Course Quiz - Financial Fitness Center

1.

Currency risk is always bad for a portfolio that contains foreign stocks.

True

False

False. Currency risk is a two-way street. Sometimes it can work in your favor.

2.

What factor complicates the decision of how much your foreign allocation should be?

Informed observers vary widely on how much to stake overseas.

Country of domicile doesn't say a lot about where a company actually does business

Neither of the above

Both of the above

Both of the above. Investing in foreign markets is not easy to pin down.

3.

What can global market index funds provide investors?

An easy way to gain exposure to all markets around the globe in one investment

Ideas for how to determine your own foreign allocation

Neither of the above

Both of the above

Both of the above. Global market index funds have made foreign investing easier for many investors.

4.

What type of risk leads many target-date funds to lower their allocation of foreign stocks as investors near retirement?

Currency risk

Interest rate risk

Inflation risk

Currency risk. While the other risks mentioned may play a role, currency risk is the paramount one because foreign assets are not denominated in US dollars.

5.

How should you determine what your foreign allocation should be?

Add or subtract foreign exposure based on market performance

Set a strategic, long-term allocation to foreign stocks and stick with it, making only minor adjustments to rebalance

U.S. investors should not invest in foreign stocks under any circumstances

Set a strategic, long-term allocation to foreign stocks and stick with it, making only minor adjustments to rebalance.

Test your knowledge

Choose wisely. There is only one correct answer to each question.