投资学第7版Test Bank答案.docx
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投资学第7版Test Bank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)noneoftheabove
Answer:
ADifficulty:
Easy
Rationale:
AmericanDepositoryReceipts(ADRs)allowU.S.investorstoinvestinforeignstocksviatransactionsonthe.stockexchanges.
2.__________referstothepossibilityofexpropriationofassets,changesintaxpolicy,andthepossibilityofrestrictionsonforeignexchangetransactions.
A)defaultrisk
B)foreignexchangerisk
C)marketrisk
D)politicalrisk
E)noneoftheabove
Answer:
DDifficulty:
Easy
Rationale:
Alloftheabovefactorsarepoliticalinnature,andthusareexamplesofpoliticalrisk.
3.__________aremutualfundsthatinvestinonecountryonly.
A)ADRs
B)ECUs
C)single-countryfunds
D)alloftheabove
E)noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
Mutualfundsthatinvestinthestocksofonecountryonlyarecalledsingle-countryfunds.
4.Theperformanceofaninternationallydiversifiedportfoliomaybeaffectedby
A)countryselection
B)currencyselection
C)stockselection
D)alloftheabove
E)noneoftheabove
Answer:
DDifficulty:
Easy
Rationale:
Alloftheabovefactorsmayaffecttheperformanceofaninternationalportfolio.
5.Overtheperiod2001-2005,mostcorrelationsbetweenthe.stockindexandstock-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.The__________indexisawidelyusedindexof.stocks.
A)CBOE
B)DowJones
C)EAFE
D)alloftheabove
E)noneoftheabove
Answer:
CDifficulty:
Easy
Rationale:
TheEurope,Australia,FarEast(EAFE)indexcomputedbyMorganStanleyisawidelyusedindexof.stocks.
7.The__________equitymarkethadthehighestaveragelocalcurrencyreturnbetween2001and2005.
A)Russian
B)Norwegian
C).
D).
E)noneoftheabove
Answer:
ADifficulty:
Moderate
Rationale:
SeeTable.
8.The__________equitymarkethadthehighestaverage.dollarreturnbetween2001and2005.
A)Russian
B)Finnish
C)Columbian
D).
E)noneoftheabove
Answer:
CDifficulty:
Moderate
Rationale:
SeeTable.
9.The__________equitymarkethadthehighestaverage.dollarstandarddeviationbetween2001and2005.
A)Turkish
B)Finnish
C)Indonesian
D).
E)noneoftheabove
Answer:
ADifficulty:
Moderate
Rationale:
SeeTable.
10.The__________equitymarkethadthehighestaveragelocalcurrencystandarddeviationbetween2001and2005.
A)Turkish
B)Finnish
C)Indonesian
D).
E)noneoftheabove
Answer:
ADifficulty:
Moderate
Rationale:
SeeTable.
11.In2005,the.equitymarketrepresented__________oftheworldequitymarket.
A)19%
B)60%
C)43%
D)39%
E)noneoftheabove
Answer:
DDifficulty:
Moderate
Rationale:
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:
Moderate
Rationale:
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:
Moderate
Rationale:
=(1+r)X[]-1;r=%.
15.Theinterestrateona1-yearCanadiansecurityis8%.ThecurrentexchangerateisC$=US$.The1-yearforwardrateisC$=US$.Thereturn(denominatedin.$)thata.investorcanearnbyinvestingintheCanadiansecurityis__________.
A)%
B)%
C)%
D)%
E)noneoftheabove
Answer:
CDifficulty:
Moderate
Rationale:
[]=x-1;x=%.
16.Supposethe1-yearrisk-freerateofreturninthe.is4%andthe1-yearrisk-freerateofreturninBritainis7%.Thecurrentexchangerateis1pound=.$.A1-yearfutureexchangerateof__________forthepoundwouldmakeaU.S.investorindifferentbetweeninvestingintheU.S.securityandinvestingtheBritishsecurity.
A)
B)
C)
D)
E)noneoftheabove
Answer:
ADifficulty:
Moderate
Rationale:
=x/;x=.
17.ThepresentexchangerateisC$=U.S.$.TheoneyearfuturerateisC$=U.S.$.Theyieldona1-year.billis4%.Ayieldof__________ona1-year__________Canadianbillwillmakeinvestorindifferentbetweeninvestinginthe.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:
Moderate
Rationale:
18%+13%=%.
19.Ifyouinvested50%ofyourmoneyintheCanadianstockmarketand50%inthe.stockmarket,thestandarddeviationofreturnofyourportfoliowouldbe__________.
A)%
B)%
C)%
D)%
E)noneoftheabove
Answer:
ADifficulty:
Difficult
Rationale:
sP=[2(15%)2+2(20%)2+2]1/2=%.
20.ThemajorconcernthathasbeenraisedwithrespecttotheweightingofcountrieswithintheEAFEindexis
A)currencyvolatilitiesarenotconsideredintheweighting.
B)cross-correlationsarenotconsideredintheweighting.
C)inflationisnotrepresentedintheweighting.
D)theweightsarenotproportionaltotheassetbasesoftherespectivecountries.
E)noneoftheabove
Answer:
DDifficulty:
Moderate
Rationale:
SomearguethatcountriesshouldbeweightedinproportiontotheirGDPtoproperlyadjustforthetruesizeoftheircorporatesectors,sincemanyfirmsarenotpubliclytraded.
21.YouareaU.S.investorwhopurchasedBritishsecuritiesfor2,000poundsoneyearagowhentheBritishpoundcost$.NodividendswerepaidontheBritishsecuritiesinthepastyear.YourtotalreturnbasedonU.S.dollarswas__________ifthevalueofthesecuritiesisnow2,400poundsandthepoundisworth$.
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,andothersthathavebecomeavailableinrecentyears.
25.Investorslookingforeffectiveinternationaldiversificationshould
A)investabout60%oftheirmoneyinforeignstocks.
B)investthesame
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