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Question;12.2 The Demand for Foreign Securities: The Role;of International Portfolio Investors;1) A national;securities market is segmented if the required rate of return on securities in;that market differs from comparable securities traded in other, unsegmented;markets.;2) If a firm lies;within a country with ________ or ________ domestic capital markets, it can;achieve lower global cost and greater availability of capital with a properly;designed and implemented strategy to participate in international capital;markets.;A) liquid;segmented;B) liquid, large;C) illiquid;segmented;D) large;illiquid;3) Which of the;following is NOT a contributing factor to the segmentation of capital markets?;A) excessive;regulatory control;B) perceived;political risk;C) anticipated;foreign exchange risk;D) All of the;above are contributing factors.;4) Which of the;following is NOT a contributing factor to the segmentation of capital markets?;A) lack of;transparency;B) asymmetric;availability of information;C) lack of proper;reporting of insider trading;D) All of the;above are contributing factors.;5) Other things;equal, a firm that must obtain its long-term debt and equity in a highly;illiquid domestic securities market will probably have a ________.;A) relatively low;cost of capital;B) relatively;high cost of capital;C) relatively;average cost of capital;D) cost of;capital that we cannot estimate from this question;6) Relatively;high costs of capital are more likely to occur in ________.;A) highly;illiquid domestic securities markets;B) highly liquid;domestic securities markets;C) unsegmented;domestic securities markets;D) none of the;above;7) Reasons that;firms may find themselves with relatively high costs of capital include;A) The firms;reside in emerging countries with undeveloped capital markets.;B) The firms are;too small to easily gain access to their own national securities market.;C) The firms are;family owned and they choose not to access public markets and lose control of;the firm.;D) All of the;above.;Answer: D;8) Which of the;following is NOT a portfolio diversification technique used by portfolio;managers?;A) diversify by;type of security;B) diversify by;the size of capitalization of the securities held;C) diversify by;country;D) All of the;above are diversification techniques.;9) 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;10) Capital;market segmentation is a financial market imperfection caused mainly by;A) government;constraints;B) institutional;practices;C) investor;perceptions;D) all of the;above;11) Capital;market imperfections leading to financial market segmentation include;A) asymmetric;information between domestic and foreign-based investors;B) high;securities transaction costs;C) foreign;exchange risks;D) All of the;above.;12) Capital;market imperfections leading to financial market segmentation include;A) political;risks;B) corporate;governance differences;C) regulatory;barriers;D) All of the;above.;13) Several years;ago the Danish equity market prohibited ownership of foreign securities thus;few institutional analysts outside of Denmark bothered to follow Danish equity;securities. This particular fact led to market segmentation due to ________.;A) taxation;B) political risk;C) asymmetric;information;D) financial risk;14) Until 1981;Danish equity securities were taxed at a capital gains rate of 50% for;securities held for over two years, and at a speculative gains rate of 75% for;securities held for under two years. This led to market segmentation caused by;A) taxation;B) political risk;C) asymmetric;information;D) financial ris;Market;imperfections do not necessarily imply that national securities markets are;inefficient.


Paper#51186 | Written in 18-Jul-2015

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