Question 1

A eurocommercial paper (ECP)facility:

Accepted Answer

A)  involves issues typically more than USD750 million. 
B)  involves usually less than 6 banks for the marketing. 
C)  has a panel that agrees to purchase any paper up to a predetermined amount. 
D)  does not require the borrower to have a high credit rating as it uses the credit ratings for the panel of banks. 
A)  involves issues typically more than USD750 million. 
B)  involves usually less than 6 banks for the marketing. 
C)  has a panel that agrees to purchase any paper up to a predetermined amount. 
D)  does not require the borrower to have a high credit rating as it uses the credit ratings for the panel of banks.

Question 2

A _______ is a euromarket,medium- to long-term bearer security with a rate of interest referenced to LIBOR.

Accepted Answer

A)  eurocurrency term loan 
B)  eurocommercial paper 
C)  eurobond 
D)  euro floating rate note 
A)  eurocurrency term loan 
B)  eurocommercial paper 
C)  eurobond 
D)  euro floating rate note

Question 3

Which of the following is NOT a feature of euro floating rate notes (FRNs)?

Accepted Answer

A)  The coupon rates are usually reset every 6 months. 
B)  FRNs are bearer securities. 
C)  Many have a call option that gives the investor the right to sell the bond back to the issuer prior to maturity. 
D)  An FRN issue is usually about USD 100 million. 
A)  The coupon rates are usually reset every 6 months. 
B)  FRNs are bearer securities. 
C)  Many have a call option that gives the investor the right to sell the bond back to the issuer prior to maturity. 
D)  An FRN issue is usually about USD 100 million.

Question 4

The provision attached to a debt security that enables the holder to sell it to another party is called a:

Accepted Answer

A)  purchase agreement. 
B)  sell-down provision. 
C)  trade provision. 
D)  vendor provision. 
A)  purchase agreement. 
B)  sell-down provision. 
C)  trade provision. 
D)  vendor provision.

Question 5

The eurocurrency markets are large wholesale markets that involve large amounts of short-term direct financing.

Accepted Answer

A) True 
 B)False

Question 6

Euromarket bankers can narrow the spread between deposit and lending interest rates since the operating costs per dollar are lower than those faced in domestic markets.

Accepted Answer

A) True 
 B)False

Question 7

The main role of a lead manager for a syndicated loan facility program for a eurocurrency bank loan is to:

Accepted Answer

A)  provide the funds to the issuer. 
B)  act as an arranger of the debt issue, and structure the facility. 
C)  act as an underwriting syndicate, and purchase paper not taken up by the market. 
D)  provide a supporting guarantee for the issue. 
A)  provide the funds to the issuer. 
B)  act as an arranger of the debt issue, and structure the facility. 
C)  act as an underwriting syndicate, and purchase paper not taken up by the market. 
D)  provide a supporting guarantee for the issue.

Question 8

Costs faced by banks in the euromarkets operations tend to be:

Accepted Answer

A)  higher per dollar of business transactions. 
B)  higher due to the large amounts of funds involved. 
C)  lower per dollar of business transactions involved. 
D)  higher due to the operating costs per dollar. 
A)  higher per dollar of business transactions. 
B)  higher due to the large amounts of funds involved. 
C)  lower per dollar of business transactions involved. 
D)  higher due to the operating costs per dollar.

Question 9

To facilitate the issue of a P-note in the international debt markets,banks:

Accepted Answer

A)  set up a euronote issuance facility (NIF). 
B)  set up a syndicate of banks to underwrite. 
C)  agree to purchase any P-notes up to a predetermined amount. 
D)  do all of the given answers. 
A)  set up a euronote issuance facility (NIF). 
B)  set up a syndicate of banks to underwrite. 
C)  agree to purchase any P-notes up to a predetermined amount. 
D)  do all of the given answers.

