If all capital markets are fully integrated, securities of comparable expected return and risk should have the same required rate of return in each national market after adjusting for:
A) time of day and language requirements.
B) political risk and time lags.
C) foreign exchange risk and political risk.
D) foreign exchange risk and the spot rate.

Question

Quizplus · Accepted Answer

Foreign exchange risk and political risk should be adjusted for in order to compare the required rate of return for securities of similar risk and return in each national market. Time of day and language requirements are irrelevant, and spot rate is only part of foreign exchange risk. Time lags may be a factor, but are not as critical as political risk in the long run.

If All Capital Markets Are Fully Integrated, Securities of Comparable