Question 1

Proceeding the Asian crisis,

Accepted Answer

A) domestic price bubbles in East Asia, particularly in real estate, were fostered by capital inflows from bankers from the G-10 countries. 
B) the liberalization of financial markets coupled with capital inflows from bankers from the G-10 countries contributed to bubbles in financial asset prices. 
C) the close interrelationships common among commercial firms and financial institutions in Asia resulted in poor investment decision making. 
D) all of the above 
A) domestic price bubbles in East Asia, particularly in real estate, were fostered by capital inflows from bankers from the G-10 countries. 
B) the liberalization of financial markets coupled with capital inflows from bankers from the G-10 countries contributed to bubbles in financial asset prices. 
C) the close interrelationships common among commercial firms and financial institutions in Asia resulted in poor investment decision making. 
D) all of the above

Question 2

Consider the balance sheets of Bank A and Bank B.Bank A is in Milan,Bank B is in New York.The current exchange rate is €1.00 = $1.25.Show the correct balances in each account if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $125,000 using its correspondent relationship with Bank B.

Accepted Answer

Instructors note: numerical co

Question 3

A subsidiary 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 4

A bank may establish a multinational operation for the reason of retail defensive strategy.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.

Question 5

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

Accepted Answer

A) 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. 
B) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
C) 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) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition. 
A) 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. 
B) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
C) 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) multinational banking operations help a bank prevent the erosion of its traveler's check, tourist, and foreign business markets from foreign bank competition.

Question 6

A "three against nine" forward rate agreement

Accepted Answer

A) could call for a buyer to sell a six-month Eurobond in three months at prices agreed upon today. 
B) could call for a buyer to pay the seller the increased interest cost on a notational amount if six-month interest rates fall below an agreed rate beginning three months from now and ending nine months from now. 
C) is a forward contract on a three-month Eurobond with a nine-month maturity. 
D) is a forward contract on a nine-month Eurobond with a three-month maturity. 
A) could call for a buyer to sell a six-month Eurobond in three months at prices agreed upon today. 
B) could call for a buyer to pay the seller the increased interest cost on a notational amount if six-month interest rates fall below an agreed rate beginning three months from now and ending nine months from now. 
C) is a forward contract on a three-month Eurobond with a nine-month maturity. 
D) is a forward contract on a nine-month Eurobond with a three-month maturity.

Question 7

An Offshore banking center is

Accepted Answer

A) a country whose banking system is organized to permit external accounts beyond the normal economic activity of the county. 
B) is external to any government, frequently located on old oil drilling platforms located in international waters. 
C) a country like North Korea. 
D) none of the above 
A) a country whose banking system is organized to permit external accounts beyond the normal economic activity of the county. 
B) is external to any government, frequently located on old oil drilling platforms located in international waters. 
C) a country like North Korea. 
D) none of the above

Question 8

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

Accepted Answer

A) growth prospects in a home nation may be limited by a market largely saturated with the services offered by domestic banks. 
B) 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. 
C) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
D) 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. 
A) growth prospects in a home nation may be limited by a market largely saturated with the services offered by domestic banks. 
B) 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. 
C) greater stability of earnings is possible with international diversification.Offsetting business and monetary policy cycles across nations reduces the country-specific risk of any one nation. 
D) 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.

Question 9

A bank may establish a multinational operation for the reason of wholesale defensive strategy.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.

Question 10

A bank bought a "three against six" $5,000,000 FRA for a three-month period beginning three months from today and ending six months from today.The reason that the bank bought the FRA was to hedge: the bank accepted a 3-month deposit and made a six-month loan.The agreement rate with the seller is 5.0%.Assume that three months from today the settlement rate is 5.25%.Who pays whom? How much? When? The actual number of days in the FRA is 90.

Accepted Answer

A) The bank pays $3,0084.52 at the end of 3 months 
B) The bank pays $3,0084.52 at the end of 6 months 
C) The counterparty pays $3,0084.52 at the end of 3 months 
D) The counterparty pays $3,0084.52 at the end of 6 months 
A) The bank pays $3,0084.52 at the end of 3 months 
B) The bank pays $3,0084.52 at the end of 6 months 
C) The counterparty pays $3,0084.52 at the end of 3 months 
D) The counterparty pays $3,0084.52 at the end of 6 months

Question 11

A domestic bank that becomes a multinational bank to prevent erosion by foreign banks of the traveler's checks,touring,and foreign business market

Accepted Answer

A) is playing the role of the desperate housewife in this relationship. 
B) is pursuing a wholesale defensive strategy. 
C) is pursuing a retail defensive strategy. 
D) none of the above 
A) is playing the role of the desperate housewife in this relationship. 
B) is pursuing a wholesale defensive strategy. 
C) is pursuing a retail defensive strategy. 
D) none of the above

Question 12

Major distinguishing features between domestic banks and international banks are

Accepted Answer

A) the types of deposits they accept. 
B) the types of loans and investments they make. 
C) membership in loan syndicates. 
D) all of the above 
A) the types of deposits they accept. 
B) the types of loans and investments they make. 
C) membership in loan syndicates. 
D) all of the above

Question 13

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*9 FRA.You observe the following rates.   
What rate should you quote?

