International Portfolio Investment

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Question 1
Free
Multiple Choice

Under the investment dollar premium system,

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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

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Question 2
Free
Multiple Choice

Foreign equities as a proportion of U.S.investors' portfolio wealth rose from about 1 percent in the early 1980s to about ____________ by 2007.

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A

10%

B

23%

C

33%

D

67%

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Question 3
Free
Multiple Choice

In the context of investments in securities (stocks and bonds),portfolio risk diversification refers to

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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

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Question 4
Free
Multiple Choice

In the graph below,X and Y represent image

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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

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Question 5
Free
Multiple Choice

You will get more diversification

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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

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Question 6
Multiple Choice

Systematic risk is

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A
nondiversifiable risk.
B
the risk that remains even after investors fully diversify their portfolio holdings.
C
both a) and b)
D
none of the above
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Question 7
Multiple Choice

The "world beta" measures the

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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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Question 8
Multiple Choice

The less correlated the securities in a portfolio,

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A
the lower the portfolio risk.
B
the higher the portfolio risk.
C
the lower the unsystematic risk.
D
the higher the diversifiable risk.
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Question 9
Multiple Choice

Regarding the mechanics of international portfolio diversification,which statement is true?

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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
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Question 10
Multiple Choice

Systematic risk

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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
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Question 11
Multiple Choice

A fully diversified U.S.portfolio is about

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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.
D
Half as risky as a fully diversified international portfolio.
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Question 12
Multiple Choice

Studies show that international stock markets tend to move more closely together when the volatility is higher.This finding suggests that

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A
investors should liquidate their portfolio holdings during turbulent periods.
B
since investors need risk diversification most precisely when markets are turbulent, there may be less benefit to international diversification for investors who liquidate their portfolio holdings during turbulent periods.
C
this kind of correlation is why international portfolio diversification is smart for today's investor.
D
none of the above
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Question 13
Multiple Choice

The "Sharpe performance measure" (SHP)is

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A
a "risk-adjusted" performance measure.
B
the excess return (above and beyond the risk-free interest rate) per standard deviation risk.
C
the sensitivity level of a national market to world market movements.
D
both a) and b)
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Question 14
Multiple Choice

With regard to estimates of "world beta" measures of the sensitivity of a national market to world market movements,

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A
the Japanese stock market is the most sensitive to world market movements.
B
the U.S.stock market is the least sensitive to world market movements.
C
both a) and b)
D
none of the above
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Question 15
Multiple Choice

The "Sharpe performance measure" (SHP)is

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A
image
B
image
C
image
D
none of the above
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Question 16
Multiple Choice

The mean and standard deviation (SD)of monthly returns,over a given period of time,for the stock markets of two countries,X and Y are image Assuming that the monthly risk-free interest rate is 0.25%,the Sharpe performance measures,SHP(X)and SHP(Y),and the performance ranks,respectively,for X and Y are:

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A
SHP(X) = 0.271, rank = 1, and SHP(Y) = 0.219, rank = 2
B
SHP(X) = 0.271, rank = 2, and SHP(Y) = 0.219, rank = 1
C
SHP(X) = 18.84, rank = 1, and SHP(Y) = 23.04, rank = 2
D
SHP(X) = 23.04, rank = 2, and SHP(Y) = 18.84, rank = 1
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Question 17
Multiple Choice

With regard to the OIP,

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A
the composition of the optimal international portfolio is identical for all investors, regardless of home country.
B
the composition of the optimal international portfolio varies depending upon the numeraire currency used to measure returns.
C
the composition of the optimal international portfolio is identical for all investors, regardless of home country, if they hedge their risk with currency futures contracts.
D
both b) and c)
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Question 18
Multiple Choice

With regard to the OIP,

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A
the composition of the optimal international portfolio is identical for all investors, regardless of home country.
B
the OIP has more return and less risk for all investors, regardless of home country.
C
the composition of the optimal international portfolio is identical for all investors, regardless of home country, if they hedge their risk with currency futures contracts.
D
none of the above
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Question 19
Multiple Choice

With regard to the OIP,

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A
the composition of the optimal international portfolio is identical for all investors, regardless of home country.
B
the OIP has more return and less risk for all investors, regardless of home country.
C
the composition of the optimal international portfolio is identical for all investors of a particular country, whether or not they hedge their risk with currency futures contracts.
D
none of the above
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Question 20
Multiple Choice

With regard to the OIP,

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A
the optimal international portfolio contains investments from every country.
B
the OIP has more return and less risk for all investors.
C
the composition of the optimal international portfolio changes according to IRP.
D
none of the above
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