Assume That Your Singapore Subsidiary Has a Beta with Respect

question 1

Multiple Choice

Assume that your Singapore subsidiary has a beta with respect to the Singapore market of 1.2 and that the Singapore central bank rate is 1.0%. The expected return on the Singapore market
Index is 13%. The corresponding Treasury rate is 2.25%, and the expected return on the S&P
500 Index is 10%. If the Singapore stock market is almost perfectly positively correlated with
The U.S. stock market and if exchange rate movements are uncorrelated with stock market
Movements, what is the expected return of your subsidiary in the U.S.? Round your answer to
The nearest tenth of a percent.

• A)14.4%
• B)11.6%
• C)15.4%
• D)13.2%

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Definitions:

Taylorism

A management theory developed by Frederick W. Taylor that emphasizes scientific studies of tasks and time management to improve work efficiency.

Outsourcing

The process where a company hires another company or individual to perform tasks, handle operations or provide services that are either difficult to manage or outside of the hiring company's expertise.

Efficient Operations

The ability of an organization to achieve its objectives with minimum wastage of resources and optimum productivity.

Individual Growth

The personal development and enhancement of skills, knowledge, and abilities over time.