投資學(xué)第7版testbank答案5

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, changesin 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 returnbetween 2001 and 2005.A) RussianB) NorwegianC) U.K.D) U.S.E) none of the a

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

9、verage U.S. dollar standarddeviation between 2001 and 2005.A) TurkishB) FinnishC) IndonesianD) U.S.E) none of the aboveAnswer: A Difficulty: Moderate Rationale: See Table 25.9.10. The equity market had the highest average local currencystandard deviation between 2001 and 2005.A) TurkishB) FinnishC)

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

11、ization 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 curre

12、nciesC) taxes, transaction costs and capital barriers across countries makeit 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 stock

13、s 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)

14、 none of the aboveAnswer: D Difficulty: ModerateRationale: 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 yie

15、ld 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: Moderate Rationale: 1.080

17、.76/0.78 = x - 1; x = 5.23%.16. Suppose the 1-year risk-free rate of return in the U.S. is 4%a nd 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 forthe pound would make a U. S. investor indifferent between inv

18、esting 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: Moderate Rationale: 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

19、on 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 follow

20、ing to answer questions 18-19:Assumet here 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 2

21、0%, respectively.The covariance of returnsbetween 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 beA) 12.0%B) 12.5%C) 13.0%D) 15.5%E) none of the aboveAnswer:

22、 D Difficulty: Moderate Rationale: 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: DifficultRationale: 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 considere

24、d in the weighting.C) inflation is not represented in the weighting.D) the weights are notproportional to the asset bases of the respectivecountries.E) none of the aboveAnswer: D Difficulty: ModerateRationale: Some argue that countries should be weighted in proportiontotheir GDPt o properly adjust f

25、or 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 total return ba

26、sed on U. S. dollars was if the value of the securities is now 2,400pounds 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: Moderate Rationale: ($3,840 - $3,000)/$3,000 = 0.28, or 28.0%.22. U.S. investorsA) can trade derivative securities based o

27、n 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) none of the ab

28、ove.Answer: D Difficulty: ModerateRationale: U. S. investors can invest as indicated in A, examples of whichare 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 hedged by using a

29、 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 forward or futures

30、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 indexes computed by

31、 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 have become av

32、ailable 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 hedge currency

33、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 Quantitatives currency

34、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%a ppreciation;Diversified: (.25)(10%) + (.25)(-10%) + (.50)(30%) = 15% appreciation;Loss of 5% relative to EAFE.27. Calculate Quantitatives countr

35、y 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 selection

36、 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 than 60%o f

37、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%o f world equities.E) is in

38、appropriate 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 market sha

39、re 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 U.S. stocks.rela

40、tiveto the riskshe would facejustholdingB) shecan reduce itsriskrelativeto theriskshe would facejustholdingU.Sstocks.C) shewill increaseher expectedreturn,butmust also takeon more risk.D) it will have no significant impact on either the risk or the return of her portfolio.E) she needs to seek profes

41、sional 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 generatedby allowing international diversification?A) the United State

42、sB) 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 combine the countries indexes.33. “ADRs” stands for and“ WEB”S s

43、tands 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 Returns; Weighted Equity Benchmar

44、k 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) A and BE) A, B, and CAnswer: D D

45、ifficulty: ModerateRationale: They are passively manageda nd 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 index.B) the Economic Advisors Fo

46、reign 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 computed by Morgan Stanley.36. Home bias

47、 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 to overweight investments in your ho

48、me 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 performance of an international portfolio

49、 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 investing in the better-performing stock markets of the world. Co

50、untry selection can be measured as the weighted average of the equity index returns of each country using as weights the share of the managers portfolio in each country.(C) Stock selection ability may be measured as the weighted average of equity returns in excess of the equity index in each country

51、.(D) Cash/bond selection may be measured as the excess return derived from weighting bonds and bills differently from some benchmark weights.The rationale for this question is to determine the studentsunderstanding of evaluating the various components of potential abnormal returns resulting from act

52、ively managing an international 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: ModerateAnswer:Someo f the factors that might be considered in a multifactor inter

53、national APT model are:(A) A world stock index(B) A national (domestic) stock index(C) Industrial/sector indexes(D) Currency movements.Studies have indicated that domestic factors appear to be the dominant influence on stock returns. However, there is clear evidence of a world market factor during t

54、he market crash of October 1987.The rationale for this question is to determine the students understanding of the possible effects of various factors on an international portfolio.39. Marla holds her portfolio 100% in U.S. securities. She tells you thatshe believes foreign investing can be extremely

55、 hazardous to her portfolio. Shes not sure about the details, but has “heard some things ”. Discuss this idea with Marla by listing three objections you have heard from your clients who have similar fears. Explain each of the objections is subject to faulty reasoning.Difficulty: ModerateAnswer:A few

56、 of the factors students may mention areClient: “ The U.S. markets have done extremely well in the past few years, so I should stay 100% invested in them.” Your Reply: You canexplain that there are other times when foreign markets have beat the U.S. substantially in performance. You cant tell easily beforehand what markets will do the best. It is important to consider that there are many times when countries markets move in different directions and you can buffer your risk to some extent by investing globally.Client: “ You should keep your money at home.” Your Reply: Dont