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 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: 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%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 forthe pound would make a U. S. investor indifferent 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: 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 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: ModerateRationale: 1.04 = ($0.76/$0.78)(1 + r) - 1; r = 6.7%.Use the following

20、 to answer questions 18-19:Assumethere 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%, r

21、espectively. 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 beA) 12.0%B) 12.5%C) 13.0%D) 15.5%E) none of the aboveAnswer: D

22、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 Difficulty:

23、 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 considered i

24、n 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 GDPto properly adjust for t

25、he 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 based

26、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 on pr

27、ices 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 above.

28、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 for

29、ward 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 cont

30、ract 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 Mor

31、gan 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 availa

32、ble 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 expo

33、sure.D) both A and B.E) none of the above.Answer: E Difficulty: ModerateUse the followi ng to an swer questi ons 26-28:The manager of Quantitative International Fund uses EAFE as a benchmark. Last years performa nee for the fund and the ben chmark were as follows:EATEWeightReturn onEquity IndexCurre

34、ncy Application Ei/Eq-1Quantitative* WeightQuantitativeReturnEur.3010%10%.259%Aus,.105%-10%.258%FE.6015%30%.5016%26. Calculate Quantitatives currency selection return contribution.A) +20%B) -5%C) +15%D) +5%E) -10%An swer: B Difficulty: DifficultRatio nale:EAFE:(.30)(10%) + (.10)(-10%) + (.60)(30%) =

35、 20%appreciatio n;Diversified: (.25)(10%) + (.25)(-10%) + (.50)(30%) = 15% ap preciatio n;Loss of 5% relative to EAFE.27. Calculate Quantitatives country selection return contribution.A) 12.5%B) -12.5%C) 11.25%D) -1.25%E) 1.25%An swer: D Difficulty: DifficultRatio nale:EAFE:(.30)(10%) + (.10)(5%) +

36、(.60)(15%) = 12.5%; Diversified:(.25)(10%) + (.25)(5%) + (.50)(15%) = 11.25%; Loss of 1.25% relative toEAFE.28. Calculate Quantitatives stock 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%

37、- 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%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

38、.S. investors are primarily interested in U.S. securities.D) is inappropriate because U.S. securities makeup less than 40%of world equities.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 importa

39、nt to take a global perspective when making investment decisions. The S&P500 is increasingly inappropriate.30. The average country equity market 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 stat

40、ed 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.relativeto the riskshe would facejustholdingB) shecan reduce itsriskrelativeto theriskshe would facejustholdingU.Sstocks.C) shewill increaseher expectedretu

41、rn,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 professional management because she doesnt have access to international stocks on her own.Answer: B Difficulty: EasyRationale: See Figure 25.1.32. Which of th

42、e following countries has an equity index that lies on the efficient frontier generatedby allowing international diversification?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: Mod

43、erateRationale: 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 stands for A) Additional Dollar Returns; Weekly Equity and Bond SurveyB) Additional Daily Returns; World Equity and Bond SurveyC) American Dollar Returns

44、; World Equity and Bond StatisticsD) American Depository Receipts; World Equity Benchmark SharesE) Adjusted Dollar Returns; Weighted Equity Benchmark SharesAnswer: D Difficulty: EasyRationale: The student should be familiar with these basic terms that relate to international investing.34. WEBS portf

45、oliosA) 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 Difficulty: ModerateRationale: They are passively managedand whenholders want to divest their shares they sell them rather than redeeming them with the c

46、ompany that issued them. There are brokerage commissions, however.35. The EAFE isA) the East Asia Foreign Equity 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 ind

47、ex.Answer: E Difficulty: EasyRationale: The index is one of several world equity indices that exist.It is computed 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 ot

48、her countries.C) the tendency to give preferential treatment to people from your home country.D) the tendency to 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 sourc

49、es of abnormal returns.Difficulty: ModerateAnswer:The following factors may be measured to determine the performance 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 portfoli

50、o.(B) Country selection measures the contribution to performance attributable to investing in the better-performing stock markets of the world. Country 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 i

51、n 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.(D) Cash/bond selection maybe measured as the excess return derived from weighting bonds and bills differently from some benchmark weights.The rationale

52、for this question is to determine the studentsunderstanding of evaluating the various components of potential abnormal returns resulting from actively managing an international portfolio.38. Discuss someof the factors that might be included in a multifactor model of security returns in an internatio

53、nal application of arbitrage pricing theory (APT).Difficulty: ModerateAnswer:Someof the factors that might be considered in a multifactor international APT model are:(A) A world stock index(B) A national (domestic) stock index(C) Industrial/sector indexes(D) Currency movements.Studies have indicated

54、 that domestic factors appear to be the dominant influence on stock returns. However, there is clear evidence of a world market factor during the 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 i

55、nternational portfolio.39. Marla holds her portfolio 100% in U.S. securities. She tells you thatshe believes foreign investingcan be extremely 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

56、 heard from your clie nts who have similar fears.Explai n each of the object ions is subjectto 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 fewyears, so I should stay 100% in vested in

57、them.” Your Reply: You canexplai n that there are other times 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 important to consider that there are many times whe n coun tries markets move in differe nt directi ons and you can buffer your risk to some exte nt by inv est ing globally.* Clie nt:“