Question 10

A multinational corporation based in the US is issuing GBP bonds denominated in pounds to be placed in Germany and Japan.This type of issue is referred to as a:

Accepted Answer

A)  foreign bond. 
B)  Yankee bond. 
C)  eurobond. 
D)  domestic bond. 
A)  foreign bond. 
B)  Yankee bond. 
C)  eurobond. 
D)  domestic bond.

Question 11

An American depository receipt is:

Accepted Answer

A)  a security issued by a foreign company that is listed only on the New York Stock Exchange. 
B)  a security issued by a foreign company that is listed on both the New York Stock Exchange and the American Stock Exchange. 
C)  a security issued by a US bank and evidenced by a depository share. 
D)  a foreign share that has a multiple listing both in the US and its domestic market, and needs to pay a deposit before listing. 
A)  a security issued by a foreign company that is listed only on the New York Stock Exchange. 
B)  a security issued by a foreign company that is listed on both the New York Stock Exchange and the American Stock Exchange. 
C)  a security issued by a US bank and evidenced by a depository share. 
D)  a foreign share that has a multiple listing both in the US and its domestic market, and needs to pay a deposit before listing.

Question 12

Which of the following is NOT a feature of a eurocurrency stand-by facility?

Accepted Answer

A)  They act as a backup source of funds to issuers of eurocommercial paper. 
B)  They may be drawn upon during periods of tight liquidity. 
C)  They are highly reliable as a source of ongoing funding. 
D)  They are generally arranged for a period of up to two years. 
A)  They act as a backup source of funds to issuers of eurocommercial paper. 
B)  They may be drawn upon during periods of tight liquidity. 
C)  They are highly reliable as a source of ongoing funding. 
D)  They are generally arranged for a period of up to two years.

Question 13

Which of the following is a benefit of a eurocommercial paper (ECP)issue?

Accepted Answer

A)  An ECP issue is a fixed-interest security with annual coupon payments. 
B)  An ECP issue can deliver cheaper funds for best-name borrowers. 
C)  Generally, only a lead manager is required for an ECP issue. 
D)  An ECP issue is a medium-term facility with maturities generally longer than ten years. 
A)  An ECP issue is a fixed-interest security with annual coupon payments. 
B)  An ECP issue can deliver cheaper funds for best-name borrowers. 
C)  Generally, only a lead manager is required for an ECP issue. 
D)  An ECP issue is a medium-term facility with maturities generally longer than ten years.

Question 14

Which of the following is NOT a generic feature of euronote issuance facilities (NIFs)?

Accepted Answer

A)  Unconditional bearer P-notes are drawn by the borrower in its own name. 
B)  Short-term securities are issued with maturities ranging from 30 to 180 days. 
C)  Notes are bearer securities. 
D)  Notes are issued at a discount price, thus avoiding the need for a tender panel. 
A)  Unconditional bearer P-notes are drawn by the borrower in its own name. 
B)  Short-term securities are issued with maturities ranging from 30 to 180 days. 
C)  Notes are bearer securities. 
D)  Notes are issued at a discount price, thus avoiding the need for a tender panel.

Question 15

Under ______ provisions,the original lender of funds may transfer its rights (to receive interest and principal repayments)to a third party in exchange for payment.

Accepted Answer

A)  assignable 
B)  convertible 
C)  novation 
D)  sub-participation 
A)  assignable 
B)  convertible 
C)  novation 
D)  sub-participation

Question 16

The benefit of a euronote issuance facility to a bank is:

Accepted Answer

A)  the bank has a more liquid asset on its balance sheet. 
B)  the bank can lend the borrower smaller amounts and roll them over at shorter intervals. 
C)  substantial fees are involved in the process. 
D)  the bank can issue funds that are dearer than funding through a longer-term facility. 
A)  the bank has a more liquid asset on its balance sheet. 
B)  the bank can lend the borrower smaller amounts and roll them over at shorter intervals. 
C)  substantial fees are involved in the process. 
D)  the bank can issue funds that are dearer than funding through a longer-term facility.

