Chap025 - Chapter 25 International Diversification Chapter...

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Chapter 25 - International Diversification Chapter 25 International Diversification 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 American Depository Receipts (ADRs) allow U.S. investors to invest in foreign stocks via transactions on the U.S. stock exchanges. Difficulty: Easy 2. __________ refers to the possibility of expropriation of assets, changes in tax policy, and the possibility of restrictions on foreign exchange transactions. All of the above factors are political in nature, and thus are examples of political risk. Difficulty: Easy 25-1
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Chapter 25 - International Diversification 3. __________ are mutual funds that invest in one country only. Mutual funds that invest in the stocks of one country only are called single-country funds. Difficulty: Easy 4. The performance of an internationally diversified portfolio may be affected by All of the above factors may affect the performance of an international portfolio. Difficulty: Easy 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 Correlation coefficients were typically below .9, while correlations between well-diversified U.S. market portfolios were typically above .9. See Table 25.10. Difficulty: Moderate 25-2
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Chapter 25 - International Diversification 6. The __________ index is a widely used index of non-U.S. stocks. The Europe, Australia, Far East (EAFE) index computed by Morgan Stanley is a widely used index of non-U.S. stocks. Difficulty: Easy 7. The __________ equity market had the highest average local currency return between 2001 and 2005. See Table 25.9. Difficulty: Moderate 8. The developed country with the highest average local-currency equity-market return between 2001 and 2005 is See Table 25.9. Difficulty: Moderate 25-3
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Chapter 25 - International Diversification
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