Global Investment Decision Benchmark
Based on the provided information, what is the single most important return figure the Canadian investor should use as their primary benchmark to decide if the foreign investment is attractive? Justify your answer.
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Foreign Policy Rate (i*)
An investor based in Australia is considering purchasing corporate bonds issued by a company in the United Kingdom. To decide if this foreign investment is worthwhile, the investor needs a fundamental baseline for comparison. Which of the following represents the most appropriate benchmark for this Australian investor?
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Global Investment Decision Benchmark
Rationale for the Home Currency Benchmark
A Canadian investor is evaluating an investment in a German technology startup. To determine the minimum acceptable return, the investor should use the interest rate on a German government bond as their primary benchmark.
An international investment firm employs analysts from various countries. For each analyst evaluating a potential foreign investment, match them with the most appropriate risk-free benchmark they should use for their comparison.
A French investor determines that a risk-free investment in their own country yields a 2% annual return. They are evaluating a foreign investment opportunity that, after adjusting for all relevant risks and currency fluctuations, is projected to yield 1.5%. The investor should reject this opportunity because its adjusted return is less than the return available from their __________.
An investor from South Korea is considering an investment in Brazilian government bonds. Arrange the following steps in the logical order they would follow to make a decision using their home currency's risk-free asset as a benchmark.
An investor based in Switzerland has historically found it profitable to invest in a portfolio of foreign corporate bonds, as their returns consistently exceeded the 1% yield on Swiss government bonds. Recently, the Swiss central bank increased its key interest rate, causing the yield on Swiss government bonds to rise to 4%. Assuming the expected returns and risks of the foreign bonds remain the same, what is the most likely consequence for the investor's strategy?
Evaluating an Investment Manager's Rationale