Question 1

What is a foreign bond and what relevance does it have to international finance?

Accepted Answer

Foreign bonds were bonds issued in a particular country,say the United States,denominated in the currency of the United States,the USD,but issued by an entity that was not considered to be a domestic (U.S. )issuer.For instance,if the Bank of China issued a bond in the United States denominated in the USD,the bond would be considered to be a foreign bond.While foreign bonds are still issued as part of international finance,a similar,but in important aspects different instrument,has supplanted the foreign bond to some extent.Eurobonds are issued by a foreign issuer (not considered to be an issuer in the country where the bond is issued)in a country but are issued,not denominated in the currency of the country where they are issued,but are denominated in another currency that is not the currency of the country where they are issued or the currency of the issuer.For instance,if the Bank of China issued a bond in the United States denominated in euros,the bond would be considered to be a Eurobond.Both the foreign bond and the Eurobond represent the flexibility that issuers of bonds have in targeting their markets and in taking advantage of the relative strengths or weaknesses of various currencies.

Question 2

Converting an indirect quote to a direct quote require:

Accepted Answer

A) taking the inverse (1/quote)of the indirect quote. 
B) contacting a broker in foreign exchange transactions. 
C) taking into consideration the trend (positive or negative)of the value of the two currencies. 
D) changing the ratios of the two currencies. 
A) taking the inverse (1/quote)of the indirect quote. 
B) contacting a broker in foreign exchange transactions. 
C) taking into consideration the trend (positive or negative)of the value of the two currencies. 
D) changing the ratios of the two currencies. A

Question 3

What is the "bid-ask spread" and how does it affect the costs that MNCs incur in the foreign exchange market?

Accepted Answer

The bid price is what someone who is seeking to buy a specific foreign currency on the foreign exchange market is willing to pay for that currency,and the ask price is what someone who is seeking to sell a specific currency on the foreign exchange market is willing to accept for that currency.The bid-ask spread is the difference between the two prices,and,if a dealer can find an ask price that is less than a bid price,the bid-ask spread represents the profit that the deal can make by buying the currency at the ask price and selling it at the bid price.Liquid currencies (those that are bought and sold easily)have low spreads since they are regularly traded and bid and ask prices are essentially the same,but illiquid currencies (those that are not bought and sold as easily)have higher spreads since there are not as many buyers and sellers of those currencies.When an MNC seeks to buy or sell on the foreign currency market,it typically conducts those transactions through a dealer in foreign currency,and the bid-ask spread for the particular currency that the MNC is seeking to buy or sell will be the dealer's profit on the transaction,paid by the MNC.

Question 4

MNCs participate in foreign exchange markets since they:

Accepted Answer

A) seek to limit their exposure to the economic cycles in their home countries. 
B) cannot borrow domestically and must seek foreign investments. 
C) cannot find suitable domestic investment opportunities for excess funds. 
D) they have transactions with foreign buyers and sellers and invest and borrow internationally. 
A) seek to limit their exposure to the economic cycles in their home countries. 
B) cannot borrow domestically and must seek foreign investments. 
C) cannot find suitable domestic investment opportunities for excess funds. 
D) they have transactions with foreign buyers and sellers and invest and borrow internationally.

Question 5

__________________________ are agreements to pay a specific sum of money at a specified interest rate in a specified period of time,often six months.

Accepted Answer

A) Euro certificates of deposit 
B) Euro promissory notes 
C) Euro commercial paper 
D) Euro loan agreements 
A) Euro certificates of deposit 
B) Euro promissory notes 
C) Euro commercial paper 
D) Euro loan agreements

Question 6

Collateralized debt obligations are:

Accepted Answer

A) essentially the same thing as Eurobonds. 
B) bonds issued by MNCs payable in the domestic currency of the MNC. 
C) equity instruments issued by MNCs that are convertible into Eurobonds. 
D) backed by risky assets and are sold in classes having different levels of risk. 
A) essentially the same thing as Eurobonds. 
B) bonds issued by MNCs payable in the domestic currency of the MNC. 
C) equity instruments issued by MNCs that are convertible into Eurobonds. 
D) backed by risky assets and are sold in classes having different levels of risk.

Question 7

Most foreign exchange transactions involve the sale or purchase of:

Accepted Answer

A) Euros (EUR). 
B) British pounds (GBP). 
C) Japanese yen (YPY). 
D) U.S.dollars (US
D) . 
A) Euros (EUR). 
B) British pounds (GBP). 
C) Japanese yen (YPY). 
D) U.S.dollars (US
D) .

