ch15

CHAPTER 15
International Portfolio Investment

EASY (definitional)

15.1 Which one of the following is an advantage of international investing?
a) you can invest in industries that don't exist in the United States
b) you can invest in companies that have lower price‑earnings ratios
c) you can invest in companies that are, on average, more profitable than similar U.S. firms
d) you can invest in companies with lower market‑book value ratios

Ans: a
Section: International diversification
Level: Easy

15.2 While there is systematic risk within a nation, it may be _______ and diversifiable outside the country after constructing a global portfolio.
a) temporary
b) somewhat temporary
c) non-systematic
d) permanent

Ans: c
Section: Correlations and the gains from diversification
Level: Easy

15.3 The efficient frontier is the set of portfolios that has the _______ standard deviation for its level of expected return.
a) smallest possible
b) greatest possible
c) most feasible
d) least correlated

Ans: a
Section: Correlations and the gains from diversification
Level: Easy

15.4 The lack of _______, indicated by the ability to buy and sell securities efficiently, is a major obstacle on some overseas exchanges.
a) diversification
b) foreign ownership
c) liquidity
d) solvency

Ans: c
Section: Barriers to international diversification,
Level: Easy

15.5 A decomposition of the total dollar return of a foreign investment would NOT include which of the following?
a) dividend/interest income
b) capital gains (losses)
c) currency gains (losses)
d) the cost of hedging

Ans: d
Section: Measuring the total return from foreign portfolio investing
Level: Easy

15.6 _______ are 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.
a) Emerging market indexes
b) Regional funds
c) American depository receipts
d) American derivative claims

Ans: c