Question 1

The typical Eurodollar loan

Accepted Answer

A) matures in less than one year. 
B) matures in five to ten years. 
C) is for a smaller amount than the typical commercial loan made in the United States. 
D) has its principal and interest guaranteed by IMF. 
A) matures in less than one year. 
B) matures in five to ten years. 
C) is for a smaller amount than the typical commercial loan made in the United States. 
D) has its principal and interest guaranteed by IMF.

Question 2

Eurocurrency deposits are

Accepted Answer

A) time deposits denominated in a currency other than that of the issuing bank. 
B) deposits denominated in the new universal European currency. 
C) dollars used as currency in Eastern European countries with unreliable currencies. 
D) the most popular European version of traveler's checks. 
A) time deposits denominated in a currency other than that of the issuing bank. 
B) deposits denominated in the new universal European currency. 
C) dollars used as currency in Eastern European countries with unreliable currencies. 
D) the most popular European version of traveler's checks.

Question 3

How can a bank avoid exchange rate risk?

Accepted Answer

A) By buying financial futures 
B) By buying call options 
C) By buying put options 
D) By matching the currency denomination of assets and liabilities 
A) By buying financial futures 
B) By buying call options 
C) By buying put options 
D) By matching the currency denomination of assets and liabilities

Question 4

Eurobonds

Accepted Answer

A) account for only a small fraction of new issues in the international bond market. 
B) may not be legally sold in the United States. 
C) have traditionally been issued in London. 
D) are redeemable in gold. 
A) account for only a small fraction of new issues in the international bond market. 
B) may not be legally sold in the United States. 
C) have traditionally been issued in London. 
D) are redeemable in gold.

Question 5

Most of the foreign-exchange trading of banks is carried out in order to facilitate

Accepted Answer

A) imports of goods and services. 
B) exports of goods and services. 
C) foreign transactions by governments. 
D) cross-border investment and financial transactions. 
A) imports of goods and services. 
B) exports of goods and services. 
C) foreign transactions by governments. 
D) cross-border investment and financial transactions.

Question 6

The effect of evolving financial market regulation has been to

Accepted Answer

A) make financial institutions in various countries significantly different. 
B) make financial institutions in various countries more similar. 
C) increase interest rate differentials across countries. 
D) make international capital flows more difficult. 
A) make financial institutions in various countries significantly different. 
B) make financial institutions in various countries more similar. 
C) increase interest rate differentials across countries. 
D) make international capital flows more difficult.

Question 7

A U.S. bank has £75 million in deposits and makes a loan of £90 million when the exchange rate is $1 = £1. 5. If the exchange rate changes to $1 = £1, then the bank's net worth will change by

Accepted Answer

A) +$5 million. 
B) +$30 million. 
C) -$5 million. 
D) -$30 million. 
A) +$5 million. 
B) +$30 million. 
C) -$5 million. 
D) -$30 million.

Question 8

Today, the countries with large trade surpluses to deposit in Eurodollar accounts are

Accepted Answer

A) Canada and the United States. 
B) France and England. 
C) Germany and England. 
D) Japan and South Korea. 
A) Canada and the United States. 
B) France and England. 
C) Germany and England. 
D) Japan and South Korea.

Question 9

What was the international transaction currency before World War II?

Accepted Answer

A) German mark 
B) French franc 
C) U.S. dollar 
D) British pound 
A) German mark 
B) French franc 
C) U.S. dollar 
D) British pound

Question 10

The activities of a U.S. bank holding company that owns a controlling interest in a foreign financial services company are governed by

Accepted Answer

A) the Securities and Exchange Commission. 
B) the Office of the Comptroller of the Currency. 
C) Federal Reserve Regulation K. 
D) Federal Reserve Regulation Q. 
A) the Securities and Exchange Commission. 
B) the Office of the Comptroller of the Currency. 
C) Federal Reserve Regulation K. 
D) Federal Reserve Regulation Q.

Question 11

In which of the following countries has the Bank of China NOT shown significant expansion?

Accepted Answer

A) The United States 
B) Russia 
C) Canada 
D) Hong Kong 
A) The United States 
B) Russia 
C) Canada 
D) Hong Kong

Question 12

Before World War II what was the leading global financial and commercial center?

