Question 1

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

Question 2

Currently, the biggest bank in the world is

Accepted Answer

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

Question 3

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 above 
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 above

Question 4

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 5

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 6

A bank may establish a multinational operation for the reason of knowledge advantage. 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) 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. 
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) 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) 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) 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. 
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) 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 7

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 8

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 9

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 10

Merchant banks are different from traditional commercial banks in what way(s)?

Accepted Answer

A) Merchant banks can engage in investment banking activities. 
B) Merchant banks can arrange for foreign exchange transactions. 
C) Merchant banks can assist their clients in hedging exchange rate risk. 
D) All of the above 
A) Merchant banks can engage in investment banking activities. 
B) Merchant banks can arrange for foreign exchange transactions. 
C) Merchant banks can assist their clients in hedging exchange rate risk. 
D) All of the above

Question 11

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 12

A bank sold a 3 × 9 FRA. Payment is made when?

Accepted Answer

A) At the end of 3 months 
B) At the end of 6 months 
C) At the end of 9 months 
D) None of the above 
A) At the end of 3 months 
B) At the end of 6 months 
C) At the end of 9 months 
D) None of the above

Question 13

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 14

Why would a U.S. bank open a foreign branch bank instead of a foreign chartered subsidiary?

Accepted Answer

A) This form of bank organization allows the bank to be able to extend a larger loan to a customer than a locally chartered subsidiary bank of the parent. 
B) To slow down check clearing and maximize the bank's float. 
C) To avoid U.S. banking regulation. 
D) Both a and c 
A) This form of bank organization allows the bank to be able to extend a larger loan to a customer than a locally chartered subsidiary bank of the parent. 
B) To slow down check clearing and maximize the bank's float. 
C) To avoid U.S. banking regulation. 
D) Both a and c

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

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

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 18

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 19

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 20

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

Exam 11: International Banking and Money Market

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

Currently, the biggest bank in the world is

Many lessons should be learned from the credit crunch.

The Asian crisis

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

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

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

Edge Act banks

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

Merchant banks are different from traditional commercial banks in what way(s)?

The core of the international money market is

A bank sold a 3 × 9 FRA. Payment is made when?

By far the most important international finance centers are

Why would a U.S. bank open a foreign branch bank instead of a foreign chartered subsidiary?

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

LIBOR

A foreign branch bank

Proceeding the Asian crisis

A subsidiary bank is

Correspondent bank relationships can be beneficial

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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