisk

D）politicalrisk

E）noneoftheaboveAnswer:

DDifficulty:

Easy

Rationale:

Alloftheabovefactorsarepoliticalinnature,andthusareexamplesofpoliticalrisk.

3.aremutualfundsthatinvestinonecountryonly.

A）ADRs

B）ECUs

C）single-countryfunds

D）alloftheabove

E）noneoftheaboveAnswer:

CDifficulty:

Easy

Rationale:

Mutualfundsthatinvestinthestocksofonecountryonlyarecalledsingle-countryfunds.

4.Theperformanceofaninternationallydiversifiedportfoliomaybeaffectedby

A）countryselection

B）currencyselection

C）stockselection

D）alloftheabove

E）noneoftheaboveAnswer:

DDifficulty:

Easy

Rationale:

Alloftheabovefactorsmayaffecttheperformanceofaninternationalportfolio.

5.Overtheperiod2001-2005,mostcorrelationsbetweenthe.stockindex

andstock-indexportfoliosofothercountrieswere

A）negative

B）positivebutlessthan.9

C）approximatelyzero

D）.9orabove

E）noneoftheabove

Answer:

BDifficulty:

Moderate

Rationale:

Correlationcoefficientsweretypicallybelow.9,whilecorrelationsbetweenwell-diversifiedU.S.marketportfoliosweretypicallyabove.9.SeeTable.

6.Theindexisawidelyusedindexof.stocks.

A）CBOE

B）DowJones

C）EAFE

D）alloftheabove

E）noneoftheabove

Answer:

CDifficulty:

Easy

Rationale:

TheEurope,Australia,FarEast（EAFE）indexcomputedbyMorganStanleyisawidelyusedindexof.stocks.

7.Theequitymarkethadthehighestaveragelocalcurrencyreturn

between2001and2005.

A）Russian

B）Norwegian

C）.

D）.

E）noneoftheabove

Answer:

ADifficulty:

Moderate

Rationale:

SeeTable.

8.Theequitymarkethadthehighestaverage.dollarreturn

between2001and2005.

A）Russian

B）Finnish

C）Columbian

D）.

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

SeeTable.

9.Theequitymarkethadthehighestaverage.dollarstandard

deviationbetween2001and2005.

A）Turkish

B）Finnish

C）Indonesian

D）.

E）noneoftheabove

Answer:

ADifficulty:

ModerateRationale:

SeeTable.

10.Theequitymarkethadthehighestaveragelocalcurrency

standarddeviationbetween2001and2005.

A）Turkish

B）Finnish

C）Indonesian

D）.

E）noneoftheabove

Answer:

ADifficulty:

ModerateRationale:

SeeTable.

11.In2005,the.equitymarketrepresentedoftheworldequity

market.

A）19%

B）60%

C）43%

D）39%

E）noneoftheabove

Answer:

DDifficulty:

ModerateRationale:

SeeTable.

12.ThestraightforwardgeneralizationofthesimpleCAPMtointernationalstocksisproblematicbecause.

A）inflationriskperceptionsbydifferentinvestorsindifferentcountrieswilldifferasconsumptionbasketsdiffer

B）investorsindifferentcountriesviewexchangerateriskfromtheperspectiveofdifferentdomesticcurrencies

C）taxes,transactioncostsandcapitalbarriersacrosscountriesmakeitdifficultforinvestortoholdaworldindexportfolio

D）alloftheabove

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

AlloftheabovefactorsmakeabroadgeneralizationoftheCAPMtointernationalstocksproblematic.

13.Theyieldona1-yearbillinthe.is8%andthepresentexchangerateis1pound=U.S.$.Ifyouexpecttheexchangeratetobe1pound-U.S.$ayearfromnow,thereturnaU.S.investorcanexpecttoearnbyinvestingin.billsis

A）%

B）0%

C）8%

D）%

E）noneoftheabove

Answer:

DDifficulty:

ModerateRationale:

r（US）=[1+r（UK）]F0/E0-1;[][]-1=%.

14.Supposethe1-yearrisk-freerateofreturnintheU.S.is5%.Thecurrentexchangerateis1pound=U.S.$.The1-yearforwardrateis1pound=$.Whatistheminimumyieldona1-yearrisk-freesecurityinBritainthatwouldinduceaU.S.investortoinvestintheBritishsecurity?

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

CDifficulty:

ModerateRationale:

=（1+r）X[]-1;r=%.

15.Theinterestrateona1-yearCanadiansecurityis8%.ThecurrentexchangerateisC$=US$.The1-yearforwardrateisC$=US$.Thereturn（denominatedin.$）thata.investorcanearnbyinvestingintheCanadiansecurityis.

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

CDifficulty:

ModerateRationale:

[]=x-1;x=%.

16.Supposethe1-yearrisk-freerateofreturninthe.is4%andthe1-yearrisk-freerateofreturninBritainis7%.Thecurrentexchangerateis1pound=.$.A1-yearfutureexchangerateofforthepound

wouldmakeaU.S.investorindifferentbetweeninvestingintheU.S.securityandinvestingtheBritishsecurity.

A）

B）

C）

D）

E）noneoftheabove

Answer:

ADifficulty:

ModerateRationale:

=x/;x=.

