Question 1

The Asian crisis

Accepted Answer

A) followed a period of economic recession in the region coupled with record private capital outflows. 
B) followed a period of economic expansion in the region financed by record private capital inflows. 
C) began in the fall of 2001 when Japan devalued the yen. 
D) none of the above 
A) followed a period of economic recession in the region coupled with record private capital outflows. 
B) followed a period of economic expansion in the region financed by record private capital inflows. 
C) began in the fall of 2001 when Japan devalued the yen. 
D) none of the above B

Question 2

A bank may establish a multinational operation for the reason of regulatory advantage.The underlying rationale being that

Accepted Answer

A) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries. 
B) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
C) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
D) multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions. 
A) banks follow their multinational customers abroad to prevent the erosion of their clientele to foreign banks seeking to service the multinational's foreign subsidiaries. 
B) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
C) by maintaining foreign branches and foreign currency balances, banks may reduce transaction costs and foreign exchange risk on currency conversion if government controls can be circumvented. 
D) multinational banks are often not subject to the same regulations as domestic banks.There may be reduced need to publish adequate financial information, lack of required deposit insurance and reserve requirements on foreign currency deposits, and the absence of territorial restrictions. D

Question 3

International banks are different from domestic banks in what way(s)?

Accepted Answer

A) International banks can arrange trade financing. 
B) International banks can arrange for foreign exchange transactions. 
C) International banks can assist their clients in hedging exchange rate risk. 
D) All of the above 
A) International banks can arrange trade financing. 
B) International banks can arrange for foreign exchange transactions. 
C) International banks can assist their clients in hedging exchange rate risk. 
D) All of the above D

Question 4

Many lessons should be learned from the credit crunch.

Accepted Answer

A) One lesson is that credit rating agencies need to refine their models for evaluating esoteric credit risk created in MBS and CDOs. 
B) One lesson is that borrowers must be more wary of putting complete faith in credit ratings. 
C) One lesson is that bankers seem not to scrutinize credit risk as closely when they serve only as mortgage originators and then pass it on to MBS investors rather than hold the paper themselves. 
D) All of the above 
A) One lesson is that credit rating agencies need to refine their models for evaluating esoteric credit risk created in MBS and CDOs. 
B) One lesson is that borrowers must be more wary of putting complete faith in credit ratings. 
C) One lesson is that bankers seem not to scrutinize credit risk as closely when they serve only as mortgage originators and then pass it on to MBS investors rather than hold the paper themselves. 
D) All of the above

Question 5

A representative office

Accepted Answer

A) is a way for the parent bank to provide its MNC clients with a level of service greater than that provided through merely a correspondent relationship. 
B) is a small service facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents. 
C) is a step up from a correspondent relationship, but below a foreign branch. 
D) all of the above 
A) is a way for the parent bank to provide its MNC clients with a level of service greater than that provided through merely a correspondent relationship. 
B) is a small service facility staffed by parent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents. 
C) is a step up from a correspondent relationship, but below a foreign branch. 
D) all of the above

Question 6

Consider the balance sheets of Bank A and Bank B.Bank A is in London,Bank B is in New York.The current exchange rate is £1.00 = $2.00.Show the correct balances in each account if a currency trader employed at Bank A buys £45,000 from a currency trader at Bank B for $90,000 using its correspondent relationship with Bank B.

Accepted Answer

Instructors note: numerical co

Question 7

With regard to creating money,

Accepted Answer

A) only central banks such as the Federal Reserve can create money. 
B) money is created when a bank customer invests in a time deposit. 
C) commercial banks can create money when a bank lends out funds borrowed from another customer who invested in a time deposit. 
D) none of the above 
A) only central banks such as the Federal Reserve can create money. 
B) money is created when a bank customer invests in a time deposit. 
C) commercial banks can create money when a bank lends out funds borrowed from another customer who invested in a time deposit. 
D) none of the above

Question 8

An affiliate bank is

Accepted Answer

A) a locally incorporated bank that is wholly owned by a foreign parent. 
B) a locally incorporated bank that is majority owned by a foreign parent. 
C) a locally incorporated bank that is partially owned (but not controlled) by a foreign parent. 
D) both a) and b) 
A) a locally incorporated bank that is wholly owned by a foreign parent. 
B) a locally incorporated bank that is majority owned by a foreign parent. 
C) a locally incorporated bank that is partially owned (but not controlled) by a foreign parent. 
D) both a) and b)

Question 9

By far the most important international finance centers are

Accepted Answer

A) New York and London. 
B) New York, London, and Tokyo. 
C) New York, London, Tokyo, Paris, and Zurich. 
D) New York, London, Tokyo, Paris, Zurich, and Frankfurt. 
A) New York and London. 
B) New York, London, and Tokyo. 
C) New York, London, Tokyo, Paris, and Zurich. 
D) New York, London, Tokyo, Paris, Zurich, and Frankfurt.

