QUESTION 45

1. International investing

	A.	cannot be measured against a passive benchmark, such as the S&P 500.
	B.	can be measured against a widely-used index of non-U.S. stocks, the EAFE Index (Europe, Australia, Far East).
	C.	can be measured against international indexes.
	D.	can be measured against a widely-used index of non-U.S. stocks, the EAFE Index (Europe, Australia, Far East), and against international indexes.

1.82 points

QUESTION 46

1. Assume there is a fixed exchange rate between the Canadian and U.S. dollar. The expected return and standard deviation of return on the U.S. stock market are 18% and 15%, respectively. The expected return and standard deviation on the Canadian stock market are 13% and 20%, respectively. The covariance of returns between the U.S. and Canadian stock markets is 1.5%. If you invested 50% of your money in the Canadian stock market and 50% in the U.S. stock market, the expected return on your portfolio would be

	A.	13.0%.
	B.	15.5%
	C.	12.5%.
	D.	12.0%.

1.82 points

QUESTION 47

1. The yield on a 1-year bill in the United Kingdom is 5%, and the present exchange rate is 1 pound = US$2. If you expect the exchange rate to be 1 pound = US$1.98 a year from now, the return a U.S. investor can expect to earn by investing in U.K. bills is approximately __________.

	A.	-5.4%
	B.	2.5%
	C.	3.15%
	D.	3.95%

1.82 points

QUESTION 48

1. Suppose you purchase one share of the stock of XYZ Corporation at the beginning of year 1 for $36. At the end of year 1, you receive a $2 dividend and buy one more share for $30. At the end of year 2, you receive total dividends of $4 (i.e., $2 for each share) and sell the shares for $36.45 each. The dollar-weighted return on your investment is

	A.	1.75%.
	B.	4.08%.
	C.	12.35%.
	D.	8.53%.