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1) Briefly discuss why security returns are found to be less correlated across countries than within a country. 2) Briefly explain the concept of the

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1) Briefly discuss why security returns are found to be less correlated across countries than within a country. 2) Briefly explain the concept of the world beta of a security. 3) Briefly discuss the empirical evidence for the effect of exchange rate uncertainty on the risk of foreign investment. 4) Briefly discuss why do investors invest the lion's share of their funds in domestic securities. 5) Since NAFTA was established, many Asian firms, especially those from Japan and Korea, have made extensive investments in Mexico. Briefly discuss why these Asian firms decided to build production facilities in Mexico. 6) How would you explain the fact that China emerged as one of the most important recipients of FDI in recent years? 7) Explain the internalization theory of FDI. What are the strengths and weaknesses of the theory? 8) Briefly explain the spot price and the forward price and discuss whether the spot price is always less /more than the forward price or equal to the forward price. Also discuss when it can be said that the currency is trading at a premium/discount. 9) The $/CD spot bid-ask rates are $0.7560$0.7625. The 3-month forward points are 12-16. Determine the $/CD 3-month forward bid-ask rates. 10) The current spot exchange rate is $1.55/ and the three-month forward rate is $1.50/. You enter into a short position on 1,000. At maturity, the spot exchange rate is $1.60/. Calculate how much you have made or lost. 11) Briefly discuss the approaches of forecasting exchange rates and compare with each other for their performance. 12) Briefly discuss the factors that are responsible for the recent surge in international portfolio investment? 13) Explain how exchange rate fluctuations affect the return from a foreign market, measured in dollar terms. 14) Briefly discuss if exchange rate changes would always increase the risk of foreign investment. 15) Briefly discuss the condition under which exchange rate changes may actually reduce the risk of foreign investment

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