1. The possibility of political risk may be excluded when an investor considers
ID: 2653672 • Letter: 1
Question
1. The possibility of political risk may be excluded when an investor considers maximizing expected returns.
True or False
2. The Eurobond market has which of the following characteristics?
a.Eurobond issues are denominated in the currency where the bond issue is sold.
b. Disclosure requirements in the Eurobond market are much less stringent than those required by the U.S. Securities and Exchange Commission.
c. Eurobond issues are underwritten by the European Central Bank.
d. Eurobond issues are always denominated in euros.
Explanation / Answer
1- False, as the change in political parties can significantly bring about a change in investment policies, thus affecting the returns. Hence, political risk must not be excluded while considering maximising returns.
2- Eurobond issues are always denominated in euros - this is the characteristic of a Eurobond market.
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