Question 1

A foreign branch bank operates like a local bank,but legally

Accepted Answer

A) it is a part of the parent bank. 
B) a branch bank is subject to both the banking regulations of its home country and the country in which it operates. 
C) a branch bank is subject to only the banking regulations of its home country and not the country in which it operates. 
D) both a) and b) 
A) it is a part of the parent bank. 
B) a branch bank is subject to both the banking regulations of its home country and the country in which it operates. 
C) a branch bank is subject to only the banking regulations of its home country and not the country in which it operates. 
D) both a) and b)

Question 2

LIBOR

Accepted Answer

A) is the London Interbank Offered Rate. 
B) is the reference rate in London for Eurodollar deposits. 
C) one of several reference rates in London: there is a LIBOR for Eurodollars, Euroyen, Euro-Canadian dollars, and even euro. 
D) all of the above 
A) is the London Interbank Offered Rate. 
B) is the reference rate in London for Eurodollar deposits. 
C) one of several reference rates in London: there is a LIBOR for Eurodollars, Euroyen, Euro-Canadian dollars, and even euro. 
D) all of the above

Question 3

The rate charged by banks with excess funds is referred to as the interbank offered rate; they will accept interbank deposits at the interbank bid rate.

Accepted Answer

A) The spread is generally 1/8 of 1 percent for most major Eurocurrencies. 
B) The spread is generally referred to as "the TED spread". 
C) The spread is generally referred to as the bid-ask commission. 
D) None of the above 
A) The spread is generally 1/8 of 1 percent for most major Eurocurrencies. 
B) The spread is generally referred to as "the TED spread". 
C) The spread is generally referred to as the bid-ask commission. 
D) None of the above

Question 4

Which of the following are principles of sound banking behavior?

Accepted Answer

A) Avoid an undue concentration of loans to single activities 
B) Control mismatches between assets and liabilities 
C) Expand cautiously into unfamiliar activities 
D) All of the above 
A) Avoid an undue concentration of loans to single activities 
B) Control mismatches between assets and liabilities 
C) Expand cautiously into unfamiliar activities 
D) All of the above

Question 5

Offshore banks

Accepted Answer

A) are frequently located on old oil drilling platforms located in international waters. 
B) are often located in "pariah" countries like North Korea and Iran. 
C) operate as branches or subsidiaries of the parent bank. 
D) none of the above 
A) are frequently located on old oil drilling platforms located in international waters. 
B) are often located in "pariah" countries like North Korea and Iran. 
C) operate as branches or subsidiaries of the parent bank. 
D) none of the above

Question 6

Eurocredits

Accepted Answer

A) are credit cards that work in the euro zone. 
B) are short- to medium-term loans of Eurocurrency extended by Eurobanks to corporations, sovereign governments, nonprime banks, or international organizations. 
C) are short- to medium-term loans of euro currency extended by Eurobanks to corporations, sovereign governments, nonprime banks, or international organizations. 
D) none of the above 
A) are credit cards that work in the euro zone. 
B) are short- to medium-term loans of Eurocurrency extended by Eurobanks to corporations, sovereign governments, nonprime banks, or international organizations. 
C) are short- to medium-term loans of euro currency extended by Eurobanks to corporations, sovereign governments, nonprime banks, or international organizations. 
D) none of the above

Question 7

Foreign banks that establish subsidiary and affiliate banks in the U.S.

Accepted Answer

A) tend to locate in states that are major centers of financial activity. 
B) tend to locate in the highly populous states of New York, California, Illinois, Florida, Georgia, and Texas. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a) and b) 
A) tend to locate in states that are major centers of financial activity. 
B) tend to locate in the highly populous states of New York, California, Illinois, Florida, Georgia, and Texas. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a) and b)

Question 8

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 £50,000 from a currency trader at Bank B for $100,000 using its correspondent relationship with Bank B.

