InternationalFinancialManagement_5thEd_Eun_TestBank15

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15 Student: ___________________________________________________________________________ 1. Under the investment dollar premium system, A . U.K. residents received a premium over the prevailing commercial exchange rate when they sold foreign securities and repatriated the funds to the U.K. B . U.K. residents had to pay a premium over the prevailing commercial exchange rate when they bought foreign currencies to invest in foreign securities. C. None of the above 2. Foreign equities as a proportion of U.S. investors' portfolio wealth rose from about 1 percent in the early 1980s to about ___ percent by 2007. A. 10% B. 23% C. 33% D. 67% 3. In the context of investments in securities (stocks and bonds), portfolio risk diversification refers to: A. the time-honored adage "Don't put all your eggs in one basket" B. investors' ability to reduce portfolio risk by holding securities that are less than perfectly positively correlated C. the fact that the less correlated the securities in a portfolio, the lower the portfolio risk D. all of the above 4. In the graph at right, X and Y represent A. U.S. stocks and international stocks B. international stocks and U.S. stocks C. systematic risk and unsystematic risk D. none of the above 5. You will get more diversification A. across industries than across countries B. across countries than across industries C. across stocks and bonds than across countries D. none of the above 6. Systematic risk is: A. nondiversifiable risk B. the risk that remains even after investors fully diversify their portfolio holdings C. a and b D. none of the above 7. The "world beta" measures the A. unsystematic risk B. sensitivity of returns on a security to world market movements C. risk-adjusted performance D. risk of default and bankruptcy
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8. The less correlated the securities in a portfolio, A. The lower the portfolio risk B. The higher the portfolio risk C. The lower the unsystematic risk. D. The higher the diversifiable risk. 9. Regarding the mechanics of international portfolio diversification, which statement is true? A. Security returns are much less correlated across countries than within a county. B. Security returns are more correlated across countries than within a county. C. Security returns are about as equally correlated across countries as they are within a county. D. None of the above 10. Systematic risk A. Is also known as non-diversifiable risk. B. Is market risk C. Refers to the risk that remains even after investors fully diversify their portfolio holdings. D. All of the above 11. A fully diversified U.S. portfolio is about A. 75 percent as risky as a typical individual stock. B. 27 percent as risky as a typical individual stock. C. 12 percent as risky as a typical individual stock.
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This note was uploaded on 07/28/2011 for the course FIN 308 taught by Professor Canarella during the Summer '11 term at University of Nevada, Las Vegas.

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InternationalFinancialManagement_5thEd_Eun_TestBank15 - 15...

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