The Straightforward Generalization of the Simple CAPM to International Stocks

question 7

Multiple Choice

The straightforward generalization of the simple CAPM to international stocks is problematic because

• A)inflation-risk perceptions by different investors in different countries will differ as consumption baskets differ.
• B)investors in different countries view exchange-rate risk from the perspective of different domestic currencies.
• C)taxes, transaction costs, and capital barriers across countries make it difficult for investors to hold a world-index portfolio.
• D)All of the options are correct.

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Definitions:

Transferring Thoughts

The process of conveying ideas or feelings from one mind to another through speech, writing, or another medium.

Encoding

The process of converting information or data into a particular form, especially for communication or processing.

Evaluative Feedback

A type of feedback that provides a judgment or assessment of performance, typically with suggestions for improvement.

Decoding

The process of interpreting or making sense of a message or information received, especially in communication.