Question 1

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 options 
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 options

Question 2

Currently,the biggest bank in the world is

Accepted Answer

A) ICBC. 
B) Bank of America. 
C) UBS. 
D) The World Bank. 
A) ICBC. 
B) Bank of America. 
C) UBS. 
D) The World Bank.

Question 3

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 4

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 Euro currencies. 
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 options 
A) The spread is generally 1/8 of 1 percent for most major Euro currencies. 
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 options

Question 5

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,Euro yen,Euro-Canadian dollars,and even euro. 
D) all of the options 
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,Euro yen,Euro-Canadian dollars,and even euro. 
D) all of the options

Question 6

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 7

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 options 
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 options

Question 8

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

Question 9

A bank may establish a multinational operation for the reason of transaction costs.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

An Edge Act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

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) not held by the originating bank,but instead were resold for packaging into mortgage-backed securities.Additionally,they were aggregated and then sliced into tranches each representing a different risk class: AAA,AA-BB,or unrated. 
D) all of the options 
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) not held by the originating bank,but instead were resold for packaging into mortgage-backed securities.Additionally,they were aggregated and then sliced into tranches each representing a different risk class: AAA,AA-BB,or unrated. 
D) all of the options

Question 13

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.

Question 14

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

Question 15

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) tend to locate in states that are major centers of financial activity,as well as the highly populous states of New York,California,Illinois,Florida,Georgia,and Texas. 
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) tend to locate in states that are major centers of financial activity,as well as the highly populous states of New York,California,Illinois,Florida,Georgia,and Texas.

Question 16

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 options 
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 options

Question 17

Eurodollars refers to dollar deposits when the depository bank is located

Accepted Answer

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

Question 18

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 options 
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 options

Question 19

Why would a U.S.bank open a foreign branch bank?

Accepted Answer

A) Because this form of bank organization can allow a U.S.bank to provide a fuller range of services for its MNC customers than it can through a representative office. 
B) To avoid U.S.banking regulation on transactions routed through that foreign country. 
C) Because this form of organization allows the bank to service MNC clients at low cost and without the need of having bank personnel located in the country. 
D) Because this form of bank organization can allow a U.S.bank to provide a fuller range of services for its MNC customers than it can through a representative office,and to avoid U.S.banking regulation on transactions routed through that foreign country. 
A) Because this form of bank organization can allow a U.S.bank to provide a fuller range of services for its MNC customers than it can through a representative office. 
B) To avoid U.S.banking regulation on transactions routed through that foreign country. 
C) Because this form of organization allows the bank to service MNC clients at low cost and without the need of having bank personnel located in the country. 
D) Because this form of bank organization can allow a U.S.bank to provide a fuller range of services for its MNC customers than it can through a representative office,and to avoid U.S.banking regulation on transactions routed through that foreign country.

Question 20

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

So-called subprime mortgages were typically

Currently,the biggest bank in the world is

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

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.

LIBOR

Which banks cannot accept foreign deposits?

Many lessons should be learned from the credit crunch.

Banking tends to be

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

An Edge Act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking.

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

So-called subprime mortgages were typically

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

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

One lesson from the credit crunch is that

Eurodollars refers to dollar deposits when the depository bank is located

A correspondent bank relationship is established when

Why would a U.S.bank open a foreign branch bank?

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

International Monetary System

Globalization and the Multinational Firm

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

So-called subprime mortgages were typically

Currently,the biggest bank in the world is

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

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.

LIBOR

Which banks cannot accept foreign deposits?

Many lessons should be learned from the credit crunch.

Banking tends to be

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

An Edge Act bank is typically located in a state different from that of its parent in order to get around the prohibition on interstate branch banking.

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

So-called subprime mortgages were typically

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

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

One lesson from the credit crunch is that

Eurodollars refers to dollar deposits when the depository bank is located

A correspondent bank relationship is established when

Why would a U.S.bank open a foreign branch bank?

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

International Monetary System

Globalization and the Multinational Firm

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