CHAPTER 10 QUESTIONS AND
ANSWERS
TheerMSCIerEAFEerIndexerconsistseroferstockserfromercompanieserfromeroverer20erdevelopeder
marketsertoermeasureerinternationalerequityermarketerperformance.erTheerIndexeriserconsider
edertheeroldestertrulyerinternationalerstockerindex:eriterhaserbeenercalculatedersinceer1969.erMan
yerforeignerstockerfundserareercomparederagainstertheerMSCIerEAFEerIndex.
Baileyeriserthinkingerabouterinvestingerineraermutualerfund.erSheerdecidesertoerinvesterinertheeriSh
areserMSCIerEAFEerIndexerFund,erwhichermimicsertheerMSCIerEAFEerIndex.
SelectertheerbesterdescriptionerofertheeriSHareserMSCIerEAFEerIndexerfund.
a)eraneractiveerfund
b)eraerpassiveerfund
c)eraerlitigationerfund
d)eraersectorerfunder-erANS--b)eraerpassiveerfund
Eacherofertheereventserwilleraffectertheerstockerofertheercompanyerinvolved.erForereachercompan
y,erpleaseerpredictertheereffecteronertheerdemanderoferitserstockershares,eraserwelleraseroneritserst
ockerprice.erAssumeerthaternothingerelseerchangeser-erANS--
ForderMotorerCompanyerannounceserthateriterwillerhaveertoerdecreaseerprofiterexpectationserfor
ertheercurrenteryear,eraseranerincreaseerinergaserpriceserhaserledermanyerpeopleertoerholderofferone
rbuyingeraernewercar:
-erdemanderwill:erdecrease
-erpriceerwill:erdecrease
Dueertoeraersuccessfuleradvertisingercampaignerusingertheer"PepsierChallenge,"erPepsiCoeran
nounceserthatersaleseroferitsersignatureersofterdrinkerareerhighererthanerexpected:
-erdemanderwill:erincrease
-erpriceerwill:erincrease
OnertheersameerdayeryouerbuyeraershareeroferGoogleerInc.erstock,ertheerUSergovernmenterannou
nceseranerincreaseerinerinteresterrates,ermakingerbondseraermoreerattractiveeroptionerforerinvest
ors
ANSWERS
TheerMSCIerEAFEerIndexerconsistseroferstockserfromercompanieserfromeroverer20erdevelopeder
marketsertoermeasureerinternationalerequityermarketerperformance.erTheerIndexeriserconsider
edertheeroldestertrulyerinternationalerstockerindex:eriterhaserbeenercalculatedersinceer1969.erMan
yerforeignerstockerfundserareercomparederagainstertheerMSCIerEAFEerIndex.
Baileyeriserthinkingerabouterinvestingerineraermutualerfund.erSheerdecidesertoerinvesterinertheeriSh
areserMSCIerEAFEerIndexerFund,erwhichermimicsertheerMSCIerEAFEerIndex.
SelectertheerbesterdescriptionerofertheeriSHareserMSCIerEAFEerIndexerfund.
a)eraneractiveerfund
b)eraerpassiveerfund
c)eraerlitigationerfund
d)eraersectorerfunder-erANS--b)eraerpassiveerfund
Eacherofertheereventserwilleraffectertheerstockerofertheercompanyerinvolved.erForereachercompan
y,erpleaseerpredictertheereffecteronertheerdemanderoferitserstockershares,eraserwelleraseroneritserst
ockerprice.erAssumeerthaternothingerelseerchangeser-erANS--
ForderMotorerCompanyerannounceserthateriterwillerhaveertoerdecreaseerprofiterexpectationserfor
ertheercurrenteryear,eraseranerincreaseerinergaserpriceserhaserledermanyerpeopleertoerholderofferone
rbuyingeraernewercar:
-erdemanderwill:erdecrease
-erpriceerwill:erdecrease
Dueertoeraersuccessfuleradvertisingercampaignerusingertheer"PepsierChallenge,"erPepsiCoeran
nounceserthatersaleseroferitsersignatureersofterdrinkerareerhighererthanerexpected:
-erdemanderwill:erincrease
-erpriceerwill:erincrease
OnertheersameerdayeryouerbuyeraershareeroferGoogleerInc.erstock,ertheerUSergovernmenterannou
nceseranerincreaseerinerinteresterrates,ermakingerbondseraermoreerattractiveeroptionerforerinvest
ors
