Question 1

A U.S.-based multinational bank

Accepted Answer

A) would not have to provide deposit insurance and meet reserve requirements on foreign currency deposits. 
B) would have to provide deposit insurance and meet reserve requirements on foreign currency deposits. 
C) would not have to provide deposit insurance but would have to meet reserve requirements on foreign currency deposits. 
D) would have to provide deposit insurance but not meet reserve requirements on foreign currency deposits. 
A) would not have to provide deposit insurance and meet reserve requirements on foreign currency deposits. 
B) would have to provide deposit insurance and meet reserve requirements on foreign currency deposits. 
C) would not have to provide deposit insurance but would have to meet reserve requirements on foreign currency deposits. 
D) would have to provide deposit insurance but not meet reserve requirements on foreign currency deposits.

Question 2

Edge Act banks are so-called because

Accepted Answer

A) they are Federally chartered subsidiaries of U.S.banks that are physically located in the United States and are allowed to engage in a full range of international banking activities. 
B) Senator Walter 
C) they can only be chartered in states that are on the borders of the United States-on the "edge" of the map. 
D) none of the above 
E) Edge of New Jersey sponsored the 1919 amendment to Section 25 of the Federal Reserve Act to allow U.S.banks to be competitive with the services foreign banks could supply their customers. 
A) they are Federally chartered subsidiaries of U.S.banks that are physically located in the United States and are allowed to engage in a full range of international banking activities. 
B) Senator Walter 
C) they can only be chartered in states that are on the borders of the United States-on the "edge" of the map. 
D) none of the above 
E) Edge of New Jersey sponsored the 1919 amendment to Section 25 of the Federal Reserve Act to allow U.S.banks to be competitive with the services foreign banks could supply their customers.

Question 3

The core of the international money market is

Accepted Answer

A) the Eurocurrency market. 
B) the market for foreign exchange. 
C) the futures forwards and options markets on foreign exchange. 
D) none of the above 
A) the Eurocurrency market. 
B) the market for foreign exchange. 
C) the futures forwards and options markets on foreign exchange. 
D) none of the above

Question 4

The models that the credit rating firms (e.g.Moody's,S&P,and Fitch)used to evaluate the risk of the various tranches of MBS debt and thereby assign a credit rating (e.g.AAA,AA-BB,or unrated)were

Accepted Answer

A) right on target, but only in the aggregate. 
B) poorly specified. 
C) superfluous, since the CDOs turned out to be backed by the full faith and credit of the U.S.Treasury. 
D) supermodels, and while as a group they were not so good at evaluating credit risk, they made up for it with their good looks and impeccable fashion sense. 
A) right on target, but only in the aggregate. 
B) poorly specified. 
C) superfluous, since the CDOs turned out to be backed by the full faith and credit of the U.S.Treasury. 
D) supermodels, and while as a group they were not so good at evaluating credit risk, they made up for it with their good looks and impeccable fashion sense.

Question 5

Since international banks have the facilities to trade foreign exchange,

Accepted Answer

A) they generally also make a market as a dealer in foreign exchange. 
B) they generally also make a market as a dealer in foreign exchange derivatives. 
C) they generally also trade foreign exchange products for their own account. 
D) none of the above 
A) they generally also make a market as a dealer in foreign exchange. 
B) they generally also make a market as a dealer in foreign exchange derivatives. 
C) they generally also trade foreign exchange products for their own account. 
D) none of the above

Question 6

Consider the position of a treasurer of a MNC,who has $20,000,000 that his firm will not need for the next 90 days.

Accepted Answer

A) He could borrow the $20,000,000 in the money market. 
B) He could take a long position in the Eurodollar futures contract. 
C) He could take a short position in the Eurodollar futures contract. 
D) None of the above 
A) He could borrow the $20,000,000 in the money market. 
B) He could take a long position in the Eurodollar futures contract. 
C) He could take a short position in the Eurodollar futures contract. 
D) None of the above

Question 7

Which of the following are reasons why a bank may establish a multinational operation?

Accepted Answer

A) Low marginal and transaction costs 
B) Home nation information services, and prestige 
C) Growth and risk reduction 
D) All of the above 
A) Low marginal and transaction costs 
B) Home nation information services, and prestige 
C) Growth and risk reduction 
D) All of the above

Question 8

Proceeding the Asian crisis

Accepted Answer

A) it may have been implicitly assumed that the governments would come to the rescue of their private banks should financial problems develop. 
B) the history of managed growth in the East Asian region at least suggested that the economic and financial system, as an integral unit, could be managed in an economic downturn. 
C) both a) and b) 
D) none of the above 
A) it may have been implicitly assumed that the governments would come to the rescue of their private banks should financial problems develop. 
B) the history of managed growth in the East Asian region at least suggested that the economic and financial system, as an integral unit, could be managed in an economic downturn. 
C) both a) and b) 
D) none of the above

Question 9

Correspondent bank relationships can be beneficial

Accepted Answer

A) because a bank can service its MNC clients at a very low cost. 
B) because a bank can service its MNC clients without the need to have personnel in many different countries. 
C) because a bank can service its MNC clients without developing its own foreign facilities to service its clients. 
D) all of the above 
A) because a bank can service its MNC clients at a very low cost. 
B) because a bank can service its MNC clients without the need to have personnel in many different countries. 
C) because a bank can service its MNC clients without developing its own foreign facilities to service its clients. 
D) all of the above

Question 10

A foreign branch bank

Accepted Answer

A) 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. 
B) operates like a local bank, but legally is a part of the parent bank. 
C) is subject to domestic regulation only 
D) all of the above 
A) 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. 
B) operates like a local bank, but legally is a part of the parent bank. 
C) is subject to domestic regulation only 
D) all of the above

Question 11

A DECREASE in the implied three-month LIBOR yield causes Eurodollar futures price

Accepted Answer

A) to increase. 
B) to decrease. 
C) there is no direct or indirect relationship. 
D) none of the above 
A) to increase. 
B) to decrease. 
C) there is no direct or indirect relationship. 
D) none of the above

Question 12

Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called

Accepted Answer

A) international service banks. 
B) investment banks. 
C) commercial banks. 
D) merchant banks. 
A) international service banks. 
B) investment banks. 
C) commercial banks. 
D) merchant banks.

