Question 1

Asset trades that deal with debt instruments are best described as

Accepted Answer

A)  share of stock. 
B)  exchange rate. 
C)  receipts. 
D)  factors. 
E)  bonds or bank deposits. 
A)  share of stock. 
B)  exchange rate. 
C)  receipts. 
D)  factors. 
E)  bonds or bank deposits.

Question 2

Calculate the expected payoff for the following cases with the formula: (P1) * (payoff if state 1) + (P2) * (payoff if state 2), where P1 and P2 are the probabilities of state 1 and 2, respectively.

Accepted Answer

The answer of Calculate the expected payoff for the following...

Question 3

Why is it useful to make a distinction between debt and equity instruments?

Accepted Answer

Debt instruments such as bonds and bank

Question 4

Banks in the U.S.

Accepted Answer

A)  are prevented from holding assets that are "too risky." 
B)  are not prevented from holding assets that are "too risky." 
C)  are encouraged not to hold assets that are "too risky." 
D)  are not encouraged not to hold assets that are "too risky." 
E)  are encouraged to lend to a single private customer. 
A)  are prevented from holding assets that are "too risky." 
B)  are not prevented from holding assets that are "too risky." 
C)  are encouraged not to hold assets that are "too risky." 
D)  are not encouraged not to hold assets that are "too risky." 
E)  are encouraged to lend to a single private customer.

Question 5

What is a difficulty encountered in regulating international banking?

Accepted Answer

A)  excessive deposit insurance rates on international banks 
B)  absence of reserve requirements 
C)  oppressive regulatory controls that reduce competitiveness 
D)  lack of funds and incentive to secure payments 
E)  variability in exchange rates 
A)  excessive deposit insurance rates on international banks 
B)  absence of reserve requirements 
C)  oppressive regulatory controls that reduce competitiveness 
D)  lack of funds and incentive to secure payments 
E)  variability in exchange rates

Question 6

A random walk model can more accurately predict exchange rates as compared to a sophisticated forecast

Accepted Answer

A)  always. 
B)  for forecasts up to a year away. 
C)  for forecasts longer than a year away. 
D)  never. 
E)  because of the predictability of exchange rates. 
A)  always. 
B)  for forecasts up to a year away. 
C)  for forecasts longer than a year away. 
D)  never. 
E)  because of the predictability of exchange rates.

Question 7

Explain why large interest rate differences would be strong evidence of unrealized gains from trade.

Accepted Answer

The difference between onshore and offsh

Question 8

Eurodollars are

Accepted Answer

A)  dollar deposits located in the United States. 
B)  dollar deposits located in Europe. 
C)  dollar deposits located outside Europe. 
D)  dollar deposits located outside the United States. 
E)  dollar deposits located outside both Europe and the United States. 
A)  dollar deposits located in the United States. 
B)  dollar deposits located in Europe. 
C)  dollar deposits located outside Europe. 
D)  dollar deposits located outside the United States. 
E)  dollar deposits located outside both Europe and the United States.

Question 9

What is an appropriate definition for "securitization"?

Accepted Answer

A)  the repackaging of bank assets into readily marketable forms 
B)  the promise of a secure return on deposits in FDIC banks 
C)  the simplification of interest-bearing assets into their simplest derivative form 
D)  the unloading of derivative securities in response to a bank run 
E)  the reinforcement of an asset's worth through official certification 
A)  the repackaging of bank assets into readily marketable forms 
B)  the promise of a secure return on deposits in FDIC banks 
C)  the simplification of interest-bearing assets into their simplest derivative form 
D)  the unloading of derivative securities in response to a bank run 
E)  the reinforcement of an asset's worth through official certification

Question 10

"It is in the interest of each depositor to withdraw her money from a bank if all other depositors are doing the same, even when the bank's assets are sound." Discuss. As part of your answer clearly state whether the statement is true or false.

Accepted Answer

True. Students should elaborat

Question 11

Capital markets of poor developing countries that liberalized their financial systems to allow private asset trade with foreigners are called

Accepted Answer

A)  direct foreign markets. 
B)  foreign exchange markets. 
C)  stock & bond markets. 
D)  emerging markets. 
E)  fledgling financial markets. 
A)  direct foreign markets. 
B)  foreign exchange markets. 
C)  stock & bond markets. 
D)  emerging markets. 
E)  fledgling financial markets.

Question 12

Besides world trade growth, what can explain the growth of international banking since the 1960s?

Accepted Answer

A)  war in the Middle East 
B)  government focus on banking regulation 
C)  an increase in world travel 
D)  the emergence of developing countries like China 
E)  desire of depositors to hold currencies outside the jurisdiction of the countries that issue them 
A)  war in the Middle East 
B)  government focus on banking regulation 
C)  an increase in world travel 
D)  the emergence of developing countries like China 
E)  desire of depositors to hold currencies outside the jurisdiction of the countries that issue them

Question 13

Describe three types of gains from trades?

Accepted Answer

A)  trades of exchange rates for goods or services, trades of goods or services for property, and trades of gold for textiles 
B)  trades of goods or services for goods or services, trades of goods or services for assets, and trades of assets for assets 
C)  trades of imports for exports, trades of exports for imports, and trades of natural resources for financial assets 
D)  trades of services for goods, trades of currency for services, and trades of one type of currency for another 
E)  trades of current goods for future services, trades of currency for gold, and trades of one type of currency for another 
A)  trades of exchange rates for goods or services, trades of goods or services for property, and trades of gold for textiles 
B)  trades of goods or services for goods or services, trades of goods or services for assets, and trades of assets for assets 
C)  trades of imports for exports, trades of exports for imports, and trades of natural resources for financial assets 
D)  trades of services for goods, trades of currency for services, and trades of one type of currency for another 
E)  trades of current goods for future services, trades of currency for gold, and trades of one type of currency for another

Question 14

The purpose of the Basel Committee was to

Accepted Answer

A)  achieve a better coordination of the surveillance exercised by national authorities over the international banking system. 
B)  achieve a better coordination of domestic banking systems. 
C)  achieve a better coordination between brokers and investment bankers. 
D)  achieve a better coordination between bond holder and bond issuers. 
E)  manipulate bank rates for more leverage profits. 
A)  achieve a better coordination of the surveillance exercised by national authorities over the international banking system. 
B)  achieve a better coordination of domestic banking systems. 
C)  achieve a better coordination between brokers and investment bankers. 
D)  achieve a better coordination between bond holder and bond issuers. 
E)  manipulate bank rates for more leverage profits.

