Negative Marking in Examination Questions
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Questions and Answers

Which of the following is a risk faced by an investor when investing in a foreign currency denominated bond?

  • Interest rate risk
  • Exchange rate risk (correct)
  • Liquidity risk
  • Credit risk
  • If an Indian investor purchases a dollar-denominated bond and the rupee appreciates against the US dollar, what will be the impact on the investor's returns?

  • The investor's returns will not be affected.
  • The impact cannot be determined without additional information.
  • The investor will receive fewer rupees than expected. (correct)
  • The investor will receive more rupees than expected.
  • What is the term used to describe the uncertainty of returns caused by the possibility of a major change in the political or economic environment in a country?

  • Sovereign risk
  • Political risk (correct)
  • Geopolitical risk
  • Exchange rate risk
  • What is the term used to describe the risk associated with wars, terrorist acts, and tensions between states that affect the normal and peaceful course of international relations?

    <p>Geopolitical risk</p> Signup and view all the answers

    When investing in countries with unstable political-economic systems, what should an investor include in their required rate of return?

    <p>A country risk-premium</p> Signup and view all the answers

    What is the primary benefit of a globally diversified portfolio for investors?

    <p>Reduced overall risk through diversification</p> Signup and view all the answers

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