Accepted Answer

Instructors note: numerical co

Question 9

So-called subprime mortgages were typically

Accepted Answer

A) not held by the originating bank, but instead were resold for packaging into mortgage-backed securities. 
B) aggregated and then sliced into tranches each representing a different risk class: AAA, AA-BB, or unrated. 
C) both a) and b) 
D) None of the above 
A) not held by the originating bank, but instead were resold for packaging into mortgage-backed securities. 
B) aggregated and then sliced into tranches each representing a different risk class: AAA, AA-BB, or unrated. 
C) both a) and b) 
D) None of the above

Question 10

Eurocurrency

Accepted Answer

A) is the euro, the common currency of Europe. 
B) is a time deposit of money in an international bank located in a county different from the country that issued the currency. 
C) is a demand deposit of money in an international bank located in a county different from the country that issued the currency. 
D) either b) or c) 
A) is the euro, the common currency of Europe. 
B) is a time deposit of money in an international bank located in a county different from the country that issued the currency. 
C) is a demand deposit of money in an international bank located in a county different from the country that issued the currency. 
D) either b) or c)

Question 11

Approximately ___ percent of wholesale Eurobank external liabilities come from fixed time deposits,the remainder from Negotiable Certificates of Deposit.

Accepted Answer

A) 50% 
B) 75% 
C) 90% 
D) None of the above 
A) 50% 
B) 75% 
C) 90% 
D) None of the above

Question 12

The payment amount under this FRA is

Accepted Answer

A) $9,985. 
B) $10,111. 
C) $60,667. 
D) $120,000. 
A) $9,985. 
B) $10,111. 
C) $60,667. 
D) $120,000.

Question 13

A bank agrees to buy from a customer a "three against six" FRA at the market rate for such instruments.How can the bank hedge this obligation?

Accepted Answer

A) Go long a 6-month Eurodollar deposit in the amount of the FRA at the current 6-month rate financed by going short a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate. 
B) Go short a 6-month Eurodollar deposit in the amount of the FRA at the current 6-month rate; go long a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate. 
C) Borrow a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate. 
D) None of the above 
A) Go long a 6-month Eurodollar deposit in the amount of the FRA at the current 6-month rate financed by going short a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate. 
B) Go short a 6-month Eurodollar deposit in the amount of the FRA at the current 6-month rate; go long a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate. 
C) Borrow a 3-month Eurodollar deposit in the amount of the FRA at the current 3-month rate. 
D) None of the above

Question 14

So-called subprime mortgages were typically

Accepted Answer

A) mortgages granted to borrowers with less-than-perfect credit. 
B) backed by the full faith and credit of the U.S.government. 
C) held to maturity by the originating lender, thereby assuring that default risk was priced into the rate of return. 
D) none of the above 
A) mortgages granted to borrowers with less-than-perfect credit. 
B) backed by the full faith and credit of the U.S.government. 
C) held to maturity by the originating lender, thereby assuring that default risk was priced into the rate of return. 
D) none of the above

Question 15

Correspondent bank services include

Accepted Answer

A) prepaid postage and packing materials. 
B) letters of introduction. 
C) foreign exchange conversions. 
D) both b) and c) 
A) prepaid postage and packing materials. 
B) letters of introduction. 
C) foreign exchange conversions. 
D) both b) and c)

Question 16

The major legislation controlling the operation of foreign banks in the U.S.

Accepted Answer

A) specifies that foreign branch banks operating in the U.S.must comply with U.S.banking regulations just like U.S.banks. 
B) specifies that foreign branch banks operating in the U.S.must comply with their country-of-origin banking regulations just like U.S.banks operating abroad. 
C) specifies that the "shell" branches are illegal for U.S.and foreign banks. 
D) both a) and c) 
A) specifies that foreign branch banks operating in the U.S.must comply with U.S.banking regulations just like U.S.banks. 
B) specifies that foreign branch banks operating in the U.S.must comply with their country-of-origin banking regulations just like U.S.banks operating abroad. 
C) specifies that the "shell" branches are illegal for U.S.and foreign banks. 
D) both a) and c)

Question 17

Eurocredits feature rollover pricing.

