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:

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Possession

The state of having, owning, or controlling something, or in some contexts, a state in which a person is believed to be influenced or controlled by an external entity.

Nervous Breakdown

A non-medical term that signifies a period of intense mental distress, where an individual is unable to function normally in everyday life.

Mental Hygiene Movement

A movement started by Dorothea Dix (1802–1887), a Boston schoolteacher, characterized by a desire to protect and provide humane treatment for the mentally ill. Her campaign resulted directly in the opening of 32 state hospitals, including 2 in Canada. Despite the noble aims, the asylums were overcrowded and the staff had no time to do more than warehouse and restrain the patients.