In one sense, international investing may be viewed as no more than a straight-forward generalisation of portfolio selection in a domestic market on the other hand, international investments pose problems not encountered in domestic markets.

Discuss the above statement in detail highlighting the similarities and differences between domestic and international investing. Identify the challenges and problems of international investing. (10 marks)

Outline and explain the advantages of international investing. (5 marks)

Outline and explain the disadvantages of international investing. (5 marks)

In what ways can the challenges and problems of international investing be mitigated or managed? Outline and discuss the approaches in detail. ( 5 marks)

An investment in risk-free British government securities paying 10% annual interest in British pounds is made by an American investor who starts with $ 20 000. The current exchange rate is $2 per pound. At the end of the year the pound depreciates against the dollar. Calculate the investors return in both dollar and pound what if the exchange rate is $2.00, and $2.20?

(5 marks)