Accepted Answer

A) 5.96% 
B) 4.96% 
C) 1.94% 
D) None of the above 
A) 5.96% 
B) 4.96% 
C) 1.94% 
D) None of the above

Question 14

Edge Act banks are not prohibited from owning equity in business corporations,unlike domestic commercial banks.

Accepted Answer

A) True 
 B)False

Question 15

In the wholesale money market,denominations

Accepted Answer

A) are at least $10,000, but sizes of $100,000 or larger are more typical. 
B) are at least $100,000, but sizes of $500,000 or larger are more typical. 
C) are at least $500,000, but sizes of $1,000,000 or larger are more typical. 
D) none of the above 
A) are at least $10,000, but sizes of $100,000 or larger are more typical. 
B) are at least $100,000, but sizes of $500,000 or larger are more typical. 
C) are at least $500,000, but sizes of $1,000,000 or larger are more typical. 
D) none of the above

Question 16

Consider a U.S.importer desiring to purchase merchandise from a Dutch exporter invoiced in euros,at a cost of €160,000.The U.S.importer will contact his U.S.bank (where of course he has an account denominated in U.S.dollars)and inquire about the exchange rate,which the bank quotes as €0.6250/$1.00.The importer accepts this price,so his bank will proceed to ____________ the importer's account in the amount of ____________.

Accepted Answer

A) Debit, $256,000 
B) Credit, €512,100 
C) Credit, $500,000 
D) Debit, €100,000 
A) Debit, $256,000 
B) Credit, €512,100 
C) Credit, $500,000 
D) Debit, €100,000

Question 17

Eurodollars refers to dollar deposits when the depository bank is located in

Accepted Answer

A) Europe. 
B) Europe, and the Caribbean. 
C) Outside the United States. 
D) United States. 
A) Europe. 
B) Europe, and the Caribbean. 
C) Outside the United States. 
D) United States.

Question 18

Edge Act banks

Accepted Answer

A) are not prohibited from owning equity in business corporations. 
B) are prohibited from owning equity in business corporations. 
C) both a) and b) 
D) None of the above 
A) are not prohibited from owning equity in business corporations. 
B) are prohibited from owning equity in business corporations. 
C) both a) and b) 
D) None of the above

Question 19

Since SR < AR,then

Accepted Answer

A) ABC Bank will pay XYZ Bank a cash settlement at the beginning of the 91-day FRA period. 
B) XYZ Bank will pay ABC Bank a cash settlement at the beginning of the 91-day FRA period. 
C) ABC Bank will pay XYZ Bank a cash settlement at the end of the 91-day FRA period. 
D) XYZ Bank will pay ABC Bank a cash settlement at the end of the 91-day FRA period. 
A) ABC Bank will pay XYZ Bank a cash settlement at the beginning of the 91-day FRA period. 
B) XYZ Bank will pay ABC Bank a cash settlement at the beginning of the 91-day FRA period. 
C) ABC Bank will pay XYZ Bank a cash settlement at the end of the 91-day FRA period. 
D) XYZ Bank will pay ABC Bank a cash settlement at the end of the 91-day FRA period.

Question 20

Both subsidiary and affiliate banks

Accepted Answer

A) operate under the banking laws of the country in which they are incorporated. 
B) operate under the banking laws of the U.S. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a) and b) 
A) operate under the banking laws of the country in which they are incorporated. 
B) operate under the banking laws of the U.S. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a) and b)

Proceeding the Asian crisis,

A subsidiary bank is

A bank may establish a multinational operation for the reason of retail defensive strategy.The underlying rationale being that

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

A "three against nine" forward rate agreement

An Offshore banking center is

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

A bank may establish a multinational operation for the reason of wholesale defensive strategy.The underlying rationale being that

A domestic bank that becomes a multinational bank to prevent erosion by foreign banks of the traveler's checks,touring,and foreign business market

Major distinguishing features between domestic banks and international banks are

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*9 FRA.You observe the following rates. What rate should you quote?

Edge Act banks are not prohibited from owning equity in business corporations,unlike domestic commercial banks.

In the wholesale money market,denominations

Eurodollars refers to dollar deposits when the depository bank is located in

Edge Act banks

Since SR < AR,then

Both subsidiary and affiliate 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

Proceeding the Asian crisis,

A subsidiary bank is

A bank may establish a multinational operation for the reason of retail defensive strategy.The underlying rationale being that

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

A "three against nine" forward rate agreement

An Offshore banking center is

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

A bank may establish a multinational operation for the reason of wholesale defensive strategy.The underlying rationale being that

A domestic bank that becomes a multinational bank to prevent erosion by foreign banks of the traveler's checks,touring,and foreign business market

Major distinguishing features between domestic banks and international banks are

You are a bank and your customer asks you to quote an agreed-upon rate for a 3*9 FRA.You observe the following rates. What rate should you quote?

Edge Act banks are not prohibited from owning equity in business corporations,unlike domestic commercial banks.

In the wholesale money market,denominations

Eurodollars refers to dollar deposits when the depository bank is located in

Edge Act banks

Since SR < AR,then

Both subsidiary and affiliate 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