Exam 9: International Financial Markets

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

Briefly describe the three main institutions of the foreign exchange market.

A ________ currency is traded freely in the foreign exchange market.

Offshore financial centers tend to be characterized by economic and political instability and poor telecommunications infrastructures.

Samurai bonds are bonds issued in Japan by non-Japanese entities.

Which of the following statements is NOT true?

If an exchange rate quotes the number of Indian rupees needed to buy one U.S. dollar, the dollar is the quoted currency and the rupee is the base currency.

Prominent operational centers include ________ and ________.

Well-functioning financial markets funnel money from organizations and economies with excess funds to those with shortages.

When obtaining microcredit, small groups of low-income entrepreneurs can borrow money at competitive rates without having to put up collateral.

A loan in which the borrower promises to repay the borrowed amount plus a predetermined rate of interest is called ________.

Cross rates between two currencies can be calculated using either currency's indirect or direct exchange rates with another currency.

The exchange rate between the euro (€) and the dollar is €0.8461/$. Which of the following is the correct direct quote on the dollar?

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. -To insure against potential losses that result from adverse changes in exchange rates, Trader's Paradise should use currency ________.

By issuing bonds in the international bond market, borrowers from newly industrialized and developing nations can borrow money from other nations where interest rates are ________.

________ is the purchase or sale of a currency with the expectation that its value will change and generate a profit.

International transactions between two currencies other than the U.S. dollar often use the dollar as a vehicle currency.

Deregulation of capital markets resulted in all of the following EXCEPT ________.

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

The most important factor fueling growth in the international bond market is ________.