Question 1

Forward markets for currencies of developing countries are:

Accepted Answer

A)   prohibited.
B)   less liquid than markets for developed countries.
C)   more liquid than markets for developed countries.
D)   only available for use by government agencies.

Question 2

The international bond markets facilitate international transfers of short-term credit, thereby enabling governments and large corporations to borrow funds from various countries.

Accepted Answer

A) True 
 B)False

Question 3

A syndicated Eurocredit loan:

Accepted Answer

A)   represents a loan by a single bank to a syndicate of corporations.
B)   represents a loan by a single bank to a syndicate of country governments.
C)   represents a direct loan by a syndicate of oil-producing exporters to a less developed country.
D)   represents a loan by a group of banks to a borrower.
E)   A and B

Question 4

International stock markets enable firms to obtain equity financing in foreign countries. Thus, these markets have helped MNCs finance their international expansion.

Accepted Answer

A) True 
 B)False

Question 5

Futures contracts are typically ____; forward contracts are typically ____.

Accepted Answer

A)   sold on an exchange; sold on an exchange
B)   offered by commercial banks; sold on an exchange
C)   sold on an exchange; offered by commercial banks
D)   offered by commercial banks; offered by commercial banks

Question 6

Assume a Japanese firm invoices exports to the UK in pounds. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the pound to ____ against the yen, it would likely wish to hedge. It could hedge by ____ pounds forward.

Accepted Answer

A)   depreciate; buying
B)   depreciate; selling
C)   appreciate; selling
D)   appreciate; buying

Question 7

The international money market primarily concentrates on:

Accepted Answer

A)   short-term lending (one year or less) .
B)   medium-term lending.
C)   long-term lending.
D)   placing bonds with investors.
E)   placing newly issued stock in foreign markets.

Question 8

The bid/ask spread for small retail transactions is commonly in the range of ____ per cent; the bid/ask spread for wholesale transactions is commonly in the range of ____ per cent.

Accepted Answer

A)   3 to 7; 0.01 to 0.03
B)   2 to 5; 0.05 to 0.10
C)   10 to 15; 0.01 to 0.03
D)   1 to 2; 0.05 to 0.07

Question 9

The international credit market primarily concentrates on:

Accepted Answer

A)   short-term lending (less than one year) .
B)   medium-term lending.
C)   long-term lending.
D)   providing an exchange of foreign currencies for firms who need them.
E)   placing newly issued stock in foreign markets. B

Question 10

The interest rate commonly charged for loans between banks is called the cross rate.

Accepted Answer

A) True 
 B)False

Question 11

Creditors (including individual investors who purchase debt securities)  have which of the following motives for providing credit in foreign markets?

Accepted Answer

A)   High foreign exchange rate
B)   International diversification
C)   Crisis
D)   All of the above

Question 12

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

Accepted Answer

A) True 
 B)False  False

Question 13

Which of the following is not true with respect to spot market liquidity?

Accepted Answer

A)   The more willing buyers and sellers there are, the more liquid a market is.
B)   The spot markets for heavily traded currencies such as the Japanese yen are very liquid.
C)   A currency's liquidity affects the ease with which an MNC can obtain or sell that currency.
D)   If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate. D

Question 14

Which of the following is true?

Accepted Answer

A)   Non-UK firms may desire to issue bonds in the UK due to less regulations in the UK.
B)   UK firms may desire to issue bonds in the UK due to less regulations in the UK.
C)   UK firms may desire to issue bonds in the non-UK markets due to less regulations in non-UK countries.
D)   A and B.

Question 15

Assume that a bank's bid rate on Japanese yen is £0.0026 and its ask rate is £0.0028. Its bid/ask percentage spread is:

Accepted Answer

A)   about 7.52%.
B)   about 7.70%.
C)   about 7.14%.
D)   about 4.43%.

Question 16

The US dollar is not ever used as a medium of exchange in:

Accepted Answer

A)   industrialized countries outside the US.
B)   in any Latin American countries.
C)   in Eastern European countries where foreign exchange restrictions exist.
D)   none of the above.

Question 17

Which of the following is the motives for investors to invest in foreign markets?

Accepted Answer

A)   Economic condition
B)   Exchange rate expectation
C)   International diversification
D)   All of the above

Question 18

According to the text, the forward rate is commonly used for:

Accepted Answer

A)   hedging.
B)   Eurocurrency transactions.
C)   Eurocredit transactions.
D)   Eurobond transactions.

Question 19

The existence of imperfect markets has prevented the internationalization of financial markets.

Accepted Answer

A) True 
 B)False

Question 20

LIBOR is:

Accepted Answer

A)   the interest rate commonly charged for loans between banks.
B)   the average inflation rate in European countries.
C)   the maximum loan rate ceiling on loans in the international money market.
D)   the maximum deposit rate ceiling on deposits in the international money market.
E)   the maximum interest rate offered on bonds that are issued in London.

Exam 3: International Financial Markets

Forward markets for currencies of developing countries are:

Correct AnswerverifiedShow Answer

The international bond markets facilitate international transfers of short-term credit, thereby enabling governments and large corporations to borrow funds from various countries.

Correct AnswerverifiedShow Answer

A syndicated Eurocredit loan:

Correct AnswerverifiedShow Answer

International stock markets enable firms to obtain equity financing in foreign countries. Thus, these markets have helped MNCs finance their international expansion.

Correct AnswerverifiedShow Answer

Futures contracts are typically ____; forward contracts are typically ____.

Correct AnswerverifiedShow Answer

Assume a Japanese firm invoices exports to the UK in pounds. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the pound to ____ against the yen, it would likely wish to hedge. It could hedge by ____ pounds forward.

Correct AnswerverifiedShow Answer

The international money market primarily concentrates on:

Correct AnswerverifiedShow Answer

The bid/ask spread for small retail transactions is commonly in the range of ____ per cent; the bid/ask spread for wholesale transactions is commonly in the range of ____ per cent.

Correct AnswerverifiedShow Answer

The international credit market primarily concentrates on:

Correct AnswerverifiedB

The interest rate commonly charged for loans between banks is called the cross rate.

Correct AnswerverifiedShow Answer

Creditors (including individual investors who purchase debt securities) have which of the following motives for providing credit in foreign markets?

Correct AnswerverifiedShow Answer

A currency put option provides the right, but not the obligation, to buy a specific currency at a specific price within a specific period of time.

Correct AnswerverifiedFalse

Which of the following is not true with respect to spot market liquidity?

Correct AnswerverifiedD

Which of the following is true?

Correct AnswerverifiedShow Answer

Assume that a bank's bid rate on Japanese yen is £0.0026 and its ask rate is £0.0028. Its bid/ask percentage spread is:

Correct AnswerverifiedShow Answer

The US dollar is not ever used as a medium of exchange in:

Correct AnswerverifiedShow Answer

Which of the following is the motives for investors to invest in foreign markets?

Correct AnswerverifiedShow Answer

According to the text, the forward rate is commonly used for:

Correct AnswerverifiedShow Answer

The existence of imperfect markets has prevented the internationalization of financial markets.

Correct AnswerverifiedShow Answer

LIBOR is:

Correct AnswerverifiedShow Answer

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Futures contracts are typically ; forward contracts are typically .

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Assume a Japanese firm invoices exports to the UK in pounds. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the pound to against the yen, it would likely wish to hedge. It could hedge by pounds forward.

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The bid/ask spread for small retail transactions is commonly in the range of per cent; the bid/ask spread for wholesale transactions is commonly in the range of per cent.

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B

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False

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D

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