Question 17

In the euromarkets,the reference rate is usually the rate at which banks in the market offer funds to each other.All of the following are reference rates used in the euromarkets except:

Accepted Answer

A)  SIBOR-Singapore Inter-Bank Offered Rate 
B)  LIMEAN-London Inter-Bank Mean 
C)  LIBOR-London Inter-Bank Offered Rate 
D)  LEAR-London Euromarket Average Rate 
A)  SIBOR-Singapore Inter-Bank Offered Rate 
B)  LIMEAN-London Inter-Bank Mean 
C)  LIBOR-London Inter-Bank Offered Rate 
D)  LEAR-London Euromarket Average Rate

Question 18

Which of the following is NOT a feature of euro floating rate notes (FRNs)?

Accepted Answer

A)  Typically, FRNs issues are at least USD100 million. 
B)  FRNs are a bearer bond issue in the euromarkets. 
C)  A FRN call option gives the issuer the right to redeem the bonds before maturity. 
D)  As the coupon is adjusted frequently over its lifetime, the price of the FRN is quite volatile. 
A)  Typically, FRNs issues are at least USD100 million. 
B)  FRNs are a bearer bond issue in the euromarkets. 
C)  A FRN call option gives the issuer the right to redeem the bonds before maturity. 
D)  As the coupon is adjusted frequently over its lifetime, the price of the FRN is quite volatile.

Question 19

What are the features of a floating rate note?
 Outline some possible factors that may have led to their development.

Accepted Answer

Floating rate notes are bearer bonds of

Question 20

According to the text,the primary reason for an underwriters' syndication for the issue of notes under a euronote issuance facility is to:

Accepted Answer

A)  monitor and coordinate the actions of the different underwriters. 
B)  reduce the risk of selling a large issue. 
C)  charge higher underwriting fees. 
D)  submit a combined bid for purchase that the issuer compares with other bids. 
A)  monitor and coordinate the actions of the different underwriters. 
B)  reduce the risk of selling a large issue. 
C)  charge higher underwriting fees. 
D)  submit a combined bid for purchase that the issuer compares with other bids.

Exam 11: International Debt Markets

A eurocommercial paper (ECP)facility:

A _______ is a euromarket,medium- to long-term bearer security with a rate of interest referenced to LIBOR.

Which of the following is NOT a feature of euro floating rate notes (FRNs)?

The provision attached to a debt security that enables the holder to sell it to another party is called a:

The eurocurrency markets are large wholesale markets that involve large amounts of short-term direct financing.

Euromarket bankers can narrow the spread between deposit and lending interest rates since the operating costs per dollar are lower than those faced in domestic markets.

The main role of a lead manager for a syndicated loan facility program for a eurocurrency bank loan is to:

Costs faced by banks in the euromarkets operations tend to be:

To facilitate the issue of a P-note in the international debt markets,banks:

A multinational corporation based in the US is issuing GBP bonds denominated in pounds to be placed in Germany and Japan.This type of issue is referred to as a:

An American depository receipt is:

Which of the following is NOT a feature of a eurocurrency stand-by facility?

Which of the following is a benefit of a eurocommercial paper (ECP)issue?

Which of the following is NOT a generic feature of euronote issuance facilities (NIFs)?

Under ______ provisions,the original lender of funds may transfer its rights (to receive interest and principal repayments)to a third party in exchange for payment.

The benefit of a euronote issuance facility to a bank is:

In the euromarkets,the reference rate is usually the rate at which banks in the market offer funds to each other.All of the following are reference rates used in the euromarkets except:

Which of the following is NOT a feature of euro floating rate notes (FRNs)?

What are the features of a floating rate note? Outline some possible factors that may have led to their development.

According to the text,the primary reason for an underwriters' syndication for the issue of notes under a euronote issuance facility is to:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: The Structure and Operation of the Fx Market

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

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