Question 1

Banks in the U.S.

Accepted Answer

A)  cannot hold common stocks. 
B)  can hold common stocks. 
C)  cannot hold common stocks of companies they do business with. 
D)  cannot hold common stocks of companies that have their headquarters in the same State. 
E)  can hold risky assets. 
A)  cannot hold common stocks. 
B)  can hold common stocks. 
C)  cannot hold common stocks of companies they do business with. 
D)  cannot hold common stocks of companies that have their headquarters in the same State. 
E)  can hold risky assets.

Question 2

What structures make up the international capital markets?

Accepted Answer

A)  stock market, IFM, and the World bank 
B)  bond market, foreign exchange rates, IFM, and the World bank 
C)  commercial banks, corporations, non-bank financial institutions, the central banks, and other government agencies 
D)  commercial banks and corporations 
E)  the central banks and non-bank financial institutions 
A)  stock market, IFM, and the World bank 
B)  bond market, foreign exchange rates, IFM, and the World bank 
C)  commercial banks, corporations, non-bank financial institutions, the central banks, and other government agencies 
D)  commercial banks and corporations 
E)  the central banks and non-bank financial institutions

Question 3

"Bank failure may not be limited to banks that have mismanaged their assets." Explain why?

Accepted Answer

A sound bank faced with the wholesale lo

Question 4

How international trade in assets can make both countries better off?

Accepted Answer

By allowing them to reduce the riskiness

Question 5

What is the basic motive for asset trade?

Accepted Answer

A)  the belief that large risks will lead to large returns 
B)  restoration of the balance of payments 
C)  portfolio unification 
D)  economic stability 
E)  increase expected returns and reduced risk 
A)  the belief that large risks will lead to large returns 
B)  restoration of the balance of payments 
C)  portfolio unification 
D)  economic stability 
E)  increase expected returns and reduced risk

Question 6

People who are risk averse,

Accepted Answer

A)  value a collection of assets only on the basis of its expected returns. 
B)  value a collection of assets only on the basis of the risk of that return. 
C)  value a collection of assets not only on the basis of its expected returns but also on the basis of the risk of that return. 
D)  are less likely to invest in life insurance. 
E)  are less likely to have a diverse portfolio. 
A)  value a collection of assets only on the basis of its expected returns. 
B)  value a collection of assets only on the basis of the risk of that return. 
C)  value a collection of assets not only on the basis of its expected returns but also on the basis of the risk of that return. 
D)  are less likely to invest in life insurance. 
E)  are less likely to have a diverse portfolio.

Question 7

Calculate the expected payoff for the following cases, where q1 and q2 are the probabilities of state 1 and 2, respectively.

Accepted Answer

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

Question 8

For the following question, assume the following facts: (1) Chase (which is located in the United States) has a 20% reserve requirement imposed by the government.
(2) Bank of Germany has no reserve requirements.
(3) Both banks may invest at an 8% interest rate.
(4) Both banks have fixed costs of $3 per deposit made.
What is the difference between the minimum interest rates each bank can offer and still make a profit if the deposit is $500 for 1 year?

Accepted Answer

A)  0 - Both banks can offer the same rate. 
B)  1% 
C)  1.6% 
D)  0.4% 
E)  20% 
A)  0 - Both banks can offer the same rate. 
B)  1% 
C)  1.6% 
D)  0.4% 
E)  20%

Question 9

The Fed's Regulation Q

Accepted Answer

A)  placed a ceiling on the interest rates U.S. banks could pay on time deposits to foreigners. 
B)  placed a ceiling on the interest rates U.S. banks could pay on time deposits. 
C)  placed a ceiling on the amount U.S. residents can deposits in Euro banks. 
D)  placed a ceiling on the amount foreign residents can deposits in domestic American banks. 
E)  placed a ceiling on the amount foreign banks can pay on time deposits. 
A)  placed a ceiling on the interest rates U.S. banks could pay on time deposits to foreigners. 
B)  placed a ceiling on the interest rates U.S. banks could pay on time deposits. 
C)  placed a ceiling on the amount U.S. residents can deposits in Euro banks. 
D)  placed a ceiling on the amount foreign residents can deposits in domestic American banks. 
E)  placed a ceiling on the amount foreign banks can pay on time deposits.

