FIN 320 Week 10 Quiz – Strayer



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Quiz 8 Chapter 19 and 20
Chapter 19: ___________________________________________________________________________
1.
In 2011, U.S. securities represented ______ of the world market for equities. 
 

A. 
less than 25%

B. 
more than two-thirds

C. 
between 30% and 40%

D. 
a consistent 50%

2.
_____ has the highest market capitalization of listed corporations among developed markets. 
 

A. 
The United States

B. 
Japan

C. 
The United Kingdom

D. 
Switzerland

3.
Total capitalization of corporate equity in the United States in 2011 was about _______ trillion. 
 

A. 
$13.9

B. 
$23.4

C. 
$30.2

D. 
$45.5

4.
If you limit your investment opportunity set to only the largest six countries in the world in terms of equity capitalization as a percentage of total global equity capital, you will include about _______ of the world's equity. 
 

A. 
34%

B. 
44%

C. 
54%

D. 
64%

5.
Limiting your investments to the top six countries in the world in terms of market capitalization may make sense for _________ investor but probably does not make sense for ________ investor. 
 

A. 
an active; a passive

B. 
a passive; an active

C. 
a security selection expert; a market timer

D. 
a fundamental; a technical

6.
WEBS are ____________________. 
 

A. 
investments in country-specific portfolios

B. 
traded exactly like mutual funds

C. 
identical to ADRs

D. 
designed to give investors foreign currency exposure to multiple countries

7.
Which one of the following allows you to purchase the stock of a specific foreign company? 
 

A. 
WEBS

B. 
MSCI

C. 
ADR

D. 
EAFE

8.
Generally speaking, countries with ______ capitalization of equities ________. 
 

A. 
larger; have higher GDP

B. 
smaller; are wealthier

C. 
larger; have smaller GDP

D. 
larger; are higher-growth countries

9.
The 32 "developed" countries with the largest equity capitalization made up about _____ of the world GDP in 2011. 
 

A. 
22%

B. 
44%

C. 
68%

D. 
85%

10.
According to a regression of GDP on market capitalization in 2010, virtually all developed countries had _______ per capita GDP than (as) predicted by the regression. 
 

A. 
higher

B. 
lower

C. 
the same

D. 
sometimes lower and sometimes higher

11.
If the direct quote for the exchange rate for the U.S. dollar versus the Canadian dollar is .98, what is the indirect quote? 
 

A. 
1.98

B. 
1.02

C. 
.02

D. 
1.05

12.
EAFE stands for _______. 
 

A. 
Equity And Foreign Exchange

B. 
European, Australian, Far East

C. 
European, Asian, Foreign Exchange

D. 
European, American, Far East

13.
Which one of the following country risks includes the possibility of expropriation of assets, changes in tax policy, and restrictions on foreign exchange transactions? 
 

A. 
Default risk

B. 
Foreign exchange risk

C. 
Market risk

D. 
Political risk

14.
The __________ index is a widely used index of non-U.S. stocks. 
 

A. 
CBOE

B. 
Dow Jones

C. 
EAFE

D. 
Lehman Index

15.
Suppose that U.S. equity markets represent about 35% of total global equity markets and that the typical U.S. investor has about 95% of her portfolio invested only in U.S. equities. This is an example of _________. 
 

A. 
home-country bias

B. 
excessive diversification

C. 
active management

D. 
passive management

16.
The four largest economies in the world in 2010 were ____________. 
 

A. 
United States, India, China, and Japan

B. 
United States, China, Canada, and Japan

C. 
United States, China, Japan, and Germany

D. 
China, United Kingdom, Canada, and United States

17.
The proper formula for interest rate parity is ___________. 
 

A. 
[1 + rf(foreign)]/[1 + rf(US)] = F1/E0

B. 
[1 + rf(US)]/[1 + rf(foreign)] = E0/F1

C. 
[1 + rf(US)]/[1 + rf(foreign)] = F0/E0

D. 
[1 + rf(foreign)]/[1 + rf(foreign)] = F0/E1

18.
Research indicates that exchange risk of the major currencies has been _________ so far in this century. 
 

A. 
relatively high

B. 
relatively low

C. 
declining slightly

D. 
declining rapidly

19.
It appears from empirical work that exchange rate risk ____________. 
 

A. 
has been declining for individual investments in recent years

B. 
is mostly diversifiable

C. 
is mostly systematic risk

D. 
is unimportant for an investment in a single foreign country

20.
Passive investors with well-diversified international portfolios _________. 
 

A. 
can safely ignore all political risk in emerging markets

B. 
can expect very large diversification gains from their international investing

C. 
do not need to be concerned with hedging exposure to foreign currencies

D. 
can expect returns to be better than the EAFE on a consistent basis

21.
Which stock market has the largest weight in the EAFE index? 
 

A. 
Japan

B. 
Germany

C. 
United Kingdom

D. 
Australia


22.
The correlation coefficient between the U.S. stock market index and stock market indexes of major countries is __________. 
 

A. 
between -1 and -.5

B. 
between -.50 and 0

C. 
between 0 and .5

D. 
between .5 and 1

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