Foreign investment decision

Question

Question 1: Describe the diversification principle in the context of foreign investment in relation to the domestic investment?

Question 2: Describe different factors determining return on securities in different countries.

Question 3: How do you compute the rate of return on foreign bond? Assume that ‘d’ represents domestic market and ‘f’ foreign market and r_d = 10%, r_f = 8%. Further suppose that foreign currency appreciates by 2% and corporate income tax rate r_y = 25% and the capital gains tax T = 12% in both the countries, then recognize the market for investment.

Question 4: Describe the factors influencing risk measurement in the international investment?

Question 5: What do you know by proficient portfolio in international financial management? Describe mathematical interpretation of the concept.

Question 6: How can you compute required rate of return on the international investment in integrated and segmented capital markets.

Question 7: Describe the Capital Asset Pricing Model (CAPM) in two country perspective.