Question 10

U.S.banks that establish subsidiary and affiliate banks

Accepted Answer

A) are allowed to underwrite securities. 
B) must provide FDIC insurance on their foreign-currency denominated demand deposits. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a) and b) 
A) are allowed to underwrite securities. 
B) must provide FDIC insurance on their foreign-currency denominated demand deposits. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a) and b)

Question 11

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*6 FRA.You observe the following rates:  
 What rate should you quote?

Accepted Answer

A) 5.96% 
B) 4.96% 
C) 2.48% 
D) None of the above 
A) 5.96% 
B) 4.96% 
C) 2.48% 
D) None of the above

Question 12

One lesson from the credit crunch is that

Accepted Answer

A) in the aggregate, credit scores tend to understate the probability of default-thereby a pool of subprime mortgages is actually quite a safe investment since not every borrower defaults. 
B) moral hazard, while an issue in the market for used cars, does not seem to affect the U.S.financial system due to the effective regulatory environment. 
C) bankers seem not to scrutinize credit risk as closely when they serve only as mortgage originators and then pass it on to MBS investors rather than hold the paper themselves. 
D) none of the above 
A) in the aggregate, credit scores tend to understate the probability of default-thereby a pool of subprime mortgages is actually quite a safe investment since not every borrower defaults. 
B) moral hazard, while an issue in the market for used cars, does not seem to affect the U.S.financial system due to the effective regulatory environment. 
C) bankers seem not to scrutinize credit risk as closely when they serve only as mortgage originators and then pass it on to MBS investors rather than hold the paper themselves. 
D) none of the above

Question 13

In reference to capital requirements,

Accepted Answer

A) bank capital adequacy refers to the amount of equity capital a bank holds as reserves against impaired loans. 
B) bank capital adequacy refers to the amount of debt capital a bank holds as reserves against risky assets to reduce the probability of bank failure. 
C) most bank regulators agree with the doctrine of "less is more". 
D) none of the above 
A) bank capital adequacy refers to the amount of equity capital a bank holds as reserves against impaired loans. 
B) bank capital adequacy refers to the amount of debt capital a bank holds as reserves against risky assets to reduce the probability of bank failure. 
C) most bank regulators agree with the doctrine of "less is more". 
D) none of the above

Question 14

The LIBOR rate for euro

Accepted Answer

A) is EURIBOR. 
B) is a government set rate. 
C) is the rate at which Interbank deposits of euro are offered by one prime bank to another in the euro zone. 
D) both a) and c) 
A) is EURIBOR. 
B) is a government set rate. 
C) is the rate at which Interbank deposits of euro are offered by one prime bank to another in the euro zone. 
D) both a) and c)

Question 15

Eurocredits

Accepted Answer

A) are often so large that individual banks cannot handle them. 
B) are short- to medium-term loans of Eurocurrency extended by Eurobanks to corporations, sovereign governments, nonprime banks, or international organizations. 
C) frequently require the use of a banking syndicate. 
D) all of the above 
A) are often so large that individual banks cannot handle them. 
B) are short- to medium-term loans of Eurocurrency extended by Eurobanks to corporations, sovereign governments, nonprime banks, or international organizations. 
C) frequently require the use of a banking syndicate. 
D) all of the above

Question 16

The most widely used futures contract for hedging short-term U.S.dollar interest rate risk is

Accepted Answer

A) the Eurodollar contract. 
B) the Euroyen contract. 
C) the EURIBOR contract. 
D) none of the above 
A) the Eurodollar contract. 
B) the Euroyen contract. 
C) the EURIBOR contract. 
D) none of the above

Question 17

The current exchange rate is €1.00 = $1.50.Compute the correct balances in Bank A's correspondent account(s)with Bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $150,000 using its correspondent relationship with Bank B)

Accepted Answer

A) Bank A's dollar-denominated account at B will fall by $150,000. 
B) Bank B's dollar-denominated account at A will fall by $150,000. 
C) Bank A's pound-denominated account at B will fall by €100,000. 
D) Bank B's pound-denominated account at A will rise by €100,000. 
A) Bank A's dollar-denominated account at B will fall by $150,000. 
B) Bank B's dollar-denominated account at A will fall by $150,000. 
C) Bank A's pound-denominated account at B will fall by €100,000. 
D) Bank B's pound-denominated account at A will rise by €100,000.

