Question 1

Why do Canadian investors prefer using international funds rather than the single foreign stocks to invest globally?

Accepted Answer

International funds offer diversification across multiple stocks and markets, reducing the risk compared to investing in single foreign stocks.

Question 2

A pair of running shoes costs HK$588 in Hong Kong, but C$97.85 in Canada. If goods must be sold with one price, what is the spot rate? Ignore transportation costs for simplicity.

Accepted Answer

The answer of A pair of running shoes costs HK$588...

Question 3

The spot and 12-month forward rates in dollar per yen are C$0.011868 = $\times$1 and C$0.012185, respectively. The forward rate for the Japanese yen is selling at a _________ to the spot rate.

Accepted Answer

The forward rate is higher than the spot rate, indicating a premium. The percentage premium is calculated as [(Forward Rate - Spot Rate) / Spot Rate] * 100 = [(0.012185 - 0.011868) / 0.011868] * 100 = 2.67%.

Question 4

While the 3-month forward rate for US dollar is C$1.2991 per USD, the spot rate is US$0.7706 per C$. According to a forward contract, how much C$ will be needed to settle a payment of US$1,000,000 in three months?

Accepted Answer

To settle a payment of US$1,000,000 in three months using the 3-month forward rate of C$1.2991 per USD, you would need C$1,299,100 (1,000,000 * 1.2991).

Question 5

If one Swiss franc can purchase 1.039 Canadian dollars now, how many Swiss francs can one Canadian dollar buy?

Accepted Answer

To find how many Swiss francs one Canadian dollar can buy, take the reciprocal of 1.039. 1 / 1.039 = 0.9625.

Question 6

While international investing can reduce risk below domestic levels, one important risk factor is not considered. What is that?

Accepted Answer

The important risk factor not considered in international investing is foreign exchange risk, which refers to the possibility that changes in currency exchange rates can affect the value of an investment. This risk occurs because investments denominated in foreign currencies must be converted back to the investor's domestic currency, and fluctuations in exchange rates can result in a loss or gain on the investment.

Question 7

While globalization encourages security markets in different countries move together, _________ will be realized from international diversification.

Accepted Answer

As globalization causes security markets to move together, the benefits of international diversification, such as risk reduction, become smaller.

Question 8

While you are looking for the spot exchange rates for the British pound ($\le$), the Japanese yen ($\times$), and the Canadian dollar ($), you find the following quotes: $\le$ 0.4230 = $1 and $\times$84.26 = $1. What is the cross-rate for British pound per Japanese yen ($\le$/$\times$)?

Accepted Answer

The answer of While you are looking for the spot...

Question 9

Lululemon is found on the NASDAQ under the symbol LULU and _______ on the TSX under the symbol LLL.

Accepted Answer

When a company is listed on multiple stock exchanges, it is called crosslisting. Lululemon is listed on both the NASDAQ and the TSX, hence it is crosslisted. "Dually registered" and "double certified" are not commonly used terms in relation to stock exchange listings. "Symmetrically traded" and "hypothenticated" are not accurate descriptions of Lululemon's listing status.

Question 10

With a direct quote for the Renminbi (the currency unit in China) is 0.1568. Which of the following is true?
I. It costs you C$1.00 for 0.1568 Renminbi
II. It costs you C$0.1568 for 1.00 Renminbi
III. Your C$1.00 can buy 6.3776 Renminbi
IV. You have to use C$6.3776 to buy 1.00 Renminbi

Accepted Answer

A direct quote for the Renminbi being 0.1568 means 1 unit of foreign currency (Renminbi) is equivalent to 0.1568 of the home currency (Canadian dollars, in this case). Therefore, it costs C$0.1568 to buy 1.00 Renminbi (II), and C$1.00 can buy 1/0.1568 = 6.3776 Renminbi (III).

Question 11

The spot and 12-month forward rates in dollar per yen are C$0.011868 = $\times$1 and C$0.012185, respectively. The forward rate for the Canadian dollar is selling at a _________ to the spot rate.

Accepted Answer

The answer of The spot and 12-month forward rates in...

Question 12

Canadian stocks are cross-listed in the United States as

Accepted Answer

The answer of Canadian stocks are cross-listed in the United...

Question 13

With an indirect quote for the Dinar (the currency unit in Jordan) is 0.5456. Which of the following is true?
I. You can buy C$1.00 for 0.5456 Dinar
II. You can buy C$0.5456 for 1.00 Dinar
III. You can buy C$1.00 for 1.8329 Dinar
IV. You can buy C$1.8329 for 1.00 Dinar

Accepted Answer

The answer of With an indirect quote for the Dinar...

Question 14

Suppose we observe the two exchange rates: $\times$/US$ = 100, A$/US$ = 1.5. If the current cross-rate ($\times$/A$) between $\times$ and A$ is 50, which of the following is true?

Accepted Answer

The answer of Suppose we observe the two exchange rates:...