17.ThepresentexchangerateisC$=U.S.$.TheoneyearfuturerateisC$=U.S.$.Theyieldona1-year.billis4%.Ayieldof

ona1-yearCanadianbillwillmakeinvestorindifferent

betweeninvestinginthe.billandtheCanadianbill.

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

=[（$$（1+r）]-1;r=%.

Usethefollowingtoanswerquestions18-19:

AssumethereisafixedexchangeratebetweentheCanadianand.dollar.Theexpectedreturnandstandarddeviationofreturnonthe.stockmarketare18%and15%,respectively.TheexpectedreturnandstandarddeviationontheCanadianstockmarketare13%and20%,respectively.Thecovarianceofreturnsbetweenthe.andCanadianstockmarketsis%.

18.Ifyouinvested50%ofyourmoneyintheCanadianstockmarketand50%inthe.stockmarket,theexpectedreturnonyourportfoliowouldbe

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

DDifficulty:

ModerateRationale:

18%+13%=%.

19.Ifyouinvested50%ofyourmoneyintheCanadianstockmarketand50%inthe.stockmarket,thestandarddeviationofreturnofyourportfoliowouldbe.

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

ADifficulty:

Difficult

22221/2

Rationale:

sP=[2（15%）2+2（20%）2+2]1/2=%.

20.ThemajorconcernthathasbeenraisedwithrespecttotheweightingofcountrieswithintheEAFEindexis

A）currencyvolatilitiesarenotconsideredintheweighting.

B）cross-correlationsarenotconsideredintheweighting.

C）inflationisnotrepresentedintheweighting.

D）theweightsarenotproportionaltotheassetbasesoftherespective

countries.

E）noneoftheabove

Answer:

DDifficulty:

Moderate

Rationale:

Somearguethatcountriesshouldbeweightedinproportionto

theirGDPtoproperlyadjustforthetruesizeoftheircorporatesectors,sincemanyfirmsarenotpubliclytraded.

21.YouareaU.S.investorwhopurchasedBritishsecuritiesfor2,000poundsoneyearagowhentheBritishpoundcost$.NodividendswerepaidontheBritishsecuritiesinthepastyear.YourtotalreturnbasedonU.S.

dollarswasifthevalueofthesecuritiesisnow2,400pounds

andthepoundisworth$.

A）%

B）%

C）%

D）%

E）noneoftheabove

Answer:

CDifficulty:

Moderate

Rationale:

（$3,840-$3,000）/$3,000=,or%.

22..investors

A）cantradederivativesecuritiesbasedonpricesinforeignsecuritymarkets.

B）cannottradeforeignderivativesecurities.

C）cantradeoptionsandfuturesontheNikkeistockindexof225stockstradedontheTokyostockexchangeandonFTSE（FinancialTimesShareExchange）indexesof.andEuropeanstocks.

D）AandC.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

U.S.investorscaninvestasindicatedinA,examplesofwhicharegiveninC.

23.Exchangeraterisk

A）resultsfromchangesintheexchangeratesinthecurrenciesoftheinvestorandthecountryinwhichtheinvestmentismade.

B）canbehedgedbyusingaforwardorfuturescontractinforeignexchange.

C）cannotbeeliminated.

D）AandC.

E）AandB.

Answer:

EDifficulty:

Moderate

Rationale:

Althoughinternationalinvestinginvolvesriskresultingfromthechangingexchangeratesbetweencurrencies,thisriskcanbehedgedbyusingaforwardorfuturescontractinforeignexchange.

24.Internationalinvesting

A）cannotbemeasuredagainstapassivebenchmark,suchastheS&P500.

B）canbemeasuredagainstawidelyusedindexofnon-U.S.stocks,theEAFEindex（Europe,Australia,FarEast）.

C）canbemeasuredagainstinternationalindexescomputedbyMorganStanley,SalomonBrothers,FirstBostonandGoldman,Sachs,amongothers.

D）BandC.

E）noneoftheabove.

Answer:

DDifficulty:

Moderate

Rationale:

Internationalinvestmentscanbeevaluatedagainstaninternationalindex,suchasEAFE,createdbyMorganStanley,andothers

thathavebecomeavailableinrecentyears.

25.Investorslookingforeffectiveinternationaldiversificationshould

A）investabout60%oftheirmoneyinforeignstocks.

B）investthesamepercentageoftheirmoneyinforeignstocksthatforeignequitiesrepresentintheworldequitymarket.

C）frequentlyhedgecurrencyexposure.

D）bothAandB.

E）noneoftheabove.

Answer:

EDifficulty:

Moderate

Usethefollowingtoanswerquestions26-28:

ThemanagerofQuantitativeInternationalFundusesEAFEasabenchmark.Lastyear'sperformanceforthefundandthebenchmarkwereasfollows:

26.CalculateQuantitative'scurrencyselectionreturncontribution.

A）+20%

B）-5%

C）+15%

D）+5%

E）-10%

Answer:

BDifficulty:

Difficult

Rationale:

EAFE:

（.30）（10%）+（.10）（-10%）+（.60）（30%）=20%appreciation;

Diversified:

（.25）（10%）+（.25