Question 18

ABC International has borrowed $4,000,000 at LIBOR plus a lending margin of .65 percent per annum on a three-month rollover basis from Barclays in London.Three month LIBOR is currently 5.5 percent,but ABC is worried about an increase in three-month LIBOR 3 months from now.What could they do to hedge?

Accepted Answer

A) Buy a 3*6 FRA in the amount of $4million. 
B) Sell a 3*6 FRA in the amount of $4million. 
C) Buy a 3*3 FRA in the amount of $4million. 
D) Buy a 3*9 FRA in the amount of $4million. 
A) Buy a 3*6 FRA in the amount of $4million. 
B) Sell a 3*6 FRA in the amount of $4million. 
C) Buy a 3*3 FRA in the amount of $4million. 
D) Buy a 3*9 FRA in the amount of $4million.

Question 19

The most popular way for a U.S.bank to expand overseas is

Accepted Answer

A) branch banks. 
B) representative offices. 
C) subsidiary banks. 
D) affiliate banks. 
A) branch banks. 
B) representative offices. 
C) subsidiary banks. 
D) affiliate banks.

Question 20

On September 10,1990 the published prices (cents on the dollar)on Latin American bank debt was quoted as follows:   Assume that the central banks of Mexico,Venezuela,and Chile redeemed their debts at 50 percent,85 percent,and 76 percent,respectively,of face value in a debt-for-equity swap.If the three countries had equal political risk,based purely on financial considerations,the cost of a $40,000,000 assembly plant investment in local currency would be ranked (lowest to highest)in dollar cost as follows:

Accepted Answer

A) Venezuela first, Mexico second, Chile third 
B) Venezuela first, Chile second, Mexico third 
C) Chile first, Venezuela second, Mexico third 
D) Mexico first, Chile second, Venezuela third 
A) Venezuela first, Mexico second, Chile third 
B) Venezuela first, Chile second, Mexico third 
C) Chile first, Venezuela second, Mexico third 
D) Mexico first, Chile second, Venezuela third

The Asian crisis

A bank may establish a multinational operation for the reason of regulatory advantage.The underlying rationale being that

International banks are different from domestic banks in what way(s)?

Many lessons should be learned from the credit crunch.

A representative office

With regard to creating money,

An affiliate bank is

By far the most important international finance centers are

U.S.banks that establish subsidiary and affiliate banks

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*6 FRA.You observe the following rates: What rate should you quote?

One lesson from the credit crunch is that

In reference to capital requirements,

The LIBOR rate for euro

Eurocredits

The most widely used futures contract for hedging short-term U.S.dollar interest rate risk is

The current exchange rate is €1.00 = $1.50.Compute the correct balances in Bank A's correspondent account(s)with Bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $150,000 using its correspondent relationship with Bank B)

The most popular way for a U.S.bank to expand overseas is

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 11: International Banking and Money Market

The Asian crisis

A bank may establish a multinational operation for the reason of regulatory advantage.The underlying rationale being that

International banks are different from domestic banks in what way(s)?

Many lessons should be learned from the credit crunch.

A representative office

With regard to creating money,

An affiliate bank is

By far the most important international finance centers are

U.S.banks that establish subsidiary and affiliate banks

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*6 FRA.You observe the following rates: What rate should you quote?

One lesson from the credit crunch is that

In reference to capital requirements,

The LIBOR rate for euro

Eurocredits

The most widely used futures contract for hedging short-term U.S.dollar interest rate risk is

The current exchange rate is €1.00 = $1.50.Compute the correct balances in Bank A's correspondent account(s)with Bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $150,000 using its correspondent relationship with Bank B)

The most popular way for a U.S.bank to expand overseas is

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters