Question 1

The member nations of the European Union have relative freedom to set their own fiscal policies EXCEPT for which of the following?

Accepted Answer

A) government spending 
B) government taxation 
C) government surpluses or deficits 
D) government printing of the euro currency 
A) government spending 
B) government taxation 
C) government surpluses or deficits 
D) government printing of the euro currency D

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

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. C

Question 4

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 5

The British Bankers Association (BBA)estimates that LIBOR was used in the pricing of more than ________ in assets globally.

Accepted Answer

A) $100 billion 
B) $360 billion 
C) $360 trillion 
D) $100 trillion 
A) $100 billion 
B) $360 billion 
C) $360 trillion 
D) $100 trillion

Question 6

A ________ is a financial intermediation device that allowed the participant to borrow short and lend long.

Accepted Answer

A) sub-prime loan 
B) structured investment vehicle 
C) non-conforming loan 
D) all of the above 
A) sub-prime loan 
B) structured investment vehicle 
C) non-conforming loan 
D) all of the above

Question 7

What is a Collateralized Debt Obligation (CDO)? In your answer explain how CDOs are generally separated into one of three tranches. What types of mistakes were made by security rating agencies that contributed to the collapse of the CDO market?

Accepted Answer

Financial institutions create and then p

Question 8

Securitization may degrade credit quality because the process severs the link of lending and repayment (risk and reward)between the originator of the loan and the borrower.

Accepted Answer

A) True 
 B)False

Question 9

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 explicitly allowed corporate combinations of commercial banks with other types of financial institutions such as insurance companies and investment banking firms.

Accepted Answer

A) True 
 B)False

Question 10

What is TARP? Provide an argument for why TARP was necessary and successful.

Accepted Answer

TARP is the Troubled Asset Recovery Prog

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

Baring the (hopefully temporary setback of 2008)capital is more mobile today than ever before.

Accepted Answer

A) True 
 B)False

Question 14

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 15

When the EU moved to a single currency with the adoption of the euro, its member states agreed to each of the following EXCEPT:

Accepted Answer

A) a single currency. 
B) control of their own money supply. 
C) free movement of capital in and out of their economies. 
D) In fact, the member states agreed to ALL of the above. 
A) a single currency. 
B) control of their own money supply. 
C) free movement of capital in and out of their economies. 
D) In fact, the member states agreed to ALL of the above.

Question 16

The authors make it clear that the main source of market failure with collateralized debt obligations lay almost exclusively with the rating agencies.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Even though household debt as a percentage of disposable income rose rapidly in the United States in early 2000s, the rate was even greater in Britain, topping out at over 170% in 2008.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following pieces of U.S. legislation was developed and passed in response to the 2008-2009 international credit crisis?

Accepted Answer

A) Gramm-Leach-Bliley Financial Services Modernization Act 
B) Dodd-Frank Wall Street Reform and Consumer Protection Act 
C) Depository Institutions Deregulation and Monetary Control Act 
D) The Glass-Steagall Act 
A) Gramm-Leach-Bliley Financial Services Modernization Act 
B) Dodd-Frank Wall Street Reform and Consumer Protection Act 
C) Depository Institutions Deregulation and Monetary Control Act 
D) The Glass-Steagall Act

Question 20

Debt issued by the national government is called:

Accepted Answer

A) debenture debt. 
B) municipal debt. 
C) sovereign debt. 
D) none of the above 
A) debenture debt. 
B) municipal debt. 
C) sovereign debt. 
D) none of the above

The member nations of the European Union have relative freedom to set their own fiscal policies EXCEPT for which of the following?

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

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

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

The British Bankers Association (BBA)estimates that LIBOR was used in the pricing of more than ________ in assets globally.

A ________ is a financial intermediation device that allowed the participant to borrow short and lend long.

What is a Collateralized Debt Obligation (CDO)? In your answer explain how CDOs are generally separated into one of three tranches. What types of mistakes were made by security rating agencies that contributed to the collapse of the CDO market?

Securitization may degrade credit quality because the process severs the link of lending and repayment (risk and reward)between the originator of the loan and the borrower.

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 explicitly allowed corporate combinations of commercial banks with other types of financial institutions such as insurance companies and investment banking firms.

What is TARP? Provide an argument for why TARP was necessary and successful.

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

The Glass-Steagall Act of 1933:

Baring the (hopefully temporary setback of 2008)capital is more mobile today than ever before.

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

When the EU moved to a single currency with the adoption of the euro, its member states agreed to each of the following EXCEPT:

The authors make it clear that the main source of market failure with collateralized debt obligations lay almost exclusively with the rating agencies.

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

Even though household debt as a percentage of disposable income rose rapidly in the United States in early 2000s, the rate was even greater in Britain, topping out at over 170% in 2008.

Which of the following pieces of U.S. legislation was developed and passed in response to the 2008-2009 international credit crisis?

Debt issued by the national government is called:

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Working Capital Management

International Trade Finance

Filters

Exam 5: The Continuing Global Financial Crisis

The member nations of the European Union have relative freedom to set their own fiscal policies EXCEPT for which of the following?

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

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

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

The British Bankers Association (BBA)estimates that LIBOR was used in the pricing of more than ________ in assets globally.

A ________ is a financial intermediation device that allowed the participant to borrow short and lend long.

What is a Collateralized Debt Obligation (CDO)? In your answer explain how CDOs are generally separated into one of three tranches. What types of mistakes were made by security rating agencies that contributed to the collapse of the CDO market?

Securitization may degrade credit quality because the process severs the link of lending and repayment (risk and reward)between the originator of the loan and the borrower.

The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 explicitly allowed corporate combinations of commercial banks with other types of financial institutions such as insurance companies and investment banking firms.

What is TARP? Provide an argument for why TARP was necessary and successful.

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

The Glass-Steagall Act of 1933:

Baring the (hopefully temporary setback of 2008)capital is more mobile today than ever before.

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

When the EU moved to a single currency with the adoption of the euro, its member states agreed to each of the following EXCEPT:

The authors make it clear that the main source of market failure with collateralized debt obligations lay almost exclusively with the rating agencies.

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

Even though household debt as a percentage of disposable income rose rapidly in the United States in early 2000s, the rate was even greater in Britain, topping out at over 170% in 2008.

Which of the following pieces of U.S. legislation was developed and passed in response to the 2008-2009 international credit crisis?

Debt issued by the national government is called:

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Working Capital Management

International Trade Finance

Filters