1.The level of diversification benefits available from investing internationally is determined by the:

A)   relative returns between markets.

B)   correlations between market returns.

C)   standard deviations of the returns.

D)   degree to which returns are non-normally distributed.

2.The following is a matrix of return correlations for markets A, B, and C.

Which combination of markets will produce the lowest overall level of portfolio risk, as measured by the standard deviation of portfolio returns?

A)   A and B.

B)   Cannot be determined with information given.

C)   A and C.

D)   B and C.

3.The evidence suggests that the correlation of returns between U.S. government bonds and an index of international government bonds is:

A)   between 0.0 and -0.5, and that between indices of U.S. investment grade bonds is between 0.0 and 0.5.

B)   between 0.0 and 0.5, and that between indices of U.S. investment grade bonds is close to 1.0.

C)   between 0.0 and 0.5, and that between indices of U.S. investment grade bonds is between 0.25 and 0.75.

D)   between 0.0 and -0.5, and that between indices of U.S. investment grade bonds is close to 1.0.

答案和详解如下：

1.The level of diversification benefits available from investing internationally is determined by the:

A)   relative returns between markets.

B)   correlations between market returns.

C)   standard deviations of the returns.

D)   degree to which returns are non-normally distributed.

The correct answer was B)

The principal factor that determines whether or not diversification benefits are available from investing internationally is the correlation of returns. In general, the lower the correlation, the greater the benefits.

2.The following is a matrix of return correlations for markets A, B, and C.

	A	B	C
A	1.0	0.5	0.4
B		1.0	0.3
C			1.0

Which combination of markets will produce the lowest overall level of portfolio risk, as measured by the standard deviation of portfolio returns?

A)   A and B.

B)   Cannot be determined with information given.

C)   A and C.

D)   B and C.

The correct answer was B)

All combinations appear likely to yield diversification benefits. However, while B and C clearly have the lowest correlation between the pairs, we cannot determine which combination will have the lowest overall standard deviation of returns without knowing the standard deviations of the individual markets.

3.The evidence suggests that the correlation of returns between U.S. government bonds and an index of international government bonds is:

A)   between 0.0 and -0.5, and that between indices of U.S. investment grade bonds is between 0.0 and 0.5.

B)   between 0.0 and 0.5, and that between indices of U.S. investment grade bonds is close to 1.0.

C)   between 0.0 and 0.5, and that between indices of U.S. investment grade bonds is between 0.25 and 0.75.

D)   between 0.0 and -0.5, and that between indices of U.S. investment grade bonds is close to 1.0.

The correct answer was B)

The evidence suggests that the correlation of returns between U.S. and non-U.S. government bonds is approximately 0.35, while that between indices of investment grade U.S. bonds is close to 1.0.