Question 1

Macroeconomic factors affecting international equity returns include

Accepted Answer

A)  exchange rate changes.
B)  interest rate differentials.
C)  changes in inflationary expectations.
D)  all of the aboveE) B) and C)
F) None of the above

Question 2

A common set of factors that affect equity returns include

Accepted Answer

A)  macroeconomic variables that influence the overall economic environment in which the firm issuing the security conducts its business.
B)  exchange rate changes between the currency of the country issuing the stock and the currency of other countries where suppliers, customers, and investors of the firm reside.
C)  the industrial structure of the country in which the firm operates.
D)  all of the aboveE) All of the above
F) A) and C)

Question 3

The Toronto Stock exchange

Accepted Answer

A)  is a fully automated.
B)  features electronic matching of public orders.
C)  has continuous order flow.
D)  all of the aboveE) C) and D)
F) All of the above

Question 4

Comparing agency versus dealer markets, which combination of the following statements is true: (i)  - In a "dealer market," the broker takes the client's order through the agent, who matches it with another public order.
(ii)  - In an "agency market," the broker takes the trade through the dealer, who participates in trades as a principal by buying and selling the security for his own account.
(iii)  - In an "agency market," the broker takes the client's order through the agent, who matches it with another public order.
(iv)  - In a "dealer market," the broker takes the trade through the dealer, who participate in trades as a principal by buying and selling the security for his own account.
(v)  - An agent can be viewed as a "broker's broker."
(vi)  - A dealer can be viewed as a "broker's broker."

Accepted Answer

A)  (i) , (ii) , and (v) 
B)  (i) , (ii) , and (vi) 
C)  (iii) , (iv) , and (v) 
D)  (iii) , (iv) , and (vi) E) C) and D)
F) B) and D)

Question 5

The market capitalization of the developing world

Accepted Answer

A)  is about 80 percent of the market capitalization of the entire world.
B)  is about 60 percent of the market capitalization of the entire world.
C)  is about 40 percent of the market capitalization of the entire world.
D)  is about 20 percent of the market capitalization of the entire world.E) A) and B)
F) None of the above

Question 6

The secondary stock markets

Accepted Answer

A)  are the markets for "pre-owned" or "used" shares of stock.
B)  provide marketability to shares.
C)  provide price discovery or share valuation.
D)  all of the aboveE) C) and D)
F) A) and D)

Question 7

Many of the larger the larger emerging equity markets (e.g. Korea, India)

Accepted Answer

A)  have poor liquidity at present.
B)  are more liquid stock markets than the developed world, since the poor people living in the developing world are eager to sell their securities.
C)  have high turnover ratios.
D)  none of the aboveE) None of the above
F) All of the above

Question 8

In a dealer market, the broker takes the trade through the dealer, who participates in trades as a principal by buying and selling the security for his own account.

Accepted Answer

A) True 
 B)False

Question 9

In the London market, Rolls-Royce stock closed at £0.875 per share. On the same day, the British Pound sterling to the U.S. dollar spot exchange rate was £0.6366/$1.00. Rolls Royce trades as an ADR in the OTC market in the United States. Five underlying Rolls-Royce shares are packaged into one ADR. If the Rolls Royce ADRs were trading at $5.75 when the underlying shares were trading in London at £0.875, ignoring transaction costs, the arbitrage trading profit would be:

Accepted Answer

A)  $0.00
B)  $1.12
C)  $2.12
D)  $3.12E) B) and C)
F) A) and B)

Question 10

Generally, the higher the turnover ratio,

Accepted Answer

A)  the less liquid the secondary stock market, indicating ease in trading.
B)  the more liquid the secondary stock market, indicating ease in trading.
C)  the more liquid the primary stock market, indicating ease in trading.
D)  the more efficient the stock market is.E) A) and C)
F) B) and D)

Question 11

The OTC market

Accepted Answer

A)  does not accept credit-the dealers "only take cash".
B)  is a dealer market.
C)  includes the NASDAQ in the U.S.
D)  both b and cE) None of the above
F) A) and D)

Question 12

On the Paris bourse, shares of Avionelle trade at €45. The spot exchange rate is $1.40 = €1.00. What is the no-arbitrage U.S. dollar price of an Avionelle ADR? Assume that transactions costs are negligible.

Accepted Answer

A)  $63
B)  $32.14
C)  $45
D)  $45.50E) C) and D)
F) B) and D)

Question 13

Yankee stocks

Accepted Answer

A)  often trade as ADRs and have higher risks than trading the actual shares.
B)  often trade as ADRs and have lower risks than trading the actual shares.
C)  are bank receipts representing a multiple of foreign shares deposited in a U.S. bank.
D)  both b and cE) B) and C)
F) B) and D)

Question 14

Asprem (1989)  found that changes in industrial production, employment, and imports, the level of interest rates, and an inflation measure explained only a small portion of the variability of equity returns for 10 European countries, but that substantially more of the variation was explained by

Accepted Answer

A)  an international market index.
B)  changes in exchange rates.
C)  the Herfindahl index.
D)  the 4-firm concentration ratio.E) None of the above
F) C) and D)

Question 15

Which investment is likely to be the most liquid?

Accepted Answer

A)  A share of publicly traded company trading on the NYSE.
B)  A bond issued by a Fortune 500 company.
C)  A house in a nice part of town.
D)  a and b are equally liquidE) All of the above
F) A) and B)

Question 16

The sale of new common stock by corporations to initial investors occurs in

Accepted Answer

A)  the primary market.
B)  the secondary market.
C)  the OTC market.
D)  the dealer market.E) B) and D)
F) A) and D)

Question 17

Unlike day orders, a good-til-cancelled (GTC)  order is an order to buy or sell a security at a specific or limit price that lasts until the order is completed or cancelled. Which of the following are true?