Question 13

Which banks cannot accept foreign deposits?

Accepted Answer

A) Domestic banks located in the U.S. 
B) Edge Act banks located in the U.S. 
C) Subsidiary banks located overseas 
D) Foreign branches located overseas 
A) Domestic banks located in the U.S. 
B) Edge Act banks located in the U.S. 
C) Subsidiary banks located overseas 
D) Foreign branches located overseas

Question 14

Banking tends to be

Accepted Answer

A) a low marginal cost industry. 
B) a high marginal cost industry. 
C) a constant average cost industry. 
D) none of the above 
A) a low marginal cost industry. 
B) a high marginal cost industry. 
C) a constant average cost industry. 
D) none of the above

Question 15

A representative office

Accepted Answer

A) is what lawyers' offices are called in Mexico. 
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 small service facility staffed by correspondent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents. 
D) none of the above 
A) is what lawyers' offices are called in Mexico. 
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 small service facility staffed by correspondent bank personnel that is designed to assist MNC clients of the parent bank in dealings with the bank's correspondents. 
D) none of the above

Question 16

LIBOR

Accepted Answer

A) is a market rate, analogous to the U.S.Federal Funds rate. 
B) is a government set rate, like the discount rate. 
C) is the rate at which banks in London will accept interbank deposits. 
D) none of the above 
A) is a market rate, analogous to the U.S.Federal Funds rate. 
B) is a government set rate, like the discount rate. 
C) is the rate at which banks in London will accept interbank deposits. 
D) none of the above

Question 17

Forward rate agreements can be used for speculative purposes.If one believes rates will be less than the agreement rate,

Accepted Answer

A) take a short position in a forward rate agreement. 
B) the purchase of a FRA is the suitable position. 
C) the sale of a FRA is the suitable position. 
D) take a long position in the spot market. 
A) take a short position in a forward rate agreement. 
B) the purchase of a FRA is the suitable position. 
C) the sale of a FRA is the suitable position. 
D) take a long position in the spot market.

Question 18

Multinational banks are often not subject to the same regulations as domestic banks.

Accepted Answer

A) There may be increased need to publish adequate financial information. 
B) There may be reduced need to publish adequate financial information. 
C) Their requirements to publish adequate financial information are the same. 
D) None of the above 
A) There may be increased need to publish adequate financial information. 
B) There may be reduced need to publish adequate financial information. 
C) Their requirements to publish adequate financial information are the same. 
D) None of the above

Question 19

The current exchange rate is £1.00 = $2.00.Compute the correct balances in Bank A's correspondent account(s)with Bank B 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

A) Bank A's dollar-denominated account at B will rise by $90,000. 
B) Bank B's dollar-denominated account at A will fall by $90,000. 
C) Bank A's pound-denominated account at B will rise by £45,000. 
D) Bank B's pound-denominated account at A will rise by £45,000. 
A) Bank A's dollar-denominated account at B will rise by $90,000. 
B) Bank B's dollar-denominated account at A will fall by $90,000. 
C) Bank A's pound-denominated account at B will rise by £45,000. 
D) Bank B's pound-denominated account at A will rise by £45,000.

Question 20

Edge Act banks

Accepted Answer

A) can accept foreign deposits, extend trade credit, finance foreign projects abroad, trade foreign currencies, and engage in investment banking activities with U.S.citizens involving foreign securities. 
B) are federally chartered subsidiaries of U.S.banks that are physically located in the United States and are allowed to engage in a full range of international banking activities. 
C) can underwrite securities, but can only be located in states on the edge of the U.S. 
D) both a) and b) 
A) can accept foreign deposits, extend trade credit, finance foreign projects abroad, trade foreign currencies, and engage in investment banking activities with U.S.citizens involving foreign securities. 
B) are federally chartered subsidiaries of U.S.banks that are physically located in the United States and are allowed to engage in a full range of international banking activities. 
C) can underwrite securities, but can only be located in states on the edge of the U.S. 
D) both a) and b)

Exam 11: International Banking and Money Market

A U.S.-based multinational bank

Edge Act banks are so-called because

The core of the international money market is

The models that the credit rating firms (e.g.Moody's,S&P,and Fitch)used to evaluate the risk of the various tranches of MBS debt and thereby assign a credit rating (e.g.AAA,AA-BB,or unrated)were

Since international banks have the facilities to trade foreign exchange,

Consider the position of a treasurer of a MNC,who has $20,000,000 that his firm will not need for the next 90 days.

Which of the following are reasons why a bank may establish a multinational operation?

Proceeding the Asian crisis

Correspondent bank relationships can be beneficial

A foreign branch bank

A DECREASE in the implied three-month LIBOR yield causes Eurodollar futures price

Banks that both perform traditional commercial banking functions and engage in investment banking activities are often called

Which banks cannot accept foreign deposits?

Banking tends to be

A representative office

LIBOR

Forward rate agreements can be used for speculative purposes.If one believes rates will be less than the agreement rate,

Multinational banks are often not subject to the same regulations as domestic banks.

The current exchange rate is £1.00 = $2.00.Compute the correct balances in Bank A's correspondent account(s)with Bank B 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)

Edge Act 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

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