Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
10th Edition
ISBN: 9780077835422
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Chapter 19, Problem 1PS
Summary Introduction
To determine whether the given information is true or false
Expert Solution & Answer
Answer to Problem 1PS
Thus, the given statement is considered as false.
Explanation of Solution
Given Information:
Due to currency risk, dollar-denominated returns of international portfolios will have a higher standard deviation than local currency-denominated returns
Reason for given statement considered as false:
Risk that is related with exchange rates is more when investment is done in local currency. If investment is done in foreign currency and in terms of dollars, the risk to firm will be limited to the risk tolerated by the investor.
If in case investment is done in local currency, risk will increase as investor will have to face both exchange rate risk and trading or business risk.
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Chapter 19 Solutions
Essentials of Investments (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Ch. 19 - Prob. 1PSCh. 19 - Prob. 2PSCh. 19 - Prob. 3PSCh. 19 - Prob. 4PSCh. 19 - Prob. 5PSCh. 19 - Prob. 6PSCh. 19 - Now suppose the investor in Problem 3 also sells...Ch. 19 - Prob. 8PSCh. 19 - If the current exchange rate is 1.35/ , the...Ch. 19 - If you were to invest 10,000 in the British bills...
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