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LOS f: Explain why currency risk should not be a significant barrier to international investment.
Q1. Which of the following statements regarding international diversification is least accurate?
A) Foreign currency risk will diversify the risk from domestic government monetary and fiscal policies.
B) A depreciating foreign currency benefits the international investor.
C) Foreign currency risk and foreign asset risk are not additive.
Q2. The following data applies to a foreign stock investment:
- The gain on the stock in foreign currency terms was 15%.
- The foreign currency has depreciated by 8%.
- The standard deviation of stock returns was 35% and the standard deviation of the foreign currency was 11%.
- The correlation between the stock returns and the currency is 0.10.
What is the expected return of the portfolio?
A) 5.80%.
B) 24.20%.
C) 7.00%.
Q3. The following data applies to a foreign stock investment:
- The gain on the stock in foreign currency terms was 22%.
- The foreign currency has appreciated by 7%.
- The standard deviation of stock returns was 38% and the standard deviation of the foreign currency was 24%.
- The correlation between the stock returns and the currency is 0.10.
What is the expected return of the portfolio?
A) 13.46%.
B) 30.54%.
C) 29.00%.
Q4. Joe Murad, a U.S. investor, invested in foreign securities. The following data is available:
- The return on stock in foreign currency terms was 14%.
- The foreign currency depreciated by 5%.
- The standard deviation of stock returns was 30%.
- The standard deviation of the foreign currency was 10%.
- The correlation between the stock return and the currency was 0.30.
Murad’s return on his foreign securities investment is:
A) 9.70%.
B) 9.00%.
C) 8.30%.
Q5. The risk of the portfolio in U.S. dollar terms as measured by its standard deviation is:
A) 11.80%.
B) 36.75%.
C) 34.35%.
Q6. The contribution of currency risk to the risk of the portfolio is closest to:
A) 4.00%.
B) 4.35%.
C) 5.00%.
[此贴子已经被作者于2009-3-5 16:50:02编辑过] | 
发表于 2009-3-5 16:44
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