Question 15

The benefits of the cross-listing are all except

Accepted Answer

Cross-listing often involves complying with regulatory requirements in multiple markets, which can increase costs and complexity for the company. Therefore, there are typically more regulations to comply with, rather than fewer, when a company cross-lists. The other choices listed (lower cost of capital, higher visibility, greater liquidity, and lower risk) are all potential benefits of cross-listing.

Question 16

Given three hypothetical exchange rates: $\le$/$ = 0.6, $\times$/$ = 0.9 and $\times$/$\le$ = 1.6, what is the arbitrage profit assuming you have $100?

Accepted Answer

Using $100:
- Convert to F1F1F10: $100 x 0.6/F1F1F10 = F1F1F60
- Convert F1F1F60 to F1F1F1S1: F1F1F60 x 0.9/F1F1F10 = F1F1F54
- Convert F1F1F54 to $: F1F1F54/1.6/F1F1F10 = $6.67
So, the arbitrage profit would be $6.67 - $100 = $6.67 - $100 = $6.67.

Question 17

The 6-month forward rate for Euro is 1.6003 Canadian dollars per Euro. The spot rate is 1.5992 Canadian dollars per Euro. With a forward contract, how many Canadian dollars will be received for 50,000 Euros in six months?

Accepted Answer

To calculate the amount of Canadian dollars received in 6 months, we use the formula:

Forward rate * amount of Euros = amount of Canadian dollars

So, 1.6003 * 50,000 = 80,015 Canadian dollars.
Therefore, the answer is C: $80,015.

Question 18

A liquid stock market in the one where

Accepted Answer

A liquid stock market is one where investors can easily buy and sell shares quickly at the current market prices, without significant price changes occurring as a result of their transactions. This means that there is a high level of trading activity and a large number of participants, making it relatively easy for investors to enter or exit positions. Option A accurately reflects this definition.

Question 19

Companies may cross-list their shares to

Accepted Answer

Cross-listing can have multiple benefits for companies, including expanding their investor base by making their shares available in multiple markets and increasing their name recognition and visibility in foreign markets. Additionally, cross-listing can enhance market liquidity by providing more opportunities for buying and selling shares. Therefore, all of the above options are valid reasons for companies to cross-list their shares.

Question 20

Suppose that a commodity costs the same regardless of what currency is used to purchase or where it is selling. The spot exchange rate is 2.3638 Canadian dollars per British pound. If a computer notebook costs C$1,695 in Canada, how much should it cost in Britain?

Accepted Answer

To find the cost in Britain, divide the Canadian price by the exchange rate: 1695 / 2.3638 ≈ 717. Thus, the notebook should cost approximately £717 in Britain.

Quiz 20: International Portfolio Investment

Why do Canadian investors prefer using international funds rather than the single foreign stocks to invest globally?

A pair of running shoes costs HK$588 in Hong Kong, but C$97.85 in Canada. If goods must be sold with one price, what is the spot rate? Ignore transportation costs for simplicity.

The spot and 12-month forward rates in dollar per yen are C$0.011868 = $\times$ 1 and C$0.012185, respectively. The forward rate for the Japanese yen is selling at a _________ to the spot rate.

While the 3-month forward rate for US dollar is C$1.2991 per USD, the spot rate is US$0.7706 per C$. According to a forward contract, how much C$ will be needed to settle a payment of US$1,000,000 in three months?

If one Swiss franc can purchase 1.039 Canadian dollars now, how many Swiss francs can one Canadian dollar buy?

While international investing can reduce risk below domestic levels, one important risk factor is not considered. What is that?

While globalization encourages security markets in different countries move together, _________ will be realized from international diversification.

While you are looking for the spot exchange rates for the British pound ( $\le$ ) , the Japanese yen ( $\times$ ) , and the Canadian dollar ($) , you find the following quotes: $\le$ 0.4230 = $1 and $\times$ 84.26 = $1. What is the cross-rate for British pound per Japanese yen ( $\le$ / $\times$ ) ?

Lululemon is found on the NASDAQ under the symbol LULU and _______ on the TSX under the symbol LLL.

With a direct quote for the Renminbi (the currency unit in China) is 0.1568. Which of the following is true? I. It costs you C$1.00 for 0.1568 Renminbi II. It costs you C$0.1568 for 1.00 Renminbi III. Your C$1.00 can buy 6.3776 Renminbi IV. You have to use C$6.3776 to buy 1.00 Renminbi

The spot and 12-month forward rates in dollar per yen are C$0.011868 = $\times$ 1 and C$0.012185, respectively. The forward rate for the Canadian dollar is selling at a _________ to the spot rate.

