choose the correct answer:

As the exchange risk and the within country risk are usually relatively independent:

a. an investor in the U.S. faces a higher exchange risk than the sum of exchange risk and within country risk.

b. an investor in the U.S. faces the same exchange risk as the sum of exchange risk and within country risk.

c. a U.S. investors exchange risk is unaffected by any change in the sum of exchange risk and within country risk.

d. an investor in the U.S. faces a lower total risk than the sum of exchange risk and within country risk.

Market based forward looking estimate of future expected returns are obtained using one of the following:

a. Estimation of the market probabilities from the prices at which derivative securities trade.

b. Historical data to estimate expected returns and measures of risk

c. Estimation of equity risk premium

d. Earning-price ratio and dividend-price ratio.

Under the assumption that the future stream of interest rates is perpetual and fixed, dividend ratio predicts a low future equity premium, when:

a. stocks are equally prices compared to their future dividends.

b. stocks have high prices compared to their future dividends.

c. stocks have low prices compared to their current dividends.

d. stocks have high prices compared to their current dividends.

What is the concept behind the indexes used in the Fama and French Model?

a. Form portfolios with standard deviations that mimic the impact of the variables.

b. Form portfolios with returns that are opposite to the impact of the variables.

c. Form portfolios with returns that mimic the impact of the variables.

d. Form portfolios with standard deviations that are opposite to the impact of the variables.

Which of the following is true of a cutoff rate?

a. The cutoff rate is be determined by dividing the Beta with the difference between average return and return on the riskfree rate of the securities.

b. All securities whose return is above the cutoff rate are selected in the market portfolio.

c. The cutoff rate is computed from the characteristics of all securities in the optimum portfolio.

d. All securities whose risk is below the cutoff rate are selected in the optimum portfolio.