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LOS a: Evaluate the implications of international diversification for domestic equity and fixed income portfolios, based on the traditional assumptions of low correlations across international markets.
Q1. A domestic stock has an expected return of 12% and a standard deviation of 18%. A foreign stock has an expected return of 25% and a standard deviation of 33%. An investor has 60% of the domestic stock in their portfolio and 40% in the foreign stock. If the correlation between the stocks is 0.70, what is the portfolio’s standard deviation?
A) 24.00%.
B) 17.20%.
C) 22.15%.
Q2. Which of the following is NOT a reason why investors should consider constructing global portfolios?
A) Lower correlations between international assets.
B) Increasingly integrated global capital markets.
C) Appreciating foreign currencies.
Q3. Which of the following would benefit an investor who is considering foreign markets?
A) Depreciating foreign currencies.
B) Withholding taxes on foreign investments.
C) Lower correlations between international assets.
Q4. Which of the following arguments makes the case for international diversification?
A) The presence of increased Sharpe ratios with international investing.
B) Correlations are said to have increased over time.
C) Corporations are becoming more global in their orientation. | 
发表于 2009-3-5 16:23
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