The Straightforward Generalization of the Simple CAPM to International Stocks

question 33

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.
• E) None of the options are correct.

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Definitions:

Hepaticophyta

A division of non-vascular plants known as liverworts, which are small, herbaceous plants found worldwide, playing a key role in the ecology of moist habitats.

Anthocerophyta

A phylum of non-vascular plants known as hornworts, characterized by a sporophyte that resembles a horn.

Ferns

A group of non-flowering vascular plants that reproduce via spores and have neither seeds nor flowers.

Bryophyta

A division of non-vascular land plants that are known as mosses, characterized by life-cycles with a dominant gametophyte stage.