投资学第7版Test Bank答案.docx

1、投资学第7版Test Bank答案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

2、 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) no

3、ne 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 Difficult

4、y: 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 Answ

5、er: 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

6、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)

7、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)

8、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 T

9、able . 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 deviati

10、on 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 Rat

11、ionale: 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

12、 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 ma

13、ke 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 inve

14、sting 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 = $. Wh

15、at 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) % B) % C) % D) % E) none of the above Answer: C Difficulty: Moderate Rationale: = (1 + r) X - 1; r = %. 15. The interest rate on a 1-year Canadian security is 8%

16、. The current exchange rate is C$ = US $. The 1-year forward rate is C$ = US $. The return (denominated in . $) that a . investor can earn by investing in the Canadian security is _. A) % B) % C) % D) % E) none of the above Answer: C Difficulty: Moderate Rationale: = x - 1; x = %. 16. Suppose the 1-

17、year risk-free rate of return in the . is 4% and the 1-year risk-free rate of return in Britain is 7%. The current exchange rate is 1 pound = . $. 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 Britis

18、h security. A) B) C) D) E) none of the above Answer: A Difficulty: Moderate Rationale: = x/; x = . 17. The present exchange rate is C$ = U. S. $. The one year future rate is C$ = U. S. $. The yield on a 1-year . bill is 4%. A yield of _ on a 1-year _ Canadian bill will make investor indifferent betw

19、een investing in the . bill and the Canadian bill. A) % B) % C) % D) % E) none of the above Answer: D Difficulty: Moderate Rationale: = ($(1 + r) - 1; r = %.Use the following to answer questions 18-19:Assume there is a fixed exchange rate between the Canadian and . dollar. The expected return and st

20、andard deviation of return on the . 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 . and Canadian stock markets is %. 18. If you invested 50% of your money in the

21、 Canadian stock market and 50% in the . stock market, the expected return on your portfolio would be _. A) % B) % C) % D) % E) none of the above Answer: D Difficulty: Moderate Rationale: 18% + 13% = %. 19. If you invested 50% of your money in the Canadian stock market and 50% in the . stock market,

22、the standard deviation of return of your portfolio would be _. A) % B) % C) % D) % E) none of the above Answer: A Difficulty: Difficult Rationale: sP = 2(15%)2 + 2(20%)2 + 21/2 = %. 20. The major concern that has been raised with respect to the weighting of countries within the EAFE index is A) curr

23、ency volatilities are not considered in the weighting. B) cross-correlations are not considered in the weighting. C) inflation is not represented in the weighting. D) the weights are not proportional to the asset bases of the respective countries. E) none of the above Answer: D Difficulty: Moderate

24、Rationale: Some argue that countries should be weighted in proportion to their GDP to properly adjust for the true size of their corporate sectors, since many firms are not publicly traded. 21. You are a U. S. investor who purchased British securities for 2,000 pounds one year ago when the British p

25、ound cost $. No dividends were paid on the British securities in the past year. Your total return based on U. S. dollars was _ if the value of the securities is now 2,400 pounds and the pound is worth $. A) % B) % C) % D) % E) none of the above Answer: C Difficulty: Moderate Rationale: ($3,840 - $3,

26、000)/$3,000 = , or %. 22. . investors A) can trade derivative securities based on prices in foreign security markets. B) cannot trade foreign derivative securities. C) can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Time

27、s Share Exchange) indexes of . and European stocks. D) A and C. E) none of the above. Answer: D Difficulty: Moderate Rationale: U. S. investors can invest as indicated in A, examples of which are given in C. 23. Exchange rate risk A) results from changes in the exchange rates in the currencies of th

28、e investor and the country in which the investment is made. B) can be hedged by using a forward or futures contract in foreign exchange. C) cannot be eliminated. D) A and C. E) A and B. Answer: E Difficulty: Moderate Rationale: Although international investing involves risk resulting from the changi

29、ng exchange rates between currencies, this risk can be hedged by using a forward or futures contract in foreign exchange. 24. International investing A) cannot be measured against a passive benchmark, such as the S&P 500. B) can be measured against a widely used index of non-U. S. stocks, the EAFE i

30、ndex (Europe, Australia, Far East). C) can be measured against international indexes computed by Morgan Stanley, Salomon Brothers, First Boston and Goldman, Sachs, among others. D) B and C. E) none of the above. Answer: D Difficulty: Moderate Rationale: International investments can be evaluated against an international index, such as EAFE, created by Morgan Stanley, and others that have become available in recent years. 25. Investors looking for effective international diversification should A) invest about 60% of their money in foreign stocks. B) invest the same