Accepted Answer

A) London 
B) New York 
C) Tokyo 
D) Berlin 
A) London 
B) New York 
C) Tokyo 
D) Berlin

Question 13

The growth of Islamic banking in recent years has occurred for all of the following reasons EXCEPT

Accepted Answer

A) adopting the approach to banking and payment of interest found in Europe and the U.S. 
B) record oil prices contributing to record budget surpluses in some Gulf states. 
C) increased desire among many muslims to follow the Koran's teachings regarding interest. 
D) changes in political sentiment. 
A) adopting the approach to banking and payment of interest found in Europe and the U.S. 
B) record oil prices contributing to record budget surpluses in some Gulf states. 
C) increased desire among many muslims to follow the Koran's teachings regarding interest. 
D) changes in political sentiment.

Question 14

Recent research has found that deposit insurance

Accepted Answer

A) reduces the likelihood of financial crises. 
B) increases the likelihood of financial crises. 
C) is unrelated to the likelihood of financial crises. 
D) reduces the confidence of depositors. 
A) reduces the likelihood of financial crises. 
B) increases the likelihood of financial crises. 
C) is unrelated to the likelihood of financial crises. 
D) reduces the confidence of depositors.

Question 15

From 1970 until the early 1980s the creditworthiness of many developing nations was improving because

Accepted Answer

A) the collapse of Communism allowed these countries to spend less on defense. 
B) of falling commodity prices. 
C) of high real interest rates. 
D) of rising commodity prices and low real interest rates. 
A) the collapse of Communism allowed these countries to spend less on defense. 
B) of falling commodity prices. 
C) of high real interest rates. 
D) of rising commodity prices and low real interest rates.

Question 16

In the Islamic religion, it is forbidden to

Accepted Answer

A) earn a profit. 
B) make loans. 
C) charge interest that is too high. 
D) pay or earn interest. 
A) earn a profit. 
B) make loans. 
C) charge interest that is too high. 
D) pay or earn interest.

Question 17

Before World War II

Accepted Answer

A) capital flows between the United States and other countries were much greater than they are today. 
B) capital flows between the United States and other countries were prohibited. 
C) capital flows between the United States and other countries were restricted by regulation. 
D) the volume of international trade was large relative to the volume of domestic economic activity. 
A) capital flows between the United States and other countries were much greater than they are today. 
B) capital flows between the United States and other countries were prohibited. 
C) capital flows between the United States and other countries were restricted by regulation. 
D) the volume of international trade was large relative to the volume of domestic economic activity.

Question 18

As of 1997, about what percentage of Citicorp's assets are held abroad?

Accepted Answer

A) 1% 
B) 5% 
C) 60% 
D) 90% 
A) 1% 
B) 5% 
C) 60% 
D) 90%

Question 19

A foreign branch bank

Accepted Answer

A) may not make loans within the United States. 
B) may not accept deposits from U.S. residents. 
C) may not accept deposits from non-U.S. residents. 
D) may accept deposits from U.S. residents and make loans to them. 
A) may not make loans within the United States. 
B) may not accept deposits from U.S. residents. 
C) may not accept deposits from non-U.S. residents. 
D) may accept deposits from U.S. residents and make loans to them.

Question 20

Branches of U.S. banks in which city control the most assets?

Accepted Answer

A) Tokyo 
B) Hong Kong 
C) Paris 
D) London 
A) Tokyo 
B) Hong Kong 
C) Paris 
D) London

Exam 16: Banking in the International Economy

The typical Eurodollar loan

Eurocurrency deposits are

How can a bank avoid exchange rate risk?

Eurobonds

Most of the foreign-exchange trading of banks is carried out in order to facilitate

The effect of evolving financial market regulation has been to

A U.S. bank has £75 million in deposits and makes a loan of £90 million when the exchange rate is $1 = £1. 5. If the exchange rate changes to $1 = £1, then the bank's net worth will change by

Today, the countries with large trade surpluses to deposit in Eurodollar accounts are

What was the international transaction currency before World War II?

The activities of a U.S. bank holding company that owns a controlling interest in a foreign financial services company are governed by

In which of the following countries has the Bank of China NOT shown significant expansion?

Before World War II what was the leading global financial and commercial center?

The growth of Islamic banking in recent years has occurred for all of the following reasons EXCEPT

Recent research has found that deposit insurance

From 1970 until the early 1980s the creditworthiness of many developing nations was improving because

In the Islamic religion, it is forbidden to

Before World War II

As of 1997, about what percentage of Citicorp's assets are held abroad?

A foreign branch bank

Branches of U.S. banks in which city control the most assets?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

Monetary Policy Tools

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters