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Unformatted text preview: Chapter 17 Global Investing TRUE/FALSE QUESTIONS 1. T F All MSCI equity indexes are calculated using full market capitalization weights. 2. T F The three largest securities markets in the world are found in the United States, Japan, and Germany. 3. T F The emerging markets of countries such as Brazil, Mexico, and South Africa, hold speculative potential and offer investors the opportunity to participate in dynamically growing economies. 4. T F The typical emerging market covered by MSCI has GDP per capita that is one- half that seen in countries with developed markets. 5. T F A free index includes various securities that are only available to domestic investors or are available to domestic investors on more favorable terms than those accessible to foreign investors. 6. T F Foreign stock market returns are often more volatile than domestic returns. 7. T F Foreign markets typically have modest daily trading activity when compared with the United States. 8. T F Brokerage commissions, exchange fees, currency translation costs, and custodial fees tend to be substantially lower in emerging markets than in the developed markets of Europe. 9. T F Expropriation risk is the most pervasive political risk faced when making global investments. 10. T F When the dollar is weak, the dollar price of goods and services purchased from abroad falls. 11. T F A trade surplus occurs when U.S. consumers buy more goods and services produced abroad than the amount of U.S. goods and services bought by foreigners. 12. T F If stock prices in Japan rise by 10% and the dollar weakens 3% against the Japanese Yen, the net return earned by U.S. investors on their Japanese holdings jumps to 13%. 13. T F During the late-1990s, the valuation of U.S. equities reached unprecedented lows relative to valuations in foreign markets. 14. T F Investors exhibit a home bias by overweighting their portfolios in domestic securities. 15. T F In many developed foreign markets, local trading hours are irregular, clearing and trade settlement capabilities are antiquated, and shareholder reporting requirements are often lax. 16. T F Brazil hosts a leading emerging stock market. 17. T F Investing in foreign markets, especially emerging foreign markets, generally involves much higher market volatility than that associated with U.S. equities. 18. T F Liquidity risk refers to loss potential tied to the fact that a stock can become difficult to buy or sell. 19. T F In a sponsored ADR program, exchanges like the NYSE initiate the ADR process and work with a depositary bank to actively manage the program. 20. T F Level I ADRs are the highest-profile forms of sponsored ADR programs. In a Level I ADR program, an issuer floats a public offering of ADRs in the United States and obtains listing on a major U.S. exchange or Nasdaq....
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This note was uploaded on 05/03/2011 for the course FIN 427 taught by Professor Staff during the Spring '08 term at Washington State University .
- Spring '08