投資學(xué)第7版TestBank答案25

1、Multiple Choice Questions1. Shares of several foreign firms are traded in the U.S. markets in the form ofA) ADRsB) ECUsC) single-country fundsD) all of the aboveE) none of the aboveAnswer: A Difficulty: EasyRationale: American Depository Receipts (ADRs) allow U. S. investors to invest in foreign sto

2、cks via transactions on the U.S. 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 riskB) foreign exchange riskC) market riskD) political riskE) none of the aboveAnswer: D Dif

3、ficulty: EasyRationale: 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) ADRsB) ECUsC) single-country fundsD) all of the aboveE) none of the aboveAnswer: C Difficulty: EasyRationale: Mutual funds that inv

4、est in the stocks of one country only are called single-country funds.4. The performance of an internationally diversified portfolio may be affected byA) country selectionB) currency selectionC) stock selectionD) all of the aboveE) none of the aboveAnswer: D Difficulty: EasyRationale: All of the abo

5、ve factors may affect the performance of an international portfolio.5. Over the period 2001-2005, most correlations between the U.S. stock index and stock-index portfolios of other countries wereA) negativeB) positive but less than .9C) approximately zeroD) .9 or aboveE) none of the aboveAnswer: B D

6、ifficulty: ModerateRationale: Correlation coefficients were typically below .9, while correlations between well-diversified U. S. market portfolios were typically above .9. See Table 25.10.6. The index is a widely used index of non-U.S. stocks.A) CBOEB) Dow JonesC) EAFED) all of the aboveE) none of

7、the aboveAnswer: C Difficulty: EasyRationale: The Europe, Australia, Far East (EAFE) index computed by Morgan Stanley is a widely used index of non-U.S. stocks.7. The equity market had the highest average local currency return between2001 and 2005.A) RussianB) NorwegianC) U.K.D) U.S.E) none of the a

8、boveAnswer: A Difficulty: ModerateRationale: See Table 25.9.8. The equity market had the highest average U.S. dollar return between 2001and 2005.A) RussianB) FinnishC) ColumbianD) U.S.E) none of the aboveAnswer: C Difficulty: ModerateRationale: See Table 25.9.9. The equity market had the highest ave

9、rage U.S. dollar standard deviationbetween 2001 and 2005.A) TurkishB) FinnishC) IndonesianD) U.S.E) none of the aboveAnswer: A Difficulty: ModerateRationale: See Table 25.9.10. The equity market had the highest average local currency standarddeviation between 2001 and 2005.A) TurkishB) FinnishC) Ind

10、onesianD) U.S.E) none of the aboveAnswer: A Difficulty: ModerateRationale: See Table 25.9.11. In 2005, the U.S. equity market represented of the world equity market.A) 19%B) 60%C) 43%D) 39%E) none of the aboveAnswer: D Difficulty: Moderate Rationale: See Table 25.1.12. The straightforward generaliza

11、tion 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 differB) investors in different countries view exchange rate risk from the perspective of different domestic currenci

12、esC) taxes, transaction costs and capital barriers across countries make it difficult for investor to hold a world index portfolioD) all of the aboveE) none of the above.Answer: D Difficulty: ModerateRationale: All of the above factors make a broad generalization of the CAPM to international stocks

13、problematic.13. The yield on a 1-year bill in the U.K. is 8% and the present exchange rate is 1 pound = U. S. $1.60. If you expect the exchange rate to be 1 pound - U. S. $1.50 a year from now, the return a U. S. investor can expect to earn by investing in U.K. bills isA) -6.7%B) 0%C) 8%D) 1.25%E) n

14、one of the aboveAnswer: D Difficulty: Moderate Rationale: r(US) = 1 + r(UK)F0/E0 - 1; 1.081.50/1.60 - 1 = 1.25%.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. $1.60. The 1-year forward rate is 1 pound = $1.57. What is the minimum yiel

15、d on a 1-year risk-free security in Britain that would induce a U. S. investor to invest in the British security?A) 2.44%B) 2.50%C) 7.00%D) 7.62%E) none of the aboveAnswer: C Difficulty: Moderate Rationale: 1.05 = (1 + r) X 1.57/1.60 - 1; r = 7.0%.15. The interest rate on a 1-year Canadian security

16、is 8%. The current exchange rate is C$ = US $0.78. The 1-year forward rate is C$ = US $0.76. The return (denominated in U.S. $) that a U.S. investor can earn by investing in the Canadian security is .A) 3.59%B) 4.00%C) 5.23%D) 8.46%E) none of the aboveAnswer: C Difficulty: ModerateRationale: 1.080.7

17、6/0.78 = x - 1; x = 5.23%.16. 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. investorindifferent between inves

18、ting in the U. S. security and investing the British security.A) 1.6037B) 2.0411C) 1.7500D) 2.3369E) none of the aboveAnswer: A Difficulty: ModerateRationale: 1.04/1.07 = x/1.65; x = 1.6037.17. The present exchange rate is C$ = U. S. $0.78. The one year future rate is C$ = U. S. $0.76. The yield on

