Chap025 - Multiple Choice Questions 1. Shares of several...

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Multiple Choice Questions 1. Shares of several foreign firms are traded in the U.S. 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 invest in foreign stocks 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 risk B) foreign exchange risk C) market risk D) political risk E) none 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 Difficulty: Easy Rationale: Mutual funds that invest in the stocks of one country only are called single- country funds.
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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 Answer: 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 U.S. stock index and stock- index portfolios of other countries were A) negative B) positive but less than .9 C) approximately 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 25.10. 6. The __________ index is a widely used index of non-U.S. stocks. A) CBOE B) 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 non-U.S. stocks.
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Chapter 25 International Diversification 7. The __________ equity market had the highest average local currency return between 2001 and 2005. A) Russian B) Norwegian C) U.K. D) U.S. E) none of the above Answer: A Difficulty: Moderate Rationale: See Table 25.9. 8. The __________ equity market had the highest average U.S. dollar return between 2001 and 2005. A) Russian B) Finnish C) Columbian D) U.S. E) none of the above Answer: C Difficulty: Moderate Rationale: See Table 25.9. 9. The __________ equity market had the highest average U.S. dollar standard deviation between 2001 and 2005. A) Turkish B) Finnish C) Indonesian D) U.S. E) none of the above Answer: A Difficulty: Moderate Rationale: See Table 25.9. 10.
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This note was uploaded on 02/22/2009 for the course ECONOMICS 4313 taught by Professor Tsui during the Spring '09 term at HKU.

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Chap025 - Multiple Choice Questions 1. Shares of several...

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