Canadian stocks are cross-listed in the United States as

With an indirect quote for the Dinar (the currency unit in Jordan) is 0.5456. Which of the following is true? I. You can buy C$1.00 for 0.5456 Dinar II. You can buy C$0.5456 for 1.00 Dinar III. You can buy C$1.00 for 1.8329 Dinar IV. You can buy C$1.8329 for 1.00 Dinar

Suppose we observe the two exchange rates: $\times$ /US$ = 100, A$/US$ = 1.5. If the current cross-rate ( $\times$ /A$) between $\times$ and A$ is 50, which of the following is true?

The benefits of the cross-listing are all except

Given three hypothetical exchange rates: $\le$ /$ = 0.6, $\times$ /$ = 0.9 and $\times$ / $\le$ = 1.6, what is the arbitrage profit assuming you have $100?

The 6-month forward rate for Euro is 1.6003 Canadian dollars per Euro. The spot rate is 1.5992 Canadian dollars per Euro. With a forward contract, how many Canadian dollars will be received for 50,000 Euros in six months?

A liquid stock market in the one where

Companies may cross-list their shares to

Suppose that a commodity costs the same regardless of what currency is used to purchase or where it is selling. The spot exchange rate is 2.3638 Canadian dollars per British pound. If a computer notebook costs C$1,695 in Canada, how much should it cost in Britain?

Quiz 20: International Portfolio Investment

Why do Canadian investors prefer using international funds rather than the single foreign stocks to invest globally?

A pair of running shoes costs HK$588 in Hong Kong, but C$97.85 in Canada. If goods must be sold with one price, what is the spot rate? Ignore transportation costs for simplicity.

The spot and 12-month forward rates in dollar per yen are C$0.011868 = ×\times× 1 and C$0.012185, respectively. The forward rate for the Japanese yen is selling at a _________ to the spot rate.

While the 3-month forward rate for US dollar is C$1.2991 per USD, the spot rate is US$0.7706 per C$. According to a forward contract, how much C$ will be needed to settle a payment of US$1,000,000 in three months?

If one Swiss franc can purchase 1.039 Canadian dollars now, how many Swiss francs can one Canadian dollar buy?

While international investing can reduce risk below domestic levels, one important risk factor is not considered. What is that?

While globalization encourages security markets in different countries move together, _________ will be realized from international diversification.

Lululemon is found on the NASDAQ under the symbol LULU and _______ on the TSX under the symbol LLL.

With a direct quote for the Renminbi (the currency unit in China) is 0.1568. Which of the following is true? I. It costs you C$1.00 for 0.1568 Renminbi II. It costs you C$0.1568 for 1.00 Renminbi III. Your C$1.00 can buy 6.3776 Renminbi IV. You have to use C$6.3776 to buy 1.00 Renminbi

The spot and 12-month forward rates in dollar per yen are C$0.011868 = ×\times× 1 and C$0.012185, respectively. The forward rate for the Canadian dollar is selling at a _________ to the spot rate.

Canadian stocks are cross-listed in the United States as

With an indirect quote for the Dinar (the currency unit in Jordan) is 0.5456. Which of the following is true? I. You can buy C$1.00 for 0.5456 Dinar II. You can buy C$0.5456 for 1.00 Dinar III. You can buy C$1.00 for 1.8329 Dinar IV. You can buy C$1.8329 for 1.00 Dinar

Suppose we observe the two exchange rates: ×\times× /US$ = 100, A$/US$ = 1.5. If the current cross-rate ( ×\times× /A$) between ×\times× and A$ is 50, which of the following is true?

The benefits of the cross-listing are all except

Given three hypothetical exchange rates: ≤\le≤ /$ = 0.6, ×\times× /$ = 0.9 and ×\times× / ≤\le≤ = 1.6, what is the arbitrage profit assuming you have $100?

The 6-month forward rate for Euro is 1.6003 Canadian dollars per Euro. The spot rate is 1.5992 Canadian dollars per Euro. With a forward contract, how many Canadian dollars will be received for 50,000 Euros in six months?

A liquid stock market in the one where

Companies may cross-list their shares to

Suppose that a commodity costs the same regardless of what currency is used to purchase or where it is selling. The spot exchange rate is 2.3638 Canadian dollars per British pound. If a computer notebook costs C$1,695 in Canada, how much should it cost in Britain?

The spot and 12-month forward rates in dollar per yen are C$0.011868 = $\times$ 1 and C$0.012185, respectively. The forward rate for the Japanese yen is selling at a _________ to the spot rate.

The spot and 12-month forward rates in dollar per yen are C$0.011868 = $\times$ 1 and C$0.012185, respectively. The forward rate for the Canadian dollar is selling at a _________ to the spot rate.

Suppose we observe the two exchange rates: $\times$ /US$ = 100, A$/US$ = 1.5. If the current cross-rate ( $\times$ /A$) between $\times$ and A$ is 50, which of the following is true?

Given three hypothetical exchange rates: $\le$ /$ = 0.6, $\times$ /$ = 0.9 and $\times$ / $\le$ = 1.6, what is the arbitrage profit assuming you have $100?