Question 10

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 11

Why is portfolio diversification so important in international trade?

Accepted Answer

Portfolio diversification is important i

Question 12

Complete the following table 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 Complete the following table with the formula...

Question 13

U.S. reserve requirements

Accepted Answer

A)  are rejected by half the banks operating in the United States. 
B)  show how regulatory asymmetries can operate to enhance the profitability of Eurocurrency trading. 
C)  tend to harm the bank's business and decrease monetary aggregates. 
D)  force banks to hold a portion of its assets in a liquid form easily mobilized to meet sudden deposit outflows. 
E)  remain in place, but capital requirements have begin defaulting. 
A)  are rejected by half the banks operating in the United States. 
B)  show how regulatory asymmetries can operate to enhance the profitability of Eurocurrency trading. 
C)  tend to harm the bank's business and decrease monetary aggregates. 
D)  force banks to hold a portion of its assets in a liquid form easily mobilized to meet sudden deposit outflows. 
E)  remain in place, but capital requirements have begin defaulting.

Question 14

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

Accepted Answer

The difference between onshore and offsh

Question 15

Departures from interest parity

Accepted Answer

A)  can be explained using theories of risk premium. 
B)  cannot be explained using theories of risk premium. 
C)  may or may not be able to be explained using theories of risk premium, more research is needed. 
D)  are completely unrelated to risk premium. 
E)  occur when risk premium is overcalculated. 
A)  can be explained using theories of risk premium. 
B)  cannot be explained using theories of risk premium. 
C)  may or may not be able to be explained using theories of risk premium, more research is needed. 
D)  are completely unrelated to risk premium. 
E)  occur when risk premium is overcalculated.

Question 16

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 17

What are the three types of gains from international transactions between the residents of different countries?

Accepted Answer

The three types are:
(1) Gains due to co

Question 18

The main problem with securitization is that

Accepted Answer

A)  governments are no longer able to repackage bank assets. 
B)  securitized banks grow too large and create oligopolies. 
C)  There is no problem. Governments can still get an accurate picture of global financial flows by simply examining bank balance sheets. 
D)  governments are not able to monitor bank assets or to asses a bank's risk to the soundness of the international banking system. 
E)  the bank assets are not marketable. 
A)  governments are no longer able to repackage bank assets. 
B)  securitized banks grow too large and create oligopolies. 
C)  There is no problem. Governments can still get an accurate picture of global financial flows by simply examining bank balance sheets. 
D)  governments are not able to monitor bank assets or to asses a bank's risk to the soundness of the international banking system. 
E)  the bank assets are not marketable.

Question 19

The leading center of Eurocurrency trading is

Accepted Answer

A)  New York City. 
B)  Chicago. 
C)  London. 
D)  Paris. 
E)  Frankfurt. 
A)  New York City. 
B)  Chicago. 
C)  London. 
D)  Paris. 
E)  Frankfurt.

Question 20

Regulatory asymmetries can explain why the following places have become main Eurocurrency centers:

Accepted Answer

A)  the United States 
B)  Germany 
C)  Zurich, Somalia, and Mozambique 
D)  London, Luxembourg, and The United States 
E)  London, Luxembourg, and Hong Kong 
A)  the United States 
B)  Germany 
C)  Zurich, Somalia, and Mozambique 
D)  London, Luxembourg, and The United States 
E)  London, Luxembourg, and Hong Kong

Exam 21: Financial Globalization: Opportunity and Crisis

Banks in the U.S.

What structures make up the international capital markets?

"Bank failure may not be limited to banks that have mismanaged their assets." Explain why?

How international trade in assets can make both countries better off?

What is the basic motive for asset trade?

People who are risk averse,

Calculate the expected payoff for the following cases, where q1 and q2 are the probabilities of state 1 and 2, respectively.

The Fed's Regulation Q

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

Why is portfolio diversification so important in international trade?

Complete the following table 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.

U.S. reserve requirements

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

Departures from interest parity

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

What are the three types of gains from international transactions between the residents of different countries?

The main problem with securitization is that

The leading center of Eurocurrency trading is

Regulatory asymmetries can explain why the following places have become main Eurocurrency centers:

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 European Experience

Developing Countries: Growth, Crisis, and Reform

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