Question 1

Using local currency returns, the S&P 500 has the highest correlation with

Accepted Answer

A) Euronext. 
B) FTSE. 
C) Nikkei. 
D) Toronto. 
A) Euronext. 
B) FTSE. 
C) Nikkei. 
D) Toronto. D

Question 2

The yield on a 1-year bill in the U.K.is 8%, and the present exchange rate is 1 pound = Cad.$1.60.If you expect the exchange rate to be 1 pound = Cadf.$1.50 a year from now, the return a Canadian investor can expect to earn by investing in U.K.bills is

Accepted Answer

A) -6.7%. 
B) 0%. 
C) 8%. 
D) 1.25%. 
A) -6.7%. 
B) 0%. 
C) 8%. 
D) 1.25%. D

Question 3

You are a Canadian investor who purchased British securities for 4,000 pounds one year ago when the British pound cost $1.50.No dividends were paid on the British securities in the past year.Your total return based on Canadian dollars was __________ if the value of the securities is now 4,400 pounds and the pound is worth $1.62.

Accepted Answer

A) 16.7% 
B) 18.8% 
C) 28.0% 
D) 40.0% 
A) 16.7% 
B) 18.8% 
C) 28.0% 
D) 40.0% B

Question 4

Canadian investors

Accepted Answer

A) can trade derivative securities based on prices in foreign security markets. 
B) cannot trade foreign derivative securities. 
C) can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange) indexes of U.K.and European stocks. 
D) can trade derivative securities based on prices in foreign security markets and can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange) indexes of U.K.and European stocks. 
A) can trade derivative securities based on prices in foreign security markets. 
B) cannot trade foreign derivative securities. 
C) can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange) indexes of U.K.and European stocks. 
D) can trade derivative securities based on prices in foreign security markets and can trade options and futures on the Nikkei stock index of 225 stocks traded on the Tokyo stock exchange and on FTSE (Financial Times Share Exchange) indexes of U.K.and European stocks.

Question 5

You are a Canadian investor who purchased British securities for 2,000 pounds, one year ago when the British pound cost $1.50.No dividends were paid on the British securities in the past year.Your total return based on Canadian dollars was __________ if the value of the securities is now 2,400 pounds and the pound is worth $1.60.

Accepted Answer

A) 16.7% 
B) 20.0% 
C) 28.0% 
D) 40.0% 
A) 16.7% 
B) 20.0% 
C) 28.0% 
D) 40.0%

Question 6

According to PRS, in 2015, which country had the highest composite risk rating on a scale of 0 (most risky) to 100 (least risky)?

Accepted Answer

A) Switzerland 
B) Canada 
C) Germany 
D) U.S. 
A) Switzerland 
B) Canada 
C) Germany 
D) U.S.

Question 7

The straightforward generalization of the simple CAPM to international stocks is problematic because

Accepted Answer

A) inflation-risk perceptions by different investors in different countries will differ as consumption baskets differ. 
B) investors in different countries view exchange-rate risk from the perspective of different domestic currencies. 
C) taxes, transaction costs, and capital barriers across countries make it difficult for investors to hold a world-index portfolio. 
D) All of the options are correct. 
A) inflation-risk perceptions by different investors in different countries will differ as consumption baskets differ. 
B) investors in different countries view exchange-rate risk from the perspective of different domestic currencies. 
C) taxes, transaction costs, and capital barriers across countries make it difficult for investors to hold a world-index portfolio. 
D) All of the options are correct.

Question 8

When Country A's currency strengthens against Country B's, citizens of Country A will

Accepted Answer

A) pay less to buy Country B's products. 
B) pay more to buy Country B's products. 
C) pay more to buy domestically-produced products. 
D) not be affected by the change in their currency's value. 
A) pay less to buy Country B's products. 
B) pay more to buy Country B's products. 
C) pay more to buy domestically-produced products. 
D) not be affected by the change in their currency's value.

Question 9

"ADRs" stands for ___________, and "WEBS" stands for ____________.

Accepted Answer

A) additional dollar returns; weekly equity and bond survey 
B) additional daily returns; world equity and bond survey 
C) American dollar returns; world equity and bond statistics 
D) American depository receipts; world equity benchmark shares 
A) additional dollar returns; weekly equity and bond survey 
B) additional daily returns; world equity and bond survey 
C) American dollar returns; world equity and bond statistics 
D) American depository receipts; world equity benchmark shares

Question 10

Suppose the 1-year risk-free rate of return in Canada.is 6%.The current exchange rate is 1 pound = Cad $1.62.The 1-year forward rate is 1 pound = $1.53.What is the minimum yield on a 1-year risk-free security in Britain that would induce a Canadian investor to invest in the British security?

Accepted Answer

A) 15.44% 
B) 13.50% 
C) 12.24% 
D) 7.62% 
A) 15.44% 
B) 13.50% 
C) 12.24% 
D) 7.62%

Question 11

When an investor adds international stocks to his or her Canadian stock portfolio,

Accepted Answer

A) it will raise his or her risk relative to the risk he or she would face just holding U.S.stocks. 
B) he or she can reduce the risk of his or her portfolio. 
C) he or she will increase his or her expected return but must also take on more risk. 
D) it will have no impact on either the risk or the return of his or her portfolio. 
A) it will raise his or her risk relative to the risk he or she would face just holding U.S.stocks. 
B) he or she can reduce the risk of his or her portfolio. 
C) he or she will increase his or her expected return but must also take on more risk. 
D) it will have no impact on either the risk or the return of his or her portfolio.