19、a 1-year U.S. bill is 4%. A yield of on a 1-year Canadian bill will make investor indifferent between investing in the U.S. bill and the Canadian bill.A) 2.4%B) 1.3%C) 6.4%D) 6.7%E) none of the aboveAnswer: D Difficulty: Moderate Rationale: 1.04 = ($0.76/$0.78)(1 + r) - 1; r = 6.7%.Use the following

20、 to answer questions 18-19: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%,

21、 respectively. The covariance of returns between the U.S. and Canadian stock markets is 1.5%.18. 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 .A) 12.0%B) 12.5%C) 13.0%D) 15.5%E) none of the aboveAnswer

22、: D Difficulty: ModerateRationale: 18% (0.5) + 13%(0.5) = 15.5%.19. If you invested 50% of your money in the Canadian stock market and 50% in the U.S. stock market, the standard deviation of return of your portfolio would be .A) 12.53%B) 15.21%C) 17.50%D) 18.75%E) none of the aboveAnswer: A Difficul

23、ty: Difficult2 2 2 2 1/2Rationale: sP = (0.5)2(15%)2 + (0.5)2(20%)2 + 2(0.5)(0.5)(1.5)1/2 = 12.53%.20. The major concern that has been raised with respect to the weighting of countries within the EAFE index isA) currency volatilities are not considered in the weighting.B) cross-correlations are not

24、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 aboveAnswer: D Difficulty: ModerateRationale: Some argue that countries should be weighted in proportion to their GDP to prop

25、erly 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 pound cost $1.50. No dividends were paid on the British securities in the past year. Your to

26、tal return based on U. S. dollars was if the value ofthe securities is now 2,400 pounds and the pound is worth $1.60.A) 16.7%B) 20.0%C) 28.0%D) 40.0%E) none of the aboveAnswer: C Difficulty: ModerateRationale: ($3,840 - $3,000)/$3,000 = 0.28, or 28.0%.22. U.S. investorsA) can trade derivative securi

27、ties 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 Times Share Exchange) indexes of U.K. and European stocks.D) A and C.E) no

28、ne of the above.Answer: D Difficulty: ModerateRationale: U. S. investors can invest as indicated in A, examples of which are given in C.23. Exchange rate riskA) results from changes in the exchange rates in the currencies of the investor and the country in which the investment is made.B) can be hedg

29、ed 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: ModerateRationale: Although international investing involves risk resulting from the changing exchange rates between currencies, this risk can be hedged by using a forwar

30、d or futures contract in foreign exchange.24. International investingA) 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 index (Europe, Australia, Far East).C) can be measured against international indexe

31、s 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: ModerateRationale: International investments can be evaluated against an international index, such as EAFE, created by Morgan Stanley, and others that h

32、ave become available in recent years.25. Investors looking for effective international diversification shouldA) invest about 60% of their money in foreign stocks.B) invest the same percentage of their money in foreign stocks that foreign equities represent in the world equity market.C) frequently he

33、dge currency exposure.D) both A and B.E) none of the above.Answer: E Difficulty: ModerateUse the following to answer questions 26-28:The manager of Quantitative International Fund uses EAFE as a benchmark. Last years performance for the fund and the benchmark were as follows:26. Calculate Quantitati

34、ves currency selection return contribution.A)+20%B)-5%C)+15%D)+5%E)-10%Answer: B Difficulty: DifficultRationale: EAFE: (.30)(10%) + (.10)(-10%) + (.60)(30%) = 20% appreciation;Diversified: (.25)(10%) + (.25)(-10%) + (.50)(30%) = 15% appreciation; Loss of 5% relative to EAFE.27. Calculate Quantitativ

35、es country selection return contribution.A) 12.5%B) -12.5%C) 11.25%D) -1.25%E) 1.25%Answer: D Difficulty: DifficultRationale: EAFE: (.30)(10%) + (.10)(5%) + (.60)(15%) = 12.5%; Diversified:(.25)(10%) + (.25)(5%) + (.50)(15%) = 11.25%; Loss of 1.25% relative to EAFE.28. Calculate Quantitatives stock

36、selection return contribution.A) 1.0%B) -1.0%C) 3.0%D) 0.25%E) none of the above.Answer: A Difficulty: ModerateRationale: (9% - 10%).25 + (8% - 5%).25 + (16% - 15%).50 = 1.00%29. Using the S&P500 portfolio as a proxy of the market portfolioA) is appropriate because U.S. securities represent more tha

37、n 60% of world equities.B) is appropriate because most U.S. investors are primarily interested in U.S. securities.C) is appropriate because most U.S. and non-U.S. investors are primarily interested in U.S. securities.D) is inappropriate because U.S. securities make up less than 40% of world equities

38、.E) is inappropriate because the average U.S. investor has less than 20% of her portfolio in non-U.S. equities.Answer: D Difficulty: EasyRationale: It is important to take a global perspective when making investment decisions. The S&P500 is increasingly inappropriate.30. The average country equity m