Question 8

The vehicle or intermediate currency in which most international exchange transactions are conducted is the:

Accepted Answer

A) USD. 
B) EUR. 
C) JYP. 
D) GBP. 
A) USD. 
B) EUR. 
C) JYP. 
D) GBP.

Question 9

In foreign exchange markets,________________ is the price that market makers are willing to buy and ____________________ is the price at which market makers are willing to sell a foreign currency.

Accepted Answer

A) ask;bid 
B) bid;ask 
C) offer;acceptance 
D) acceptance;offer 
A) ask;bid 
B) bid;ask 
C) offer;acceptance 
D) acceptance;offer

Question 10

Foreign exchange transactions can be classified into three categories:

Accepted Answer

A) spot transactions,forward transactions,and forward exchange swap agreements. 
B) foreign currency transactions,domestic currency transactions,and regional currency transactions. 
C) hedge transactions,exchange transactions and investment transactions. 
D) Interbank transactions,MNC transactions,and miscellaneous transactions. 
A) spot transactions,forward transactions,and forward exchange swap agreements. 
B) foreign currency transactions,domestic currency transactions,and regional currency transactions. 
C) hedge transactions,exchange transactions and investment transactions. 
D) Interbank transactions,MNC transactions,and miscellaneous transactions.

Question 11

The principal feature of Euro markets is:

Accepted Answer

A) lack of regulation. 
B) high interest rates that are available. 
C) lower risks than are present in other markets. 
D) lower rates on borrowed funds. 
A) lack of regulation. 
B) high interest rates that are available. 
C) lower risks than are present in other markets. 
D) lower rates on borrowed funds.

Question 12

Foreign currency transactions that are in the USD are called:

Accepted Answer

A) foreign currency transactions. 
B) foreign exchange transactions. 
C) Eurocurrency transactions. 
D) Eurodollar transactions. 
A) foreign currency transactions. 
B) foreign exchange transactions. 
C) Eurocurrency transactions. 
D) Eurodollar transactions.

Question 13

Fedwire is a settlement system for foreign currency exchange transactions in the United States operated by the:

Accepted Answer

A) U.S.Treasury Department. 
B) Federal Reserve Banks in the United States. 
C) New York Stock Exchange. 
D) National Association of Securities Dealers Automated Quotations (NASDAQ). 
A) U.S.Treasury Department. 
B) Federal Reserve Banks in the United States. 
C) New York Stock Exchange. 
D) National Association of Securities Dealers Automated Quotations (NASDAQ).

Question 14

The Clearing House Interbank Payment System (CHIPS)is operated by major banks in New York and facilitates foreign exchange transactions by:

Accepted Answer

A) requiring participating banks to maintain deposits in certain New York banks which process foreign exchange transactions through the deposit accounts maintained in the New York banks. 
B) coordinating with and clearing foreign exchange transactions through SWIFT. 
C) acting as market makers,dealers and brokers in foreign exchange transactions. 
D) aggregating the transactions of banks and processing the net amount of transactions of individual banks through the Fedwire system. 
A) requiring participating banks to maintain deposits in certain New York banks which process foreign exchange transactions through the deposit accounts maintained in the New York banks. 
B) coordinating with and clearing foreign exchange transactions through SWIFT. 
C) acting as market makers,dealers and brokers in foreign exchange transactions. 
D) aggregating the transactions of banks and processing the net amount of transactions of individual banks through the Fedwire system.

Question 15

In _________________,parties agree to rates at which currencies will be exchanged immediately.

Accepted Answer

A) spot markets 
B) forward markets 
C) equity markets 
D) currency markets 
A) spot markets 
B) forward markets 
C) equity markets 
D) currency markets

Question 16

Banks that are involved in borrowing and lending transactions in currencies other than their domestic currencies are called:

Accepted Answer

A) Eurobanks. 
B) foreign banks. 
C) market makers. 
D) foreign exchange dealers. 
A) Eurobanks. 
B) foreign banks. 
C) market makers. 
D) foreign exchange dealers.

Question 17

Foreign currency quotes typically use _____________ decimal places,and for major currencies,the bid and ask quotes _________________.

Accepted Answer

A) four;will differ for all four decimal places 
B) four;only the fourth decimal place will differ 
C) two;only the second decimal place will differ 
D) two;all decimal places will differ 
A) four;will differ for all four decimal places 
B) four;only the fourth decimal place will differ 
C) two;only the second decimal place will differ 
D) two;all decimal places will differ

Question 18

The two key financial instruments used in the Eurocurrency markets are:

Accepted Answer

A) foreign exchange swap agreements and Euro commercial paper. 
B) Euro commercial paper and Euro certificate of deposit. 
C) Euro certificate of deposit and Euro negotiable instruments. 
D) Euro negotiable instruments and foreign exchange swap agreements. 
A) foreign exchange swap agreements and Euro commercial paper. 
B) Euro commercial paper and Euro certificate of deposit. 
C) Euro certificate of deposit and Euro negotiable instruments. 
D) Euro negotiable instruments and foreign exchange swap agreements.

