Exam 9: International Financial Markets

If a currency's forward rate is higher than its spot rate, the currency is trading at a ________.

The rate at which one currency is exchanged for another is called the ________.

Exchange of goods and services between two parties without money is called ________.

Shares of ownership in a company's assets that give shareholders a claim on the company's future cash flows are called ________.

Explain what a vehicle currency is and the role it plays in the foreign exchange market.

Interest arbitrage is the profit-motivated purchase and sale of interest-paying securities denominated in different currencies.

A capital market is a system that allocates financial resources in the form of debt and equity according to their most efficient uses.

An expanded money supply ________.

There are two components of every quoted exchange rate: the debt and the equity rates.

For which of the following reasons do investors use the foreign exchange market?

A bond issued outside the country in whose currency it is denominated is called a(n) ________.

Scenario: Trader's Paradise Trader's Paradise is a global merchant that sells a variety of products. The company operates in 48 different countries (some developed, some developing) and some former communist countries. The company faces substantial risks given differing conditions in foreign exchange markets. -When doing business with former communist countries, Trader's Paradise would insist on getting paid in hard currency; which means they want to get paid in ________.

Forward contracts belong to a family of financial instruments called arbitrage.

Which of the following is a system that allocates financial resources in the form of debt and equity according to their most efficient uses?

________ are usually located on small island nations or territories with favorable tax and/or secrecy laws.

Deregulation of national capital markets has been instrumental in the expansion of the international capital market.

Which of these is the simultaneous purchase and sale of foreign exchange for two different dates?

The world's three most important financial centers are New York, Chicago, and London.

Scenario: Sally goes to Japan Sally Johnson has identified a market for her company's products in Japan. She is excited about expanding her company, but knows she needs to learn how the foreign exchange market works before she can successfully sell her products abroad. -If Sally knows that on March 1 the exchange rate between the European Union euro (€) and the U.S. dollar was €5/$ and that by April 1 the exchange was €4/$ she knows that ________.

If the spot for the British pound (GBP) is $1.6950/GBP and the 30-day forward rate is $1.6921/GBP, then the pound is trading at a ________ in the 30-day market.