1. After reviewing the book chapter International Asset Pricing Model explain the main differences between Local Capital Asset Pricing Model and International Asset Pricing Model (HINT The CAPM model quantifies risk premium using measure of risk (beta) and price of unit risk (the difference between the return on risky assets and the risk free rate). In your explanation, focus on the differences between these two elements.

2. In international CAPM, a risk premium for currency risk is introduced to the model. Briefly discuss how the currency risk measure and compensation per unit exposure are determined in Solniks international CAPM model (HINT: the CAPM model quantifies risk premium using a measure of risk (beta) and price of unit risk (the difference between the return on risky assets and the risk-free rate). In explaining the difference, focus on the differences in these two elements.