q-1 Which of the following is a potential explanation for the home bias in portfolio holdings?

A. Domestic portfolios allow for hedging political risk

B. Diversification of risk

C. Reduced Taxes on international stock return

D. Higher rate of return on domestic stocks

E. None of the above

Q-2 Christine wants to handle the increased political risk in a large international investment project, which one of the following can be helpful:

A. altering the project's net present value by reducing the cost of capital

B. altering the project's net present value by reducing its expected cash flows

C. forming joint venture with another company in her country

D. All of the above