answer these MCQ

10. Identify the one true statement about capital asset pricing: (a) International CAPM model is used to derive the riskiness of the actual cost of capital (b) In the international CAPM, there is a political risk factor which explains asset returns (c) International financial markets in the model are assumed to be isolated (d) Forward exchange rates are used to calculate the foreign currency risk premium (e) None of the above3. Identify the one true statement about political risk: (a) Political risk is dened as the risk of corporate defaults due to the volatility of the local currencies (b) Most countries have an official gold parity (i.e. money can be freely converted into gold at a fixed exchange rate) to reduce political risk (0) Political risks are highly nonlinear and so can be wellhedged using options (d) In the CAPM model there is a political risk factor which explains asset returns (e) None of the above 6. Identify the one true statement about the expected exposure of assets to a change in the GBP/EUR exchange rate: (a) Shares in a French importer from Britain have positive exposure to a change in the GBP/EUR (b) French importer can always successfully hedge exposure to the GBP/EUR by matching future cash inflows and cash outflows (c) Contractual exposure of a British importer arises from a signed contract with a French exporter which ensures a known cash inflow or outflow in GBP at some specified future time (d) British importer from France typically have much larger EUR inflows than outflows (e) None of the above9. Identify the one true statement about the bid-ask quotes: (a) The bid-ask spread increases with market liquidity (b) When dealing with a bank you buy at the bid and sell at the ask (c) The positive bid-ask spread makes arbitrage across markets easier (d) You lend money to the bank at the ask interest rate (e) None of the above