Question 1

An affiliate 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 2

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 3

The primary activities of offshore banks

Accepted Answer

A) include money laundering where banking secrecy laws are strict. 
B) is to seek deposits and grant loans in currencies other than the currency of the host government. 
C) involve check clearing of large bags of checks. 
D) none of the above 
A) include money laundering where banking secrecy laws are strict. 
B) is to seek deposits and grant loans in currencies other than the currency of the host government. 
C) involve check clearing of large bags of checks. 
D) none of the above

Question 4

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 5

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 6

With regard to creating money,

Accepted Answer

A) only central banks such as the Federal Reserve can create money. 
B) money is created when a bank customer invests in a time deposit. 
C) commercial banks can create money when a bank lends out funds borrowed from another customer who invested in a time deposit. 
D) none of the above 
A) only central banks such as the Federal Reserve can create money. 
B) money is created when a bank customer invests in a time deposit. 
C) commercial banks can create money when a bank lends out funds borrowed from another customer who invested in a time deposit. 
D) none of the above

Question 7

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 8

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

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

U.S. banks that establish subsidiary and affiliate banks

Accepted Answer

A) are allowed to underwrite securities. 
B) must provide FDIC insurance on their foreign-currency denominated demand deposits. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a and b 
A) are allowed to underwrite securities. 
B) must provide FDIC insurance on their foreign-currency denominated demand deposits. 
C) can underwrite securities, but not accept dollar-denominated deposits. 
D) both a and b

Question 11

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 12

The payment amount under this FRA is

Accepted Answer

A) $9,985. 
B) $10,111. 
C) $60,667. 
D) $120,000. 
A) $9,985. 
B) $10,111. 
C) $60,667. 
D) $120,000.

Question 13

One enduring truth of banking is that

Accepted Answer

A) for some reason, bankers always seem willing to lend huge amounts to borrowers with a limited potential to repay. 
B) credit ratings work, but only in the aggregate. 
C) when liquidity dries up, bankers are typically able to ride out the storm by buying up other investors debt at pennies on the dollar, holding it until the crisis is over, and then selling at a huge profit. 
D) none of the above 
A) for some reason, bankers always seem willing to lend huge amounts to borrowers with a limited potential to repay. 
B) credit ratings work, but only in the aggregate. 
C) when liquidity dries up, bankers are typically able to ride out the storm by buying up other investors debt at pennies on the dollar, holding it until the crisis is over, and then selling at a huge profit. 
D) none of the above

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

A representative office

Accepted Answer

A) is a way for the parent bank to provide its MNC clients with a level of service greater than that provided through merely a correspondent relationship. 
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 step up from a correspondent relationship, but below a foreign branch. 
D) all of the above 
A) is a way for the parent bank to provide its MNC clients with a level of service greater than that provided through merely a correspondent relationship. 
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 step up from a correspondent relationship, but below a foreign branch. 
D) all of the above

Question 16

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 17

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 18

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 Eurocurrencies. 
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 above 
A) The spread is generally 1/8 of 1 percent for most major Eurocurrencies. 
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 above

Question 19

On September 10, 1990 the published prices (cents on the dollar) on Latin American bank debt was quoted as follows:   Assume that the central banks of Mexico, Venezuela, and Chile redeemed their debts at 50 percent, 85 percent, and 76 percent, respectively, of face value in a debt-for-equity swap. If the three countries had equal political risk, based purely on financial considerations, the cost of a $40,000,000 assembly plant investment in local currency would be ranked (lowest to highest) in dollar cost as follows:

Accepted Answer

A) Venezuela first, Mexico second, Chile third 
B) Venezuela first, Chile second, Mexico third 
C) Chile first, Venezuela second, Mexico third 
D) Mexico first, Chile second, Venezuela third 
A) Venezuela first, Mexico second, Chile third 
B) Venezuela first, Chile second, Mexico third 
C) Chile first, Venezuela second, Mexico third 
D) Mexico first, Chile second, Venezuela third

Question 20

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

An affiliate bank is

Proceeding the Asian crisis,

The primary activities of offshore banks

Eurocurrency

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

With regard to creating money,

A "three against nine" forward rate agreement

Both subsidiary and affiliate banks

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

U.S. banks that establish subsidiary and affiliate banks

In the wholesale money market, denominations

The payment amount under this FRA is

One enduring truth of banking is that

A representative office

A foreign branch bank

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.

A representative office

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

An affiliate bank is

Proceeding the Asian crisis,

The primary activities of offshore banks

Eurocurrency

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

With regard to creating money,

A "three against nine" forward rate agreement

Both subsidiary and affiliate banks

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

U.S. banks that establish subsidiary and affiliate banks

In the wholesale money market, denominations

The payment amount under this FRA is

One enduring truth of banking is that

A representative office

A foreign branch bank

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.

A representative office

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