Question 1

Which of the following is an advantage that banks have when they deal with foreign currencies?

Accepted Answer

A)   Interest payments to customers are low when dealing with foreign currencies.
B)   Accounts need not be maintained when dealing with foreign currencies.
C)   Risks that investors face are low when dealing with foreign currencies.
D)   Governments give banks more freedom when dealing with foreign currencies. D

Question 2

The relatively low correlation between the movements of stock markets in different countries indicates that countries face different economic conditions.

Accepted Answer

A) True 
 B)False  True

Question 3

Explain how equity loans and debt loans differ in terms of attractiveness to businesses.

Accepted Answer

Investors purchase stock both for their dividend yield and in anticipation of gains in the price of the stock,which in theory reflects future dividend yields.An organization need not pay back this loan if they are at a loss.But the organization should pay more if the profits are high.
Debt loans require a corporation to repay a predetermined portion of the loan amount.Here,the risk is more for businesses as payments are to be made regardless of the profits.Management has no discretion as to the amount it will pay investors.

Question 4

Which of the following is a factor that makes Eurobonds more attractive than most major domestic bonds?

Accepted Answer

A)   Presence of a regulatory interference
B)   Strong disclosure requirements
C)   Favorable tax status
D)   Protection from exchange risks

Question 5

Explain the changes observed in the risk of investments when an investor increases the number of stocks in her portfolio.

Accepted Answer

The answer of Explain the changes observed in the risk...

Question 6

Banks charge borrowers a lower interest rate on Eurocurrency borrowings than for borrowings in the home currency.

Accepted Answer

A) True 
 B)False

Question 7

What is a Eurocurrency?

Accepted Answer

The answer of What is a Eurocurrency?...

Question 8

The element of risk into investing in foreign assets is more with _____ exchange rates.

Accepted Answer

A)   floating
B)   pegged
C)   fixed
D)   managed

Question 9

Market makers are _____.

Accepted Answer

A)   financial service companies that connect investors and borrowers
B)   nonbank financial institutions who want to invest money
C)   high net worth individuals with surplus cash to reinvest
D)   those who want to borrow money including individuals, companies, and governments

Question 10

Which of the following statements is true of the use of information technology in financial services?

Accepted Answer

A)   Information technology prevents the spread of financial crises.
B)   Financial services is an information-intensive industry.
C)   Financial services do not use decisions making systems.
D)   It does not require to process large volumes of information.

Question 11

When using the Euromarkets,companies _____.

Accepted Answer

A)   have funds that lack liquidity
B)   pay less for the loans
C)   attract low interest rates
D)   are secured from foreign exchange risks

Question 12

_____ separated national equity markets from each other historically.

Accepted Answer

A)   Substantial regulatory barriers
B)   Fixed exchange rates
C)   Financial similarities
D)   Desire for high levels of profit

Question 13

An important drawback of a purely domestic capital market is that the _____.

Accepted Answer

A)   investments does not receive protection from governments
B)   investments are riskier than in global capital markets
C)   market lacks a strong regulatory mechanism
D)   cost of capital tends to be higher than it is in a global market

Question 14

Banks offer higher interest rates on Eurocurrency deposits than on deposits made in the home currency because Eurocurrency deposits _____.

Accepted Answer

A)   are funded by the European union
B)   lack government regulations
C)   are associated with low risk
D)   have minimum foreign exchange risk

Question 15

Governments give banks less freedom when they deal in foreign currencies.

Accepted Answer

A) True 
 B)False

Question 16

_____ are international bonds,normally underwritten by an international syndicate of banks and placed in countries other than the one in whose currency the bond is denominated.

Accepted Answer

A)   Micro bonds
B)   Foreign bonds
C)   Eurobonds
D)   Regulatory bonds

Question 17

Eurobonds are usually offered to residents of the country in whose currency they are denominated.

Accepted Answer

A) True 
 B)False

Question 18

The main factor that makes the Eurocurrency market attractive to both depositors and borrowers is that it _____.

Accepted Answer

A)   is separated from the foreign exchange market
B)   lacks government regulation
C)   is associated with low-risk
D)   gives high levels of investor protection

Question 19

A Eurocurrency is the currency used by the countries of the European Union.

Accepted Answer

A) True 
 B)False

Question 20

Commercial banks perform a direct connection function in capital markets.

Accepted Answer

A) True 
 B)False

Exam 12: The Global Capital Market

Which of the following is an advantage that banks have when they deal with foreign currencies?

The relatively low correlation between the movements of stock markets in different countries indicates that countries face different economic conditions.

Explain how equity loans and debt loans differ in terms of attractiveness to businesses.

Which of the following is a factor that makes Eurobonds more attractive than most major domestic bonds?

Explain the changes observed in the risk of investments when an investor increases the number of stocks in her portfolio.

Banks charge borrowers a lower interest rate on Eurocurrency borrowings than for borrowings in the home currency.

What is a Eurocurrency?

The element of risk into investing in foreign assets is more with _____ exchange rates.

Market makers are _____.

Which of the following statements is true of the use of information technology in financial services?

When using the Euromarkets,companies _____.

_____ separated national equity markets from each other historically.

An important drawback of a purely domestic capital market is that the _____.

Banks offer higher interest rates on Eurocurrency deposits than on deposits made in the home currency because Eurocurrency deposits _____.

Governments give banks less freedom when they deal in foreign currencies.

_____ are international bonds,normally underwritten by an international syndicate of banks and placed in countries other than the one in whose currency the bond is denominated.

Eurobonds are usually offered to residents of the country in whose currency they are denominated.

The main factor that makes the Eurocurrency market attractive to both depositors and borrowers is that it _____.

A Eurocurrency is the currency used by the countries of the European Union.

Commercial banks perform a direct connection function in capital markets.