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:

Partnership Interest

An ownership stake in a partnership, representing a partner's share of the profits, losses, and capital.

Additional Contributions

Extra payments beyond the minimum required, often referring to retirement accounts or other savings plans.

Cash Distribution

The payment of earnings or assets from a corporation or a financial entity to its shareholders, investors, or partners.

Partnership Income

Earnings distributed to the partners of a partnership from the business, which is reported on their personal income tax returns.