Accepted Answer

A) Rollover pricing was created on Eurocredits so that Eurobanks do not end up paying more on Eurocurrency time deposits than they earn from the loans. 
B) Because of the rollover pricing feature, a Eurocredit may be viewed as a series of shorter-term loans, where at the end of each time period (generally three or six months), the loan is rolled over and the base lending rate is repriced to current LIBOR over the next time interval of the loan. 
C) The lending rate on these Eurocredits is stated as LIBOR + X percent, where X is the lending margin charged depending upon the creditworthiness of the borrower.LIBOR is reset according to a set schedule. 
D) All of the above are true 
A) Rollover pricing was created on Eurocredits so that Eurobanks do not end up paying more on Eurocurrency time deposits than they earn from the loans. 
B) Because of the rollover pricing feature, a Eurocredit may be viewed as a series of shorter-term loans, where at the end of each time period (generally three or six months), the loan is rolled over and the base lending rate is repriced to current LIBOR over the next time interval of the loan. 
C) The lending rate on these Eurocredits is stated as LIBOR + X percent, where X is the lending margin charged depending upon the creditworthiness of the borrower.LIBOR is reset according to a set schedule. 
D) All of the above are true

Question 18

Teltrex International can borrow $3,000,000 at LIBOR plus a lending margin of .75 percent per annum on a three-month rollover basis from Barclays in London.Suppose that three-month LIBOR is currently 5 17/32 percent.Further suppose that over the second three-month interval LIBOR falls to 5 1/8 percent.How much will Teltrex pay in interest to Barclays over the six-month period for the Eurodollar loan?

Accepted Answer

A) $79,921.875 
B) $91,171.88 
C) $96,174.39 
D) $364,687.52 
A) $79,921.875 
B) $91,171.88 
C) $96,174.39 
D) $364,687.52

Question 19

A correspondent bank relationship is established when

Accepted Answer

A) two banks maintain deposits with one another. 
B) two banks write to each other about the credit conditions of their countries. 
C) a group of banks form a syndicate to spread out the risk and cost of a large bond offering. 
D) all of the above 
A) two banks maintain deposits with one another. 
B) two banks write to each other about the credit conditions of their countries. 
C) a group of banks form a syndicate to spread out the risk and cost of a large bond offering. 
D) all of the above

Question 20

The primary activities of offshore banks

Accepted Answer

A) include money laundering where banking secrecy laws are strict. 
B) is to seek deposits and grant loans in currencies other than the currency of the host government. 
C) involve check clearing of large bags of checks. 
D) none of the above 
A) include money laundering where banking secrecy laws are strict. 
B) is to seek deposits and grant loans in currencies other than the currency of the host government. 
C) involve check clearing of large bags of checks. 
D) none of the above

A foreign branch bank operates like a local bank,but legally

LIBOR

The rate charged by banks with excess funds is referred to as the interbank offered rate; they will accept interbank deposits at the interbank bid rate.

Which of the following are principles of sound banking behavior?

Offshore banks

Eurocredits

Foreign banks that establish subsidiary and affiliate banks in the U.S.

So-called subprime mortgages were typically

Eurocurrency

Approximately ___ percent of wholesale Eurobank external liabilities come from fixed time deposits,the remainder from Negotiable Certificates of Deposit.

The payment amount under this FRA is

A bank agrees to buy from a customer a "three against six" FRA at the market rate for such instruments.How can the bank hedge this obligation?

So-called subprime mortgages were typically

Correspondent bank services include

The major legislation controlling the operation of foreign banks in the U.S.

Eurocredits feature rollover pricing.

A correspondent bank relationship is established when

The primary activities of offshore banks

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

A foreign branch bank operates like a local bank,but legally

LIBOR

The rate charged by banks with excess funds is referred to as the interbank offered rate; they will accept interbank deposits at the interbank bid rate.

Which of the following are principles of sound banking behavior?

Offshore banks

Eurocredits

Foreign banks that establish subsidiary and affiliate banks in the U.S.

So-called subprime mortgages were typically

Eurocurrency

Approximately ___ percent of wholesale Eurobank external liabilities come from fixed time deposits,the remainder from Negotiable Certificates of Deposit.

The payment amount under this FRA is

A bank agrees to buy from a customer a "three against six" FRA at the market rate for such instruments.How can the bank hedge this obligation?

So-called subprime mortgages were typically

Correspondent bank services include

The major legislation controlling the operation of foreign banks in the U.S.

Eurocredits feature rollover pricing.

A correspondent bank relationship is established when

The primary activities of offshore banks

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