Question 1

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 2

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 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

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 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 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 9

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 10

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 11

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 12

A bank may establish a multinational operation for the reason of low marginal 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) managerial and marketing knowledge developed at home can be used abroad with low marginal costs. 
D) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
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) managerial and marketing knowledge developed at home can be used abroad with low marginal costs. 
D) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market.

Question 13

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 14

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

Question 15

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

Accepted Answer

A) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
B) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
C) very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad. 
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) local firms may be able to obtain from a foreign subsidiary bank operating in their country more complete trade and financial market information about the subsidiary's home country than they can obtain from their own domestic banks. 
B) the foreign bank subsidiary can draw on the parent bank's knowledge of personal contacts and credit investigations for use in that foreign market. 
C) very large multinational banks have high perceived prestige, liquidity, and deposit safety that can be used to attract clients abroad. 
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 16

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 17

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 18

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 19

A domestic bank that follows a multinational client abroad to preserve that banking relationship

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 20

In reference to capital requirements,value-at-risk analysis

Accepted Answer

A) refers to traditional bank loans and deposits. 
B) refers to a "risk-focused" approach to determining adequate bank capital. 
C) provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time. 
D) both b and c 
A) refers to traditional bank loans and deposits. 
B) refers to a "risk-focused" approach to determining adequate bank capital. 
C) provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time. 
D) both b and c

Exam 11: International Banking and Money Market

A "three against nine" forward rate agreement

Eurocredits

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

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

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

By far the most important international finance centers are

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

Banking tends to be

A representative office

Major distinguishing features between domestic banks and international banks are

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

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

Correspondent bank relationships can be beneficial

The Asian crisis

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

Eurocurrency

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

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

A domestic bank that follows a multinational client abroad to preserve that banking relationship

In reference to capital requirements,value-at-risk analysis

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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