Question 15

The following simple two-country question illustrates how countries are made better off by trade in assets. Imagine that there are two countries, Home and Foreign, and that residents of each own only one asset, domestic land yielding an annual harvest of kiwi fruit. Assume that the yield on the land is uncertain. Half the time, Home's land yields a harvest of 100 tons of kiwi fruit at the same time as Foreign's land yields a harvest of 50 tons. The other half of the time the outcomes are reversed. The Foreign's harvest is 100 tons, but the Home harvest is only 50.
-Calculate the average, for each country of kiwi harvest.

Accepted Answer

The average for each country of kiwi har

Question 16

Explain why the FDIC is following a "too-big-to-fail" policy of fully protecting all depositors at the largest banks.

Accepted Answer

A tricky question. The FDIC does that al

Question 17

Which of the following statements is TRUE for the U.S.?

Accepted Answer

A)  The FDIC does not provide insurance for deposits for Savings and Loans (S&L) associations. 
B)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations, but only up to $50,000. 
C)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $250,000. 
D)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $150,000. 
E)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $100,000. 
A)  The FDIC does not provide insurance for deposits for Savings and Loans (S&L) associations. 
B)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations, but only up to $50,000. 
C)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $250,000. 
D)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $150,000. 
E)  The FDIC does provide insurance for deposits for Savings and Loans (S&L) associations up to $100,000.

Question 18

The idea of risk aversion

Accepted Answer

A)  is at odds with the idea of insurance. 
B)  helps explain the profitability of insurance companies. 
C)  has nothing to do with insurance companies. 
D)  helps explain the losses suffered by the insurance industry. 
E)  helps explain why insurance companies in the long run are zero profit companies. 
A)  is at odds with the idea of insurance. 
B)  helps explain the profitability of insurance companies. 
C)  has nothing to do with insurance companies. 
D)  helps explain the losses suffered by the insurance industry. 
E)  helps explain why insurance companies in the long run are zero profit companies.

Question 19

Which of the following statements is TRUE?

Accepted Answer

A)  Bank failures inflict serious financial harm on individual depositors. 
B)  Bank failures do not inflict serious financial harm on individual depositors. 
C)  Bank failures inflict not only serious financial harm on individual depositors, but also harm the macroeconomic stability of the economy. 
D)  Bank failures inflict serious financial harm on individual depositors, but fortunately do not harm the macroeconomic stability of the economy. 
E)  Bank failures only inflict serious financial harm on the macroeconomic stability of the economy. 
A)  Bank failures inflict serious financial harm on individual depositors. 
B)  Bank failures do not inflict serious financial harm on individual depositors. 
C)  Bank failures inflict not only serious financial harm on individual depositors, but also harm the macroeconomic stability of the economy. 
D)  Bank failures inflict serious financial harm on individual depositors, but fortunately do not harm the macroeconomic stability of the economy. 
E)  Bank failures only inflict serious financial harm on the macroeconomic stability of the economy.

Question 20

In the U.S., banks

Accepted Answer

A)  may not be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
B)  may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
C)  may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the FDIC examiners agree. 
D)  may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the Office of the Comptroller of the Currency examiners agree. 
E)  may be forced by bank examiner to adjust their balance sheets by paying off loans the examiner thinks will not be repaid. 
A)  may not be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
B)  may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid. 
C)  may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the FDIC examiners agree. 
D)  may be forced by bank examiner to adjust their balance sheets by writing off loans the examiner thinks will not be repaid only if the Fed and the Office of the Comptroller of the Currency examiners agree. 
E)  may be forced by bank examiner to adjust their balance sheets by paying off loans the examiner thinks will not be repaid.

Exam 20: Financial Globalization: Opportunity and Crisis

Asset trades that deal with debt instruments are best described as

Calculate the expected payoff for the following cases with the formula: (P1) * (payoff if state 1) + (P2) * (payoff if state 2), where P1 and P2 are the probabilities of state 1 and 2, respectively.

Why is it useful to make a distinction between debt and equity instruments?

Banks in the U.S.

What is a difficulty encountered in regulating international banking?

A random walk model can more accurately predict exchange rates as compared to a sophisticated forecast

Explain why large interest rate differences would be strong evidence of unrealized gains from trade.

Eurodollars are

What is an appropriate definition for "securitization"?

"It is in the interest of each depositor to withdraw her money from a bank if all other depositors are doing the same, even when the bank's assets are sound." Discuss. As part of your answer clearly state whether the statement is true or false.

Capital markets of poor developing countries that liberalized their financial systems to allow private asset trade with foreigners are called

Besides world trade growth, what can explain the growth of international banking since the 1960s?

Describe three types of gains from trades?

The purpose of the Basel Committee was to

Explain why the FDIC is following a "too-big-to-fail" policy of fully protecting all depositors at the largest banks.

Which of the following statements is TRUE for the U.S.?

The idea of risk aversion

Which of the following statements is TRUE?

In the U.S., banks

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Exchange Rates and the Foreign Exchange Market: an Asset Approach

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

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