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International Business, 12e (Hill)
1) A capital market brings together those who want to invest money and those who want to borrow
money.
2) Debt loans include cash loans from banks and funds raised from the sale of corporate bonds to
investors.
3) The cost of capital is the difference between cost of inputs and outputs.
4) By using the global capital market, investors have a much wider range of investment
opportunities than in a purely domestic capital market.
5) Investors can reduce the level of risk by diversifying a portfolio internationally.
6) The relatively low correlation between the movements of stock markets in different countries
indicates that countries face different economic conditions.
7) Using floating exchange rates will help countries reduce the risk of investing in foreign assets.
8) Financial services is an information-intensive industry.
9) The cost of recording, transmitting, and processing information has doubled with advancements
in technology since 1964.
10) Financial services has historically been the most tightly regulated of all industries.
11) The Eurocurrency market has been one cause of a decrease in global financial regulations.
12) The globalization of capital has been universally seen as a positive development.
13) Economist Martin Feldstein has coined the term "hot money" to pertain to long-term capital
flows.
14) The global capital market often lacks information about the fundamental quality of foreign
investments.
15) If the international capital market continues to grow, financial intermediaries likely will
provide less quality information about foreign investment opportunities.
16) Eurocurrency can be created anywhere in the world.
17) Banks charge borrowers a lower interest rate on Eurocurrency borrowings than for borrowings
in the home currency.
18) The spread between the Eurocurrency deposit rate and the Eurocurrency lending rate is more
than the spread between the domestic deposit and lending rates.
19) Governments give banks less freedom when they deal in foreign currencies.
20) Depositors are not protected against bank failures in the Eurocurrency market.
21) Foreign bonds are sold within the borrower's country and are denominated in the currency of
the country in which they are issued.
22) Eurobonds are usually offered to residents of the country in whose currency they are
denominated.
23) Government limitations are more severe for securities denominated in foreign currencies than
for domestic securities.
24) Eurobonds fall within the regulatory domain of the European Economic Community.
25) Historically, regulatory barriers have made national equity markets work together.
26) A Chinese firm borrows 1 million U.S. dollars from an American bank. The cost of this loan
will be less if the U.S. dollar appreciates against the Chinese currency.
27) The forward exchange market does not provide adequate coverage for long-term borrowings.
28) Market makers are the financial service companies that connect investors and borrowers.
Those who want to borrow money typically include
A) governments.
B) corporations with surplus cash.
C) pension funds.
D) insurance companies.
