Exam 21: International Financial Markets and Instruments: an Introduction

Discuss why an investor might be interested in foreign stocks and bonds instead of domestic financial instruments. What are the dangers of such purchases?

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Question 1

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There are several reasons why an investor might be interested in foreign stocks and bonds instead of domestic financial instruments. One reason is diversification. By investing in foreign markets, an investor can spread their risk across different economies and industries, reducing the impact of any one country's economic downturn or market volatility. Additionally, foreign markets may offer higher growth potential than domestic markets, providing the opportunity for greater returns on investment.

Another reason is currency diversification. Investing in foreign stocks and bonds allows an investor to hold assets in different currencies, which can provide a hedge against currency risk and inflation. This can be particularly important in times of economic uncertainty or when the domestic currency is weakening.

However, there are also dangers associated with purchasing foreign stocks and bonds. One major risk is currency risk. Fluctuations in exchange rates can impact the value of foreign investments, potentially leading to losses for the investor. Political and economic instability in foreign countries can also pose a risk, as it can affect the performance of foreign stocks and bonds. Additionally, foreign markets may have different regulatory and reporting standards, making it more difficult for investors to assess the true value and risk of their investments.

Overall, while investing in foreign stocks and bonds can offer diversification and growth opportunities, it is important for investors to carefully consider the potential risks and do thorough research before making such purchases.

The eurodollar deposit rate would theoretically be expected to lie theDomestic U.S. deposit rate, and the eurodollar lending rate would theoretically be Expected to lie the U.S. domestic lending rate.

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Question 2

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Global derivative instruments do NOT include which one of the following?

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Question 3

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If an individual wished to lock in a future deposit rate of 8 percent in the eurodollar Interest rate options market, she should

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Question 4

Which one of the following is NOT a component of international bank lending?

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Question 5

Several people have argued that a surge in international lending and the increase in eurodollar accounts and derivatives will contribute to economic instability. Do you agree or disagree with their concerns? Why?

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Question 6

One hundred basis points in terms of dollars is equal to __________.

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Question 7

Which one of the following gives rise to a new eurocurrency deposit?

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Question 8

If, indeed, international financial markets are well-integrated, why do interest rates differ markedly between countries?

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Question 9

Present a brief overview of what has happened to financial markets over the past fifteen years. What factors contributed to this phenomenon? What are the implications, if any, for the developing countries?

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Question 10

A London exporting firm's dollar-denominated checking account in a New York bank of the eurodollar market; a London exporting firm's dollar-denominated checking account in a London bank of the eurodollar market.

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Question 11

An approximation to the "real" interest rate can be calculated by

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Question 12

If a French citizen places $100,000 in an Italian bank and an Italian citizen places $40,000 in a French bank, "net international bank lending" increased by __________.

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Question 13

Why are investors interested in eurodollar interest rate futures and/or interest rate options? How do these instruments relate to financial risk? How might they be used in conjunction with exchange rate derivatives?

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Question 14

A surge in international bank lending could be potentially economically destabilizing because

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Question 15

The recent growth in the last 10-20 years in international bond markets

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Question 16

The increasing importance of international stock transactions most likely will

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Question 17

Suppose that short-term interest rates rise in the United States and, consequently, U.K.Financial investors respond by sending funds to the United States (and cover those funds Against any exchange rate change that might occur between the time of the investment And the time of returning the funds and interest to the United Kingdom). In this situation, Which one of the following events will NOT occur?

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Question 18

A eurodollar interest rate swap

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Question 19

If a French citizen places $100,000 in an Italian bank and an Italian citizen places $40,000 in a French bank, "international bank lending" has increased by __________.

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Question 20

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Exam 21: International Financial Markets and Instruments: an Introduction

Discuss why an investor might be interested in foreign stocks and bonds instead of domestic financial instruments. What are the dangers of such purchases?

The eurodollar deposit rate would theoretically be expected to lie __________ theDomestic U.S. deposit rate, and the eurodollar lending rate would theoretically be Expected to lie __________ the U.S. domestic lending rate.

Global derivative instruments do NOT include which one of the following?

If an individual wished to lock in a future deposit rate of 8 percent in the eurodollar Interest rate options market, she should

Which one of the following is NOT a component of international bank lending?

Several people have argued that a surge in international lending and the increase in eurodollar accounts and derivatives will contribute to economic instability. Do you agree or disagree with their concerns? Why?

One hundred basis points in terms of dollars is equal to __________.

Which one of the following gives rise to a new eurocurrency deposit?

If, indeed, international financial markets are well-integrated, why do interest rates differ markedly between countries?

Present a brief overview of what has happened to financial markets over the past fifteen years. What factors contributed to this phenomenon? What are the implications, if any, for the developing countries?

A London exporting firm's dollar-denominated checking account in a New York bank __________ of the eurodollar market; a London exporting firm's dollar-denominated checking account in a London bank __________ of the eurodollar market.

An approximation to the "real" interest rate can be calculated by

If a French citizen places $100,000 in an Italian bank and an Italian citizen places $40,000 in a French bank, "net international bank lending" increased by __________.

Why are investors interested in eurodollar interest rate futures and/or interest rate options? How do these instruments relate to financial risk? How might they be used in conjunction with exchange rate derivatives?

A surge in international bank lending could be potentially economically destabilizing because

The recent growth in the last 10-20 years in international bond markets

The increasing importance of international stock transactions most likely will

A eurodollar interest rate swap

If a French citizen places $100,000 in an Italian bank and an Italian citizen places $40,000 in a French bank, "international bank lending" has increased by __________.

Early Trade Theories: Mercantilism and the Transition to the Classical World of David Ricardo

The Classical World of David Ricardo and Comparative Advantage

Extensions and Tests of the Classical Model of Trade

Introduction to Neoclassical Trade Theory: Tools to Be Employed

Gains From Trade in Neoclassical Theory

Offer Curves and the Terms of Trade

The Basis for Trade: Factor Endowments and the Heckscher-Ohlin Model

Empirical Tests of the Factor Endowments Approach

Post Heckscher-Ohlin Theories of Trade and Intra-Industry Trade

Economic Growth and International Trade

International Factor Movements

The Instruments of Trade Policy

The Impact of Trade Policies

Arguments for Interventionist Trade Policies

Political Economy and Us Trade Policy

Economic Integration

International Trade and the Developing Countries

The Balance-Of-Payments Accounts

The Foreign Exchange Market

The Monetary and Portfolio Balance Approaches to External Balance

Price Adjustments and Balance-Of-Payments Disequilibrium

National Income and the Current Account

Economic Policy in the Open Economy Under Fixed Exchange Rates

Economic Policy in the Open Economy Under Flexible Exchange Rates

Prices and Output in the Open Economy: Aggregate Supply and Demand

Fixed or Flexible Exchange Rates

The International Monetary System: Past, Present, and Future

Filters

The eurodollar deposit rate would theoretically be expected to lie theDomestic U.S. deposit rate, and the eurodollar lending rate would theoretically be Expected to lie the U.S. domestic lending rate.

A London exporting firm's dollar-denominated checking account in a New York bank of the eurodollar market; a London exporting firm's dollar-denominated checking account in a London bank of the eurodollar market.