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49) In ________, the limited pool of investors implies that borrowers must pay more to persuade
investors to lend them their money.
A) a purely domestic market
B) a mixed market
C) an international market
D) a purely Euro market
50) Investors are able to reduce risks by diversifying an investment portfolio internationally, and
the risk reduction effects would be greater if not for
A) volatile exchange rates associated with the current floating exchange risk regime.
B) the different kinds of tax regimes in different countries.
C) the inaccessibility of foreign stock exchanges to most investors.
D) the poor quality of many stocks in international start-up firms.
51) A ________ market benefits investors by providing a wider range of investment opportunities,
thereby allowing them to build portfolios of international investments that diversify their risks.
A) foreign exchange
B) global capital
C) domestic exchange
D) domestic capital
52) Which of the following statements is true of the use of information technology in financial
services?
A) Information technology prevents the spread of financial crises.
B) Financial services are an information-intensive industry.
C) Financial services do not use decision-making systems.
D) It does not require the processing of large volumes of information.
53) What is a disadvantage of the integration of the international capital market facilitated by
technology?
A) Segregated international capital markets will emerge as a result of technology.
B) Complexity in processing large volumes of data will increase.
C) Shocks that occur in one financial center will spread globally.
D) Systems integration hinders real-time data transfer across different countries.
54) Hedge funds position themselves to make ________ bets on assets that they think will
________.
A) long; weather a volatile market
B) long; increase in value
C) short; weather a volatile market
D) short; increase in value
55) Which of the following statements is true of the deregulation of the financial industry?
A) Countries can strengthen the global capital market by encouraging strict regulations.
B) Financial services have historically been the most deregulated of all industries.
C) Deregulation helped the development of an international capital market.
D) Deregulation compels financial services companies to remain as domestic companies.
56) Hedge funds
A) are public investment funds that invest in corporate bonds and shares.
B) make long bets rather than short bets.
C) are investment funds managed by the government.
D) make short bets on assets that they think will decline in value.
57) Analysts who believe globalization of capital has serious risks argue that
A) capital does not shift in and out of countries as quickly as conditions change.
B) individual nations are becoming more vulnerable to speculative capital flows.
C) deregulation of trade is helpful for the economic growth in a country.
D) most of the capital that moves internationally is pursuing long-term gains.
58) What is a disadvantage of the global capital market?
A) Foreign investments may be driven by speculative flows in the market.
B) A truly global market reduces the liquidity of investments.
C) The availability of capital is low in a global capital market.
D) The cost of capital is more in a global market than a domestic market.
59) According to some analysts, deregulation and reduced controls on cross-border capital flows
are
A) having a stabilizing effect on national economies.
B) making individual nations more vulnerable to speculative capital flows.
C) making investors nervous and causing them to pull their money out of foreign nations.
D) allowing undeveloped nations to enter the global market.
60) Harvard economist Martin Feldstein argues that the lack of patient money is due to
A) the flood of information, due to the Internet, that investors receive about current events in other
countries.
B) money owners and managers preferring to keep their money "home."
C) the relative scarcity of information that investors have about foreign investments.
D) money owners and managers preferring to place their money in foreign investments.
61) A Eurocurrency is any currency
A) banked outside of its country of origin.
B) that is traded in European countries.
C) that originates in European countries.
D) used to buy gold and related commodities.
62) A Eurocurrency is
A) the currency used by the countries of the European Union.
B) the currency formerly used in many European countries before the formation of the European
Union and the institution of the euro.
C) any currency banked outside of its country of origin.
D) any currency banked within a European country.
63) The Eurocurrency market is attractive to both depositors and borrowers because
A) it allows fair trade within the European Union.
B) it has strong government regulations and safeguards.
C) of its commitment to economic growth in underdeveloped nations.
D) of its lack of government regulation.
64) ________ is characterized by a lack of government regulation.
A) The Eurocurrency market
B) A money market fund
C) The New Your Stock Exchange
D) A hedge fund
65) ________ deposits are regulated in all industrialized countries.
A) U.S. currency
B) Domestic currency
C) Foreign currency
D) Eurocurrency
66) Companies receive ________ when using the Eurocurrency market.
A) a lower interest rate on deposits and pay more for loans
B) tax incentives
C) a higher interest rate on deposits and pay less for loans
D) liquid asset reserve waiver
67) Investors who purchase a fixed-rate bond receive
A) incremental payouts until the bonded money runs out.
B) cash payoffs only at maturity.
C) a full cash payoff on demand.
D) a fixed set of cash payoffs.
