Exam (elaborations) MBA MKT640

MBA MKT 640 / MKT640 FOREIGN SECURITIES Question 1 Special Drawing Rights (SDR) is: a “portfolio” of currencies and its value tends to be more stable than the currencies that it is comprised of an artificial international reserve allotted to the members of the International Monetary Fund (IMF), who can then use it for transactions among themselves or with the IMF used in addition to gold and foreign exchanges, to make international payments all of the above Question 2 All of the following are considered barrier to international diversification except: easy convertibility of many currencies lack of foreign market liquidity inadequate information lack of international accounting standards Question 3 _______ is certificates of ownership by a U.S. bank offered as a convenience to investors in lieu of the underlying shares the bank holds in custody. American depository receipts Emerging market indexes Regional funds American derivative claims Question 4 While there is systematic risk within a nation, it may be _______ and diversifiable outside the country after constructing a global portfolio. somewhat temporary temporary permanent non-systematic Question 5 Which one of the following is an advantage of international investing? you can invest in companies with lower market book value ratios you can invest in industries that don't exist in the United States you can invest in companies that have lower price earnings ratios you can invest in companies that are, on average, more profitable than similar U.S. firms Question 1 The lack of _______, indicated by the ability to buy and sell securities efficiently, is a major obstacle on some overseas exchanges. solvency diversification foreign ownership liquidity Question 2 _______ is certificates of ownership by a U.S. bank offered as a convenience to investors in lieu of the underlying shares the bank holds in custody. Emerging market indexes American derivative claims Regional funds American depository receipts Question 3 Which one of the following is an advantage of international investing? you can invest in industries that don't exist in the United States you can invest in companies that have lower price earnings ratios you can invest in companies with lower market book value ratios you can invest in companies that are, on average, more profitable than similar U.S. firms Question 4 The efficient frontier is the set of portfolios that has the _______ standard deviation for its level of expected return. least correlated greatest possible most feasible smallest possible Question 5 The following are included with the decomposition of the total dollar return of a foreign investment except: dividend/interest income capital gains (losses) the cost of hedging currency gains (losses) View solution Question 6 The international monetary system can be defined as the institutional framework within which: international payments are made exchange rates among currencies are determined movement of capital is accommodated all of the above Question 7 Recent global market behavior that threatens the benefits of international portfolio diversification indicates that markets tend to be most _______ when volatility is greatest. unstable uncorrelated stable correlated Question 8 International diversification provides a better risk return trade off than does investing solely in U.S. securities primarily because: the economic cycles of nations may not be perfectly in phase there are many more securities to choose from overseas many foreign industries don't exist in the U.S. the foreign securities may follow U.S. markets in their price movements