Question 1

LIBOR stand for the London Interbank Offered Rate.

Accepted Answer

A) True 
 B)False  True

Question 2

The typical TED spread, the difference between the LIBOR and the interest rate swap index, is typically about ________ basis points.

Accepted Answer

A) 350 
B) 180 
C) 120 
D) 80 
A) 350 
B) 180 
C) 120 
D) 80 D

Question 3

The Glass-Steagall Act of 1933

Accepted Answer

A) separated commercial banking activities from investment banking activities. 
B) created the Federal Reserve System. 
C) developed the system of commercial bank deposit insurance. 
D) all of the above 
A) separated commercial banking activities from investment banking activities. 
B) created the Federal Reserve System. 
C) developed the system of commercial bank deposit insurance. 
D) all of the above A

Question 4

Which of the following is NOT another term for a prime mortgage loan?

Accepted Answer

A) Conventional loan. 
B) Top-qual loan. 
C) Conforming loan. 
D) All of the above are suitable terms for a prime mortgage loan. 
A) Conventional loan. 
B) Top-qual loan. 
C) Conforming loan. 
D) All of the above are suitable terms for a prime mortgage loan.

Question 5

It is pretty clear after reading this chapter that securitization in and of itself is a poor financial idea.

Accepted Answer

A) True 
 B)False

Question 6

The process of turning an illiquid asset into a liquid saleable asset is called ________.

Accepted Answer

A) swapping 
B) wrapping 
C) securitization 
D) creationism 
A) swapping 
B) wrapping 
C) securitization 
D) creationism

Question 7

Near the end of the U.S. housing boom many of the mortgages classified as Alt-A were in fact sub-prime.

Accepted Answer

A) True 
 B)False

Question 8

Portfolio theory relies on combining assets with ________ return correlation exclusively to reduce risk.

Accepted Answer

A) highly positive 
B) low 
C) zero 
D) none of the above 
A) highly positive 
B) low 
C) zero 
D) none of the above

Question 9

Future financial market regulation must include all of the following EXCEPT:

Accepted Answer

A) renewed regulatory requirements. 
B) increased reporting. 
C) greater transparency in pricing and valuation. 
D) Regulation must include all of the above. 
A) renewed regulatory requirements. 
B) increased reporting. 
C) greater transparency in pricing and valuation. 
D) Regulation must include all of the above.

Question 10

Credit Default Swaps are highly regulated financial instruments as a result of the Commodity Futures Modernization Act of 2000.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements concerning credit default swaps is FALSE?

Accepted Answer

A) As of year-end 2008, CDSs are completely outside of regulatory boundaries. 
B) A CDS is a derivative security that may be used for hedging risk or for speculative purposes. 
C) In order be a party to a CDO, at least one of either the buyer or seller must own the underlying asset. 
D) CDSs allow banks to severe their links to their borrowers, thereby reducing their incentive to screen and monitor the ability of borrowers to repay. 
A) As of year-end 2008, CDSs are completely outside of regulatory boundaries. 
B) A CDS is a derivative security that may be used for hedging risk or for speculative purposes. 
C) In order be a party to a CDO, at least one of either the buyer or seller must own the underlying asset. 
D) CDSs allow banks to severe their links to their borrowers, thereby reducing their incentive to screen and monitor the ability of borrowers to repay.

Question 12

In finance, a liquid asset:

Accepted Answer

A) sells quickly. 
B) sells at or near its market value. 
C) both A and B 
D) none of the above 
A) sells quickly. 
B) sells at or near its market value. 
C) both A and B 
D) none of the above

Question 13

Which of the following is NOT identified by the authors as a "safe-haven" currency?

Accepted Answer

A) The euro. 
B) The British pound. 
C) The U.S. dollar. 
D) The Japanese yen. 
A) The euro. 
B) The British pound. 
C) The U.S. dollar. 
D) The Japanese yen.

Question 14

Mortgage loans in the U.S. are classified by risk into one of three types: prime, alt-A, and sub-prime.

Accepted Answer

A) True 
 B)False

Question 15

Asset-backed securities (ASBs)may be securitized based on ________.

Accepted Answer

A) auto loans 
B) home-equity loans 
C) credit card receivables 
D) all of the above 
A) auto loans 
B) home-equity loans 
C) credit card receivables 
D) all of the above

Question 16

Bear-Stearns is the largest single bankruptcy in U.S. history.

Accepted Answer

A) True 
 B)False

Question 17

Securitization is likely to be declared illegal in the U.S. though it may still exist elsewhere in the world.

Accepted Answer

A) True 
 B)False

Question 18

From 1990 through 2007, the amount of securitized loans outstanding dropped from over $25 trillion to less than $5 trillion and was a key element in the loss of market liquidity.

Accepted Answer

A) True 
 B)False

Question 19

The accounting procedure whereby assets are revalued to market value basis on a daily basis is known as ________.

Accepted Answer

A) FASB rule 62 
B) market value accounting 
C) marked-to-market 
D) none of the above 
A) FASB rule 62 
B) market value accounting 
C) marked-to-market 
D) none of the above

Question 20

The international credit crisis began in full force in September 2008.

Accepted Answer

A) True 
 B)False

Exam 5: Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

LIBOR stand for the London Interbank Offered Rate.

The typical TED spread, the difference between the LIBOR and the interest rate swap index, is typically about ________ basis points.

The Glass-Steagall Act of 1933

Which of the following is NOT another term for a prime mortgage loan?

It is pretty clear after reading this chapter that securitization in and of itself is a poor financial idea.

The process of turning an illiquid asset into a liquid saleable asset is called ________.

Near the end of the U.S. housing boom many of the mortgages classified as Alt-A were in fact sub-prime.

Portfolio theory relies on combining assets with ________ return correlation exclusively to reduce risk.

Future financial market regulation must include all of the following EXCEPT:

Credit Default Swaps are highly regulated financial instruments as a result of the Commodity Futures Modernization Act of 2000.

Which of the following statements concerning credit default swaps is FALSE?

In finance, a liquid asset:

Which of the following is NOT identified by the authors as a "safe-haven" currency?

Mortgage loans in the U.S. are classified by risk into one of three types: prime, alt-A, and sub-prime.

Asset-backed securities (ASBs)may be securitized based on ________.

Bear-Stearns is the largest single bankruptcy in U.S. history.

Securitization is likely to be declared illegal in the U.S. though it may still exist elsewhere in the world.

From 1990 through 2007, the amount of securitized loans outstanding dropped from over $25 trillion to less than $5 trillion and was a key element in the loss of market liquidity.

The accounting procedure whereby assets are revalued to market value basis on a daily basis is known as ________.

The international credit crisis began in full force in September 2008.

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

Filters