Question 19

____________________ are Eurobonds that are issued simultaneously in multiple regions or countries.

Accepted Answer

A) Global bonds 
B) Foreign bonds 
C) Eurocurrencies 
D) Samurai bonds 
A) Global bonds 
B) Foreign bonds 
C) Eurocurrencies 
D) Samurai bonds

Question 20

Foreign exchange transactions are easy and inexpensive and even large transactions can be made without affecting market prices because:

Accepted Answer

A) of the government regulations that apply to foreign exchange markets. 
B) speculators keep the foreign exchange markets very active. 
C) the foreign exchange markets are so large. 
D) the foreign exchange markets are so old and well-established. 
A) of the government regulations that apply to foreign exchange markets. 
B) speculators keep the foreign exchange markets very active. 
C) the foreign exchange markets are so large. 
D) the foreign exchange markets are so old and well-established.

What is a foreign bond and what relevance does it have to international finance?

Converting an indirect quote to a direct quote require:

What is the "bid-ask spread" and how does it affect the costs that MNCs incur in the foreign exchange market?

MNCs participate in foreign exchange markets since they:

__________________________ are agreements to pay a specific sum of money at a specified interest rate in a specified period of time,often six months.

Collateralized debt obligations are:

Most foreign exchange transactions involve the sale or purchase of:

The vehicle or intermediate currency in which most international exchange transactions are conducted is the:

In foreign exchange markets, is the price that market makers are willing to buy and ____ is the price at which market makers are willing to sell a foreign currency.

Foreign exchange transactions can be classified into three categories:

The principal feature of Euro markets is:

Foreign currency transactions that are in the USD are called:

Fedwire is a settlement system for foreign currency exchange transactions in the United States operated by the:

The Clearing House Interbank Payment System (CHIPS)is operated by major banks in New York and facilitates foreign exchange transactions by:

In _________________,parties agree to rates at which currencies will be exchanged immediately.

Banks that are involved in borrowing and lending transactions in currencies other than their domestic currencies are called:

Foreign currency quotes typically use _ decimal places,and for major currencies,the bid and ask quotes _____.

The two key financial instruments used in the Eurocurrency markets are:

____________________ are Eurobonds that are issued simultaneously in multiple regions or countries.

Foreign exchange transactions are easy and inexpensive and even large transactions can be made without affecting market prices because:

Introduction

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

Exam 2: International Financial Markets: Structure and Innovation

What is a foreign bond and what relevance does it have to international finance?

Converting an indirect quote to a direct quote require:

What is the "bid-ask spread" and how does it affect the costs that MNCs incur in the foreign exchange market?

MNCs participate in foreign exchange markets since they:

__________________________ are agreements to pay a specific sum of money at a specified interest rate in a specified period of time,often six months.

Collateralized debt obligations are:

Most foreign exchange transactions involve the sale or purchase of:

The vehicle or intermediate currency in which most international exchange transactions are conducted is the:

In foreign exchange markets,________________ is the price that market makers are willing to buy and ____________________ is the price at which market makers are willing to sell a foreign currency.

Foreign exchange transactions can be classified into three categories:

The principal feature of Euro markets is:

Foreign currency transactions that are in the USD are called:

Fedwire is a settlement system for foreign currency exchange transactions in the United States operated by the:

The Clearing House Interbank Payment System (CHIPS)is operated by major banks in New York and facilitates foreign exchange transactions by:

In _________________,parties agree to rates at which currencies will be exchanged immediately.

Banks that are involved in borrowing and lending transactions in currencies other than their domestic currencies are called:

Foreign currency quotes typically use _____________ decimal places,and for major currencies,the bid and ask quotes _________________.

The two key financial instruments used in the Eurocurrency markets are:

____________________ are Eurobonds that are issued simultaneously in multiple regions or countries.

Foreign exchange transactions are easy and inexpensive and even large transactions can be made without affecting market prices because:

Introduction

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

In foreign exchange markets, is the price that market makers are willing to buy and ____ is the price at which market makers are willing to sell a foreign currency.

Foreign currency quotes typically use _ decimal places,and for major currencies,the bid and ask quotes _____.