LOS h: Discuss the barriers to international investments and their impact on international investors.

Q1. Which of the following statements regarding foreign security markets, relative to U.S. security markets is FALSE?

A)   Withholding taxes are often assessed.

B)   Trading costs are usually higher.

C)   Insider trading is more vigorously enforced.

Q2. Which of the following statements regarding foreign security markets, relative to U.S. security markets is FALSE?

A)   Management fees are usually higher due to the costs of data, research, accounting, and communication.

B)   Government restrictions are usually higher for bonds than for stocks.

C)   Financial reporting is usually less reliable.

Q3. Which of the following is NOT a barrier to investing in foreign security markets?

A)   The high commissions in foreign bond markets.

B)   Management fees are usually higher in foreign countries.

C)   There is often a lack of familiarity with foreign markets.

Q4. Which of the following is NOT a reason why foreign markets have less liquidity than domestic markets?

A)   The market capitalization is lower in foreign markets.

B)   There are government restrictions on the amount of equity that institutions can hold.

C)   The turnover of foreign stock markets is higher due to price manipulation.

LOS h: Discuss the barriers to international investments and their impact on international investors. fficeffice" />

Q1. Which of the following statements regarding foreign security markets, relative to ffice:smarttags" />U.S. security markets is FALSE?

A)   Withholding taxes are often assessed.

B)   Trading costs are usually higher.

C)   Insider trading is more vigorously enforced.

Correct answer is C)

Insider trading in foreign markets is usually less vigorously enforced. Trading costs are usually higher, and withholding taxes are often applied.

Q2. Which of the following statements regarding foreign security markets, relative to U.S. security markets is FALSE?

A)   Management fees are usually higher due to the costs of data, research, accounting, and communication.

B)   Government restrictions are usually higher for bonds than for stocks.

C)   Financial reporting is usually less reliable.

Correct answer is B)

Government restrictions on investing in bonds are usually lower in foreign countries relative to the restrictions for foreign stocks. Management fees are usually higher. Financial reporting in foreign countries is usually less reliable and less timely than in the U.S.

Q3. Which of the following is NOT a barrier to investing in foreign security markets?

A)   The high commissions in foreign bond markets.

B)   Management fees are usually higher in foreign countries.

C)   There is often a lack of familiarity with foreign markets.

Correct answer is A)

The commissions in foreign bond markets are usually quite low. However, there is a lack of familiarity with foreign markets and usually higher management fees, both of which will create barriers to foreign investment.

Q4. Which of the following is NOT a reason why foreign markets have less liquidity than domestic markets?

A)   The market capitalization is lower in foreign markets.

B)   There are government restrictions on the amount of equity that institutions can hold.

C)   The turnover of foreign stock markets is higher due to price manipulation.

Correct answer is C)         

Although there is a higher frequency of price manipulation in foreign markets, this does not directly impact turnover. Smaller market capitalizations in these markets, and government restrictions on institutional ownership does limit the liquidity in these markets.

thanks.