Question 1

Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?

Accepted Answer

A)  Conditionality 
B)  Debt service 
C)  Reciprocal currency arrangement 
D)  Swap agreement

Question 2

The SDR has replaced the dollar,yen,and mark as the key asset of the international financial system.

Accepted Answer

A) True 
 B)False

Question 3

The exchange of borrowing country debt for an ownership position in the borrowing country is known as:

Accepted Answer

A)  Debt forgiveness 
B)  Debt-for-debt swap 
C)  Debt reduction 
D)  Debt/equity swap

Question 4

A debt-equity swap results in a trade surplus nation forgiving the loans made to a trade-deficit nation.

Accepted Answer

A) True 
 B)False

Question 5

Under a debt-for-debt swap,a commercial bank sells its loans at a discount to a developing country government for local currency which it then uses to finance an equity investment in the debtor country.

Accepted Answer

A) True 
 B)False

Question 6

A main purpose of the International Monetary Fund is to make loans of foreign currencies to member countries which are experiencing current-account surpluses.

Accepted Answer

A) True 
 B)False

Question 7

Why do countries hold international reserves?

Accepted Answer

The answer of Why do countries hold international reserves?...

Question 8

Concerning international lending risk,country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

Accepted Answer

A) True 
 B)False

Question 9

A debt buyback is a debt-reduction technique in which a government of a debtor nation buys loans from commercial banks at a discount.

Accepted Answer

A) True 
 B)False

Question 10

The U.S.dollar has been considered a reserve (key)currency because trading nations have been willing to hold it as an international reserve asset.

Accepted Answer

A) True 
 B)False

Question 11

Concerning international lending risk,currency risk is the risk of asset losses due to changing currency values.

Accepted Answer

A) True 
 B)False

Question 12

"Owned" international reserves consist of:

Accepted Answer

A)  Special drawing rights 
B)  Oil facility 
C)  IMF drawings 
D)  Reciprocal currency arrangements

Question 13

With an international gold standard,if a country ended up with a deficit from the balances on its current and capital accounts,it would:

Accepted Answer

A)  Import gold to settle the balance 
B)  Export gold to settle the balance 
C)  Officially decrease the price of gold 
D)  Officially increase the price of gold

Question 14

Concerning international lending risk of commercial banks,____ is closely related to political developments in a borrowing country,especially the government's views concerning international investments and loans.

Accepted Answer

A)  Economic risk 
B)  Credit risk 
C)  Country risk 
D)  Currency risk

Question 15

When exchange rates are fixed by central bankers,international reserves are necessary for financing payments imbalances and the stabilization of exchange rates.

Accepted Answer

A) True 
 B)False

Question 16

The International Monetary Fund has sometimes demanded that financially-troubled nations,that borrow from the IMF,undergo austerity programs including slashing of public spending and private consumption.

Accepted Answer

A) True 
 B)False

Question 17

Concerning international debt,____ refers to a negotiated reduction in the contractual obligations of the debtor country and includes schemes such as markdowns and write-offs of debt.

Accepted Answer

A)  Debt/equity swap 
B)  Debt-for-debt swap 
C)  Debt forgiveness 
D)  Debt sales

Question 18

International reserves allow a country to finance disequilibria in its balance-of-payments position.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not considered a "borrowed" reserve?

Accepted Answer

A)  Special drawing rights 
B)  Oil facility 
C)  IMF drawings 
D)  Reciprocal currency arrangement

Question 20

Because the value of the SDR is tied directly to the value of the U.S.dollar,a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.

Accepted Answer

A) True 
 B)False

Exam 17: International Banking: Reserves, debt, and Risk

Which term best describes the process in which the International Monetary Fund provides loans to countries facing balance-of-payments difficulties provided that they initiate programs holding promise of correcting these difficulties?

The SDR has replaced the dollar,yen,and mark as the key asset of the international financial system.

The exchange of borrowing country debt for an ownership position in the borrowing country is known as:

A debt-equity swap results in a trade surplus nation forgiving the loans made to a trade-deficit nation.

Under a debt-for-debt swap,a commercial bank sells its loans at a discount to a developing country government for local currency which it then uses to finance an equity investment in the debtor country.

A main purpose of the International Monetary Fund is to make loans of foreign currencies to member countries which are experiencing current-account surpluses.

Why do countries hold international reserves?

Concerning international lending risk,country risk refers to the risk that part or all of the interest or principal of a loan will not be repaid.

A debt buyback is a debt-reduction technique in which a government of a debtor nation buys loans from commercial banks at a discount.

The U.S.dollar has been considered a reserve (key)currency because trading nations have been willing to hold it as an international reserve asset.

Concerning international lending risk,currency risk is the risk of asset losses due to changing currency values.

"Owned" international reserves consist of:

With an international gold standard,if a country ended up with a deficit from the balances on its current and capital accounts,it would:

Concerning international lending risk of commercial banks,____ is closely related to political developments in a borrowing country,especially the government's views concerning international investments and loans.

When exchange rates are fixed by central bankers,international reserves are necessary for financing payments imbalances and the stabilization of exchange rates.

The International Monetary Fund has sometimes demanded that financially-troubled nations,that borrow from the IMF,undergo austerity programs including slashing of public spending and private consumption.

Concerning international debt,____ refers to a negotiated reduction in the contractual obligations of the debtor country and includes schemes such as markdowns and write-offs of debt.

International reserves allow a country to finance disequilibria in its balance-of-payments position.

Which of the following is not considered a "borrowed" reserve?

Because the value of the SDR is tied directly to the value of the U.S.dollar,a 10 percent dollar depreciation would result in a 10 percent decrease in the SDR's value.