Question 12

As exchange rates change, they

Accepted Answer

A) change the relative purchasing power between countries. 
B) can affect imports and exports between countries. 
C) will affect the flow of funds between countries. 
D) All of the options are true. 
A) change the relative purchasing power between countries. 
B) can affect imports and exports between countries. 
C) will affect the flow of funds between countries. 
D) All of the options are true.

Question 13

Suppose the 1-year risk-free rate of return in Canada is 4%, and the 1-year risk-free rate of return in Britain is 7%.The current exchange rate is 1 pound = Cad.$1.65.A 1-year future exchange rate of __________ for the pound would make a Canadian investor indifferent between investing in the Canadian security and investing in the British security.

Accepted Answer

A) 1.6037 
B) 2.0411 
C) 1.7500 
D) 2.3369 
A) 1.6037 
B) 2.0411 
C) 1.7500 
D) 2.3369

Question 14

The present exchange rate is C$ = U.S.$0.78.The 1-year future rate is C$ = U.S.$0.75.The yield on a 1-year U.S.bill is 5%.A yield of __________ on a 1-year Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

Accepted Answer

A) 9.2% 
B) 8.3% 
C) 6.4% 
D) 11.3% 
A) 9.2% 
B) 8.3% 
C) 6.4% 
D) 11.3%

Question 15

International investing

Accepted Answer

A) cannot be measured against a passive benchmark, such as the S&P 500. 
B) can be measured against a widely-used index of non-U.S.stocks, the EAFE Index (Europe, Australia, Far East). 
C) can be measured against international indexes. 
D) can be measured against a widely-used index of non-U.S.stocks, the EAFE Index (Europe, Australia, Far East), and against international indexes. 
A) cannot be measured against a passive benchmark, such as the S&P 500. 
B) can be measured against a widely-used index of non-U.S.stocks, the EAFE Index (Europe, Australia, Far East). 
C) can be measured against international indexes. 
D) can be measured against a widely-used index of non-U.S.stocks, the EAFE Index (Europe, Australia, Far East), and against international indexes.

Question 16

The __________ index is a widely used index of non-U.S.stocks.

Accepted Answer

A) CBOE 
B) Dow Jones 
C) EAFE 
D) All of the options are correct. 
A) CBOE 
B) Dow Jones 
C) EAFE 
D) All of the options are correct.

Question 17

Shares of several foreign firms are traded in the U.S.markets in the form of

Accepted Answer

A) ADRs. 
B) ECUs. 
C) single-country funds. 
D) All of the options are correct. 
A) ADRs. 
B) ECUs. 
C) single-country funds. 
D) All of the options are correct.

Question 18

Suppose the 1-year risk-free rate of return in Canada is 5%.The current exchange rate is 1 pound = Cad $1.60.The 1-year forward rate is 1 pound = $1.57.What is the minimum yield on a 1-year risk-free security in Britain that would induce a Canadian investor to invest in the British security?

Accepted Answer

A) 2.44% 
B) 2.50% 
C) 7.00% 
D) 7.62% 
A) 2.44% 
B) 2.50% 
C) 7.00% 
D) 7.62%

Question 19

Over the period 2011-2016, most correlations between the U.S.stock index and stock-index portfolios of other countries were

Accepted Answer

A) negative. 
B) positive but less than.9. 
C) approximately zero. 
D) .9 or above. 
A) negative. 
B) positive but less than.9. 
C) approximately zero. 
D) .9 or above.

Question 20

You are a Canadian investor who purchased British securities for 2,200 pounds one year ago when the British pound cost $1.50.No dividends were paid on the British securities in the past year.Your total return based on Canadian dollars was __________ if the value of the securities is now 2,560 pounds and the pound is worth $1.60.

Accepted Answer

A) 16.7% 
B) 20.3% 
C) 24.1% 
D) 41.4% 
A) 16.7% 
B) 20.3% 
C) 24.1% 
D) 41.4%

Exam 25: International Diversification

Using local currency returns, the S&P 500 has the highest correlation with

The yield on a 1-year bill in the U.K.is 8%, and the present exchange rate is 1 pound = Cad.$1.60.If you expect the exchange rate to be 1 pound = Cadf.$1.50 a year from now, the return a Canadian investor can expect to earn by investing in U.K.bills is

Canadian investors

According to PRS, in 2015, which country had the highest composite risk rating on a scale of 0 (most risky) to 100 (least risky)?

The straightforward generalization of the simple CAPM to international stocks is problematic because

When Country A's currency strengthens against Country B's, citizens of Country A will

"ADRs" stands for ___________, and "WEBS" stands for ____________.

Suppose the 1-year risk-free rate of return in Canada.is 6%.The current exchange rate is 1 pound = Cad $1.62.The 1-year forward rate is 1 pound = $1.53.What is the minimum yield on a 1-year risk-free security in Britain that would induce a Canadian investor to invest in the British security?

When an investor adds international stocks to his or her Canadian stock portfolio,

As exchange rates change, they

The present exchange rate is C$ = U.S.$0.78.The 1-year future rate is C$ = U.S.$0.75.The yield on a 1-year U.S.bill is 5%.A yield of __________ on a 1-year Canadian bill will make investor indifferent between investing in the U.S.bill and the Canadian bill.

International investing

The __________ index is a widely used index of non-U.S.stocks.

Shares of several foreign firms are traded in the U.S.markets in the form of

Suppose the 1-year risk-free rate of return in Canada is 5%.The current exchange rate is 1 pound = Cad $1.60.The 1-year forward rate is 1 pound = $1.57.What is the minimum yield on a 1-year risk-free security in Britain that would induce a Canadian investor to invest in the British security?

Over the period 2011-2016, most correlations between the U.S.stock index and stock-index portfolios of other countries were

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

Bond Prices and Yields

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

"ADRs" stands for _, and "WEBS" stands for __.