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University of Houston-Victoria

FINC 6367 International Finance


Review Quiz for Chapter 15

1. Information about potential investment opportunities prepared by financial analysts at


investment banks, called _____________________, is made available to investors to encourage
investment transactions through the investment banks.
A. supply-side analysts
B. investment analysts
C. sell-side analysts
D. investor-focused analysts
2. Mutual funds that allow additional investment by existing owners of shares in the fund or
investments by new investors are called:
A. ongoing funds.
B. investment funds.
C. churned funds.
D. open-end funds.
3. An often overlooked benefit of debt instruments issued by firms in emerging markets is that:
A. there is an active secondary market for the instruments, making them very liquid.
B. a country risk premium is often built into the yield on the debt instrument, increasing the yield
above the yield available on other investments.
C. currency risk is not a consideration since the debt instruments are denominated in USD.
D. political risks are usually minimized by government guarantees of the instruments.
4. Generally, diversification of investments internationally allows investors to benefit from:
A. a greater variety of investment opportunities and less risk.
B. the currency diversification effect and less risk.
C. the asset diversification effect and less risk.
D. the currency diversification effect and the asset diversification effect.
5. If there is a positive correlation between the value of an asset that is invested in and the value
of the currency in which that value is represented:
A. the covariance risk increases.
B. the risk associated with the investment is reduced.
C. the economic risk is increased.
D. the economic risk and the default risk move in opposite directions and reduce overall risk.

FINC 6367 International Finance

Dr. Xavier Garza Gomez

6. What is an earnings call?


A. An earnings call occurs when investors in a firm call upon the firm to report its currency
income.
B. An earnings call occurs when a brokerage firm requires its clients who have made investments
on credit to pay the debt owed to the brokerage firm.
C. An earnings call is a general communication from an investment firm to its clients advising
them of the current earnings of the major firms covered by the investment firm.
D. An earnings call is a communication from a firm to the investment community that answers
questions about the financial affairs and status of the firm.
7. The favored investment in most developing nations is:
A. precious metals.
B. real estate.
C. equities.
D. currency.
8. Although mutual funds can diversify risks, studies show that mutual funds:
A. also offer returns in excess of recognized benchmarks.
B. produce returns that vary widely from country to country.
C. underperform compared to recognized benchmarks.
D. have higher transaction costs than other investments.
9. What does the ratio in the Sharpe Index indicate?
A. The risk per unit of return
B. The amount at risk in any investment
C. The amount of potential profit in an investment
D. The return per unit of risk
10. BRIC nations are:
A. emerging nations in Eastern Europe.
B. Brazil, Russia, India, and China.
C. emerging nations in Africa.
D. Bulgaria, Romania, Czech Republic, and Italy.

FINC 6367 International Finance

Dr. Xavier Garza Gomez

Chapter 15
Review Quiz
Answer Section
1
2
3
4
5
6
7
8
9
10

C
D
B
D
A
D
B
C
D
B

FINC 6367 International Finance

Dr. Xavier Garza Gomez