B) 342.95 C) $43.97 D) $81.43 3. International diversification allows investors

Question

B) 342.95 C) $43.97 D) $81.43 3. International diversification allows investors to further diversify away the unsystematic risk because A) the returns of foreign securities are in general uncorrelated (correlation of 0) with the returns of U.S. securities B) the returns of foreign securities have lower correlation with the returns of U.S. securities C) the returns of foreign securities are perfectly and positively correlated with the returns of U.S. securities 4. In a futures contract, the short position is taken by the person who A) commits to buying the commodity B) plays between second base and third base C) uses his margin D) commits to selling the commodity Assuming required return stays positive, zero coupon securities like T-bills A) should never be traded at discount B) can be traded at premium when coupon rate> YTM C) can be traded at discount when coupon rate> YTM D) should never be traded at premium

Explanation / Answer

23. Correct Answer is Option B. Securities of other countries will have low correlation with securities of US securities (but not necessarily 0!)

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