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Question 1 of 10
1. Question
The returns on foreign bonds depend upon the currency in which they are measured. In their own local currencies, the returns are dependent on coupon yields and capital gains, just as in the case of U.S. bonds. But when measured in dollars, the returns on foreign bonds will depend on which of the following?
I. The capital gains on the foreign currency itself.
II. The losses on the foreign currency itself.
III. The capital gains on the local currency.
IV. The losses on the local currency.Correct
The returns on foreign bonds depend upon the currency in which they are measured. In their own local currencies, the returns are dependent on coupon yields and capital gains, just as in the case of U.S. bonds. But when measured in dollars, the returns on foreign bonds also depend on the capital gains or losses on the foreign
currency itself.Incorrect
The returns on foreign bonds depend upon the currency in which they are measured. In their own local currencies, the returns are dependent on coupon yields and capital gains, just as in the case of U.S. bonds. But when measured in dollars, the returns on foreign bonds also depend on the capital gains or losses on the foreign
currency itself. -
Question 2 of 10
2. Question
Returns on foreign bonds will be enhanced during which of the following periods?
I. Periods when foreign currencies are rising against the dollar.
II. Periods when bond prices rises within the Euro markets themselves.
III. Periods when US dollar rises with foreign currencies.
IV. Periods when both bond prices and foreign currencies depreciate against the US dollar.Correct
Returns on foreign bonds will be enhanced during periods when foreign currencies are rising against the dollar just as they benefit from rising bond prices within the Euro markets themselves.
Incorrect
Returns on foreign bonds will be enhanced during periods when foreign currencies are rising against the dollar just as they benefit from rising bond prices within the Euro markets themselves.
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Question 3 of 10
3. Question
World index has a lower standard deviation than the long-term U.S. Treasury. There is no doubt that the high volatility of the foreign bond returns is primarily caused by which of the following?
I. Uncertain financial market prices
II. The volatility of the exchange rates
III. The local currency returns
IV. Local currency returns into dollarsCorrect
World index has a lower standard deviation than the long-term U.S. Treasury. There is no doubt that the high volatility of the foreign bond returns is primarily caused by the volatility of the exchange rates used to translate local currency returns into dollars.
Incorrect
World index has a lower standard deviation than the long-term U.S. Treasury. There is no doubt that the high volatility of the foreign bond returns is primarily caused by the volatility of the exchange rates used to translate local currency returns into dollars.
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Question 4 of 10
4. Question
The standard deviations for which of the following range from 10.0 percent for the dollar to pound exchange rate to 11.5 percent for the dollar to Swiss franc rate?
I. Foreign stocks exchange and bonds
II. Foreign exchange losses
III. Foreign currency exchange rates
IV. Foreign exchange gainsCorrect
The standard deviations for the foreign exchange gains and losses range from 10.0 percent for the dollar to pound exchange rate to 11.5 percent for the dollar to Swiss franc rate.
Incorrect
The standard deviations for the foreign exchange gains and losses range from 10.0 percent for the dollar to pound exchange rate to 11.5 percent for the dollar to Swiss franc rate.
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Question 5 of 10
5. Question
The foreign bonds may be too volatile to be attractive to an American investor as an alternative to U.S. Treasury bonds. That is even true of which of the following, that has a return of 8.1 percent and a standard deviation of 9.6 percent?
I. The Swiss franc
II. Non-U.S. Dollar World Government Bond Index
III. Hedged Foreign Bonds
IV. Diversified World IndexCorrect
The foreign bonds may be too volatile to be attractive to an American investor as an alternative to U.S. Treasury bonds. That is even true of the diversified World Index, which has a return of 8.1 percent and a standard deviation of 9.6 percent. The Sharpe ratio for the World Index is much lower than that of the medium-term U.S. Treasury bond.
Incorrect
The foreign bonds may be too volatile to be attractive to an American investor as an alternative to U.S. Treasury bonds. That is even true of the diversified World Index, which has a return of 8.1 percent and a standard deviation of 9.6 percent. The Sharpe ratio for the World Index is much lower than that of the medium-term U.S. Treasury bond.
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Question 6 of 10
6. Question
Foreign bonds are unlikely to be viewed as an alternative to U.S. bonds by any American investor. Instead, they might be considered as a complement to which of the following?
I. U.S. bonds in a well-diversified bond portfolio
II. Barclays Aggregate Index
III. Non-U.S. Dollar World Government Bond index
IV. Portfolio with Unhedged Foreign BondsCorrect
Foreign bonds are unlikely to be viewed as an alternative to U.S. bonds by any American investor. Instead, they might be considered as a complement to U.S. bonds in a well-diversified bond portfolio.
Incorrect
Foreign bonds are unlikely to be viewed as an alternative to U.S. bonds by any American investor. Instead, they might be considered as a complement to U.S. bonds in a well-diversified bond portfolio.
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Question 7 of 10
7. Question
If foreign currency capital gains and losses raise the standard deviation of the foreign bond return, perhaps there is a case for doing which of the following?
I. Unhedging the currency risk.
II. Hedging the currency risk.
III. Shorting the exchange rate.
IV. Longing the exchange rate.Correct
If foreign currency capital gains and losses raise the standard deviation of the foreign bond return, perhaps there is a case for hedging the currency risk.
Incorrect
If foreign currency capital gains and losses raise the standard deviation of the foreign bond return, perhaps there is a case for hedging the currency risk.
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Question 8 of 10
8. Question
Hedging the currency risk does raise the correlation between which of the following?
I. the foreign bond
II. U.S. bonds
III. U.S. stocks
IV. Non U.S. Dollar Government Bond IndexCorrect
Hedging the currency risk does raise the correlation between the foreign bond and U.S. bonds and stocks.
Incorrect
Hedging the currency risk does raise the correlation between the foreign bond and U.S. bonds and stocks.
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Question 9 of 10
9. Question
Which of the following actions would an investor do if he/she is concerned about the volatility of foreign bond investments?
I. Diversify the bond investment portfolio
II. Short the foreign bond investment
III. Hedge the foreign bonds
IV. Invest on other U.S. bondsCorrect
There is a strong case for hedging the foreign bonds if the investor is concerned about the volatility of foreign bond investments, since hedging reduces that volatility quite dramatically.
Incorrect
There is a strong case for hedging the foreign bonds if the investor is concerned about the volatility of foreign bond investments, since hedging reduces that volatility quite dramatically.
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Question 10 of 10
10. Question
Hedging is less compelling if foreign bonds are viewed as which of the following?
I. An international diversification
II. A low risk quick return on bonds index
III. A calculated risk of returns
IV. A component of an otherwise well-diversified portfolio.Correct
Hedging is less compelling if foreign bonds are viewed as a component of an otherwise well-diversified portfolio.
Incorrect
Hedging is less compelling if foreign bonds are viewed as a component of an otherwise well-diversified portfolio.