39、arket share isA) less than 2%B) between 3% and 4%C) between 5% and 7%D) between 7% and 8%E) greater than 8%Answer: A Difficulty: Moderate Rationale: This is stated in the text and confirmed by Table 25.1.31. When an investor adds international stocks to her portfolioA) it will raise her risk relativ

40、e to the risk she would face just holding U.S. stocks.B) she can reduce its risk relative to the risk she would face just holding U.S. stocks.C) she will increase her expected return, but must also take on more risk.D) it will have no significant impact on either the risk or the return of her portfo

41、lio.E) she needs to seek professional management because she doesnt have access to international stocks on her own.Answer: B Difficulty: EasyRationale: See Figure 25.1.32. Which of the following countries has an equity index that lies on the efficient frontier generated by allowing international div

42、ersification?A) the United StatesB) the United KingdomC) JapanD) NorwayE) none of the above-each of these countries indexes fall inside the efficient frontier. Answer: E Difficulty: ModerateRationale: See Figure 25.8. To get to the efficient frontier you would need to combinethe countries indexes.33

43、. “ ADRs” stands for and“ WEB”S stands for .A) Additional Dollar Returns; Weekly Equity and Bond SurveyB) Additional Daily Returns; World Equity and Bond SurveyC) American Dollar Returns; World Equity and Bond StatisticsD) American Depository Receipts; World Equity Benchmark SharesE) Adjusted Dollar

44、 Returns; Weighted Equity Benchmark SharesAnswer: D Difficulty: EasyRationale: The student should be familiar with these basic terms that relate to international investing.34. WEBS portfoliosA) are passively managed.B) are shares that can be sold by investors.C) are free from brokerage commissions.D

45、) A and BE) A, B, and CAnswer: D Difficulty: ModerateRationale: They are passively managed and when holders want to divest their shares they sell them rather than redeeming them with the company that issued them. There are brokerage commissions, however.35. The EAFE isA) the East Asia Foreign Equity

46、 index.B) the Economic Advisors Foreign Estimator index.C) the European and Asian Foreign Equity index.D) The European, Asian, French Equity index.E) the European, Australian, Far East index.Answer: E Difficulty: EasyRationale: The index is one of several world equity indices that exist. It is compu

47、ted by Morgan Stanley.36. Home bias refers toA) the tendency to vacation in your home country instead of traveling abroad.B) the tendency to believe that your home country is better than other countries.C) the tendency to give preferential treatment to people from your home country.D) the tendency t

48、o overweight investments in your home country.E) none of the above.Answer: DEssay Questions37. Discuss performance evaluation of international portfolio managers in terms of potential sources of abnormal returns.Difficulty: ModerateAnswer:The following factors may be measured to determine the perfor

49、mance of an international portfolio manager.(A) Currency selection: a benchmark might be the weighted average of the currency appreciation of the currencies represented in the EAFE portfolio.(B) Country selection measures the contribution to performance attributable to inv esti ng in the better-perf

50、ormi ng stock markets of the world. Country selecti on can be measured as the weighted average of the equity in dex retur ns of each country using as weights the share of the man agers portfolio in each coun try.(C) Stock selection ability may be measured as the weighted average of equity returns in

51、 excess of the equity in dex in each coun try.(D) Cash/bond selection may be measured as the excess return derived from weighting bonds and bills differe ntly from some ben chmark weights.The rati on ale for this questi on is to determ ine the stude nts un dersta nding of evaluat ing the various com

52、p onents of pote ntial abno rmal returns result ing from actively managing an intern ati onal portfolio.38. 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).Difficulty: ModerateAn swer:Some

53、 of the factors that might be con sidered in a multifactor intern ati onal APT modelare:(A) A world stock index(B) A national (domestic) stock index(C) Industrial/sector indexes(D) Currency movements.Studies have in dicated that domestic factors appear to be the dominant in flue nee on stock returns

54、. However, there is clear evide nee of a world market factor duri ng the market crash of October 1987.The rati on ale for this questi on is to determ ine the stude nts un dersta nding of the possible effects of various factors on an intern ati onal portfolio.39. Marla holds her portfolio 100% in U.S

55、. securities. She tells you that she believesforeig n inv esti ng can be extremely hazardous to her portfolio. Shes not sure about the details, but has“ heard some things ” . Discuss this idea with Marla by listing threeobjecti ons you have heard from your clie nts who have similar fears. Expla in e

56、ach of the objecti ons is subject to faulty reas oning.Difficulty: ModerateAn swer:A few of the factors stude nts may men ti on are* Clie nt:“ The U.S. markets have done extremely well in the past few years, so Ishould stay 100% invested in them. Your Reply: You can explain that there are other time

57、s whe n foreig n markets have beat the U.S. substa ntially in performa nee. You cant tell easily beforeha nd what markets will do the best. It is importa nt to con sider that there are many times whe n coun tries markets move in differe nt direct ions and you can buffer your risk to some exte nt by inv esti ng globally.* Clie nt:“ You should keep your money at home. ” Your Reply: Dont con fusefamiliarity with good portfolio ma