Accepted Answer

A)  A GTC order will not be executed until the limit price has been reached, regardless of how many days or weeks it might take.
B)  Investors often use GTC orders to set a limit price that is far away from the current market price.
C)  Some brokerage firms may limit the time a GTC order can remain in effect and may charge more for executing this type of order.
D)  All of the above are trueE) A) and B)
F) A) and C)

Question 18

Call markets and crowd trading offer advantages for __________ because they mitigate the possibility of sparse order flow over short time periods.

Accepted Answer

A)  thinly traded issues
B)  actively traded issues
C)  stocks but not bonds
D)  None of the aboveE) B) and D)
F) A) and B)

Question 19

A measure of "liquidity" for a stock market is

Accepted Answer

A)  the times interest earned ratio.
B)  the ratio of stock market transactions over a period of time divided by the size, or market capitalization, of the stock market.
C)  the LIBOR rate.
D)  both a and bE) A) and B)
F) C) and D)

Question 20

Solnik (1984)  examined the effect of exchange rate changes, interest rate differentials, the level of the domestic interest rate, and changes in domestic inflation expectations. He found that

Accepted Answer

A)  international monetary variables had only weak influence on equity returns in comparison to domestic variables.
B)  international monetary variables had a stronger influence on equity returns in comparison to domestic variables.
C)  international monetary variables had no influence at all on equity returns.
D)  none of the aboveE) None of the above
F) A) and C)

Exam 13: International Equity Markets

Which investment is likely to be the most liquid?

Correct Answer
verified

Call markets and crowd trading offer advantages for __________ because they mitigate the possibility of sparse order flow over short time periods.

Correct Answer
verified

The Toronto Stock exchange

Correct Answer
verified

A measure of "liquidity" for a stock market is

Correct Answer
verified

Unlike day orders, a good-til-cancelled (GTC) order is an order to buy or sell a security at a specific or limit price that lasts until the order is completed or cancelled. Which of the following are true?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Solnik (1984) examined the effect of exchange rate changes, interest rate differentials, the level of the domestic interest rate, and changes in domestic inflation expectations. He found that

Correct Answer
verified

Yankee stocks

Correct Answer
verified

Asprem (1989) found that changes in industrial production, employment, and imports, the level of interest rates, and an inflation measure explained only a small portion of the variability of equity returns for 10 European countries, but that substantially more of the variation was explained by

Correct Answer
verified

The sale of new common stock by corporations to initial investors occurs in

Correct Answer
verified

The secondary stock markets

Correct Answer
verified

The market capitalization of the developing world

Correct Answer
verified

Many of the larger the larger emerging equity markets (e.g. Korea, India)

Correct Answer
verified

A common set of factors that affect equity returns include

Correct Answer
verified

In a dealer market, the broker takes the trade through the dealer, who participates in trades as a principal by buying and selling the security for his own account.

Correct Answer
verified

The OTC market

Correct Answer
verified

Generally, the higher the turnover ratio,

Correct Answer
verified

On the Paris bourse, shares of Avionelle trade at €45. The spot exchange rate is $1.40 = €1.00. What is the no-arbitrage U.S. dollar price of an Avionelle ADR? Assume that transactions costs are negligible.

Correct Answer
verified

Macroeconomic factors affecting international equity returns include

Correct Answer
verified

Exam 13: International Equity Markets

Which investment is likely to be the most liquid?

Correct AnswerverifiedShow Answer

Call markets and crowd trading offer advantages for __________ because they mitigate the possibility of sparse order flow over short time periods.

Correct AnswerverifiedShow Answer

The Toronto Stock exchange

Correct AnswerverifiedShow Answer

A measure of "liquidity" for a stock market is

Correct AnswerverifiedShow Answer

Unlike day orders, a good-til-cancelled (GTC) order is an order to buy or sell a security at a specific or limit price that lasts until the order is completed or cancelled. Which of the following are true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Solnik (1984) examined the effect of exchange rate changes, interest rate differentials, the level of the domestic interest rate, and changes in domestic inflation expectations. He found that

Correct AnswerverifiedShow Answer

Yankee stocks

Correct AnswerverifiedShow Answer

Asprem (1989) found that changes in industrial production, employment, and imports, the level of interest rates, and an inflation measure explained only a small portion of the variability of equity returns for 10 European countries, but that substantially more of the variation was explained by

Correct AnswerverifiedShow Answer

The sale of new common stock by corporations to initial investors occurs in

Correct AnswerverifiedShow Answer

The secondary stock markets

Correct AnswerverifiedShow Answer

The market capitalization of the developing world

Correct AnswerverifiedShow Answer

Many of the larger the larger emerging equity markets (e.g. Korea, India)

Correct AnswerverifiedShow Answer

A common set of factors that affect equity returns include

Correct AnswerverifiedShow Answer

In a dealer market, the broker takes the trade through the dealer, who participates in trades as a principal by buying and selling the security for his own account.

Correct AnswerverifiedShow Answer

The OTC market

Correct AnswerverifiedShow Answer

Generally, the higher the turnover ratio,

Correct AnswerverifiedShow Answer

On the Paris bourse, shares of Avionelle trade at €45. The spot exchange rate is $1.40 = €1.00. What is the no-arbitrage U.S. dollar price of an Avionelle ADR? Assume that transactions costs are negligible.

Correct AnswerverifiedShow Answer

Macroeconomic factors affecting international equity returns include

Correct AnswerverifiedShow Answer

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