Deck 3: The International Investment Environment

Question 1

It is impossible for a foreign investor to invest in markets with capital restrictions.

Answer 1

False
Explanation: Where foreign capital restrictions apply,the foreign market is not regarded as directly investable.Rather,investment is usually via a form of fund.These funds are known as 'country funds',and operate with local government approval.

Question 2

A rate of USD/AUD 0.94 indicates that the 1AUD is worth 0.94USD.

Answer 2

True
Explanation: The quotation of USD/AUD means USD per one AUD.Hence,a rate of USD/AUD 0.94 indicates that one AUD is worth 0.94 USD.

Question 3

The wholesale rate applies to private investors dealing in A$1 000 000 or more.

Answer 3

True
Explanation: Exchange rates can be quoted as wholesale or retail rates.The wholesale rate is the inter-bank or inter-dealer rate,and generally only applies to private investors if they are dealing in A$1 000 000 or more.The retail rate is the rate that is applicable to private investors in general.

Question 4

In the Australian forex market,a rate of 1AUD = 0.6425-0.6465 EUR would be expressed as AUD/EUR 0.6425-0.6465.

Question 5

A forex rate given in Sydney of USD/AUD 0.9835-0.9965 means that the FX dealer will be willing to buy 1AUD for 0.9835USD.

Question 6

The 'spread' is the difference between the:

Question 7

A foreign exchange rate of USD/AUD 0.9925-0.9950 indicates:

Question 8

Primary risks from overseas investment include market risk and .

A)information risk
B)exchange rate risk
C)political risk
D)all of these answers

Question 9

The NZ Alternative Market (NZAX)is the New Zealand's main board and has over 150 listed securities.

Question 10

The main additional risk arising from investing in international markets to those risks investing in domestic market is:

Question 11

Australia is different to most other foreign markets in that it uses the direct method of quotation.

Question 12

The type of rate that quotes the rate when settlement will occur on the first business day following the transaction is called:

Question 13

When investment restrictions apply to a foreign equity market,the most common means of markets entry is through:

Question 14

An indirect quotation given in Sydney would involve foreign currencies being expressed in terms of the value of 1 Australian dollar.

Question 15

Which of the following maintains a portfolio of stocks in the foreign country and is subject to trading and reporting regulations in that country?

Question 16

The Australian dollar was pegged to a basket of currencies during what period?

Question 17

The sole differentiating factor of emerging markets is that they are markets of developing countries that have experienced rapid change and growth.

Question 18

A foreign investor investing in the Australian equity market will have its foreign currency denominated return reduced if the Australian dollar appreciates relative to the foreign currency.

Question 19

Most financial markets are:

Question 20

The type of rate that quotes the rate used in a forward contract when settlement is more than two business days after the transaction is called:

Question 21

Emerging markets are typically characterised as:

Question 22

Which are possible problems of emerging markets?

Question 23

In terms of the dollar value of transactions for all currencies,which of the following foreign exchange participants was the most heavily used in the most recent period?

Question 24

Which region of the world has varying levels of market regulation and restrictions on foreign trading throughout its jurisdictions due mainly to local authorities?

Question 25

Given the information contained in the table regarding a foreign investment an Australian investor made in the US,what is the discrete Australian dollar (AUD)return over the period?

Question 26

According to table 3.1,foreign financial institutions were most heavily used as foreign exchange participants in 2012,followed by non-financial institutions and then Australian financial institutions.
Using the information contained in the table,what is the EUR/USD mid-rate?

Question 27

According to table 3.1,foreign financial institutions were most heavily used as foreign exchange participants in 2012,followed by non-financial institutions and then Australian financial institutions.
Using the information contained in the table,what amount would an investor receive from exchanging 1EUR for AUD?

Question 28

Given the information contained in the table regarding a foreign investment an Australian investor made in the US,what is the discrete Australian dollar (AUD)return over the period?

Question 29

The Emerging Market Database (EMDB)is broadly categorised into four sub groups.Which group consists of organisations that have relied upon the market for finance rather than traditional banking sources?

Question 30

Which of the following characteristics typically applies to an emerging market?

Question 31

An Australian investor purchases a European-based investment at a price of EUR52.50 when the exchange rate was EUR0.6500/AUD.If the investment is sold for a price of EUR55.00 and the investor's AUD discrete return was 10%,what was the exchange rate when the investment was sold?

Question 32

According to table 3.1,foreign financial institutions were most heavily used as foreign exchange participants in 2012,followed by non-financial institutions and then Australian financial institutions.
Using the information contained in the table,for the AUD/USD exchange rate,what is the ask rate assuming direct rates from a US perspective?

Question 33

According to table 3.1,foreign financial institutions were most heavily used as foreign exchange participants in 2012,followed by non-financial institutions and then Australian financial institutions.
Using the information contained in the table,what amount would an investor receive from exchanging 1AUD for EUR?

Question 34

The Euromarket consists of a currency market where:

Question 35

The international study by Izan,Jalleh and Ong in 1991 suggests that Australian investors can reduce their risk through international investment by what percentage per annum?

Question 36

According to table 3.1,foreign financial institutions were most heavily used as foreign exchange participants in 2012,followed by non-financial institutions and then Australian financial institutions.
Using the information contained in the table,for the AUD/USD exchange rate,what is the bid rate,assuming direct rates from an Australian perspective?

Question 37

According to table 3.1,foreign financial institutions were most heavily used as foreign exchange participants in 2012,followed by non-financial institutions and then Australian financial institutions.
Using the information contained in the table,what is the USD/EUR mid-rate?

Question 38

Given the information contained in the table regarding a foreign investment an Australian investor made in the US,what is the discrete Australian dollar (AUD)return over the period?

Question 39

In mid-1997,which part of the world struggled in financial crisis?

Question 40

An Australian investor purchases a European-based investment at a price of EUR52.50 when the exchange rate was AUD0.6500/AUD.If the exchange rate when the investment was sold was 0.6400,what must the investor sell the investment for to make a discrete return of 15%?