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
A Eurocurrency is any currency banked outside of its country of origin.
Eurodollars, which account for about two-thirds of all Eurocurrencies, are
dollars banked outside of the United States.
62.
Eurodollars _____.
A.
refer to the exchange value of dollar with Euro
B.
are used to pay for imports from Europe
C.
are dollars banked outside of the United States
D.
refer to the exchange buffer that Euro has against dollar
Eurodollars are dollars banked outside of the United States. They account
for about two-thirds of all Eurocurrencies.
63.
Which of the following statements is true of Eurocurrency?
A.
Eurocurrency market is a relatively high-cost source of funds.
B.
It is produced and banked within European countries.
C.
Eurocurrency can be created anywhere in the world.
D.
It is used only for internal transactions within European Union.
A Eurocurrency is any currency banked outside of its country of origin.
Eurocurrency can be created anywhere in the world.
64.
The main factor that makes the Eurocurrency market attractive to both
depositors and borrowers is that it _____.
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
The main factor that makes the Eurocurrency market attractive to both
depositors and borrowers is its lack of government regulation. This allows
banks to offer higher interest rates on Eurocurrency deposits than on
deposits made in the home currency. The lack of regulation also allows
banks to charge borrowers a lower interest rate for Eurocurrency
borrowings than for borrowings in the home currency.
65.
Banks offer higher interest rates on Eurocurrency deposits than on deposits
made in the home currency because Eurocurrency deposits _____.
A.
are funded by the European union
B.
lack government regulations
C.
are associated with low risk
D.
have minimum foreign exchange risk
The Eurocurrency market lacks government regulation. This allows banks to
offer higher interest rates on Eurocurrency deposits than on deposits made
in the home currency, making Eurocurrency deposits attractive to those who
have cash to deposit.
66.
Which of the following is an advantage that banks have when they deal with
foreign currencies?
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.
Banks are given more freedom in their dealings in foreign currencies. For
example, the British government does not impose reserve requirement
restrictions on deposits of foreign currencies within its borders.
67.
When using the Euromarkets, companies _____.
A.
have funds that lack liquidity
B.
pay less for the loans
C.
attract low interest rates
D.
are secured from foreign exchange risks
There are strong financial motivations for companies to use the
Eurocurrency market. By doing so, they receive a higher interest rate on
deposits and pay less for loans.
68.
Which of the following is a drawback of the Eurocurrency market?
A.
Increased governmental controls
B.
High reserve ratio requirements
C.
Low interest rates on deposits
D.
Exposure to foreign exchange risk
Borrowing funds internationally can expose a company to foreign exchange
risk. This is a major drawback of the Eurocurrency market.
69.
Which of the following is true of fixed-rate bonds?
A.
Returns from fixed-rate bonds are dependent on the profitability of the
issuing company.
B.
Investors get back the face value of the bond at maturity of fixed-rate
bonds.
C.
Fixed-rate bonds issue cash payoffs only at maturity of fixed-rate bonds.
D.
Investors get a share of the company’s profit when using fixed-rate
bonds.
The most common kind of bond is a fixed-rate bond. The investor who
purchases a fixed-rate bond receives a fixed set of cash payoffs. Each year
until the bond matures, the investor gets an interest payment and then at
maturity he gets back the face value of the bond.
70.
_____ are sold outside of the borrower’s country and are denominated in the
currency of the country in which they are issued.
A.
Micro bonds
B.
Eurobonds
C.
Foreign bonds
D.
Regulatory bonds
Foreign bonds are sold outside of the borrower’s country and are
denominated in the currency of the country in which they are issued.
71.
Which of the following statements is true of foreign bonds?
A.
Such bonds must be underwritten by an international syndicate of banks.
B.
Foreign bonds are placed only in the originating country.
C.
Foreign bonds are issued by governments rather than corporations.
D.
Such bonds are denominated in the issuing country’s currency.
Foreign bonds are sold outside of the borrower’s country and are
denominated in the currency of the country in which they are issued.
72.
United States sells bonds that are denominated in dollars in Europe. This is
an example of a _____ bond.
A.
foreign
B.
Euro
C.
micro
D.
regulatory
Foreign bonds are sold outside of the borrower’s country and are
denominated in the currency of the country in which they are issued.
73.
_____ 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.
A.
Micro bonds
B.
Foreign bonds
C.
Eurobonds
D.
Regulatory bonds
Eurobonds are 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 routinely issued by multinational corporations,
large domestic corporations, sovereign governments, and international
institutions.
74.
Eurobonds are _____.
A.
denominated in the currency of the country in which they are issued
B.
normally underwritten by an international syndicate of banks
C.
denominated in a currency that is accepted by the European Union
D.
are sold outside the borrower’s county with reference to the originating
currency
Eurobonds are normally underwritten by an international syndicate of banks
and placed in countries other than the one in whose currency the bond is
denominated.
75.
An Italian corporation issues a bond denominated in dollars. This is an
example of a _____.
A.
foreign bond
B.
Eurobond
C.
micro bond
D.
regulatory bond
Eurobonds are 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 routinely issued by multinational corporations,
large domestic corporations, sovereign governments, and international
institutions.
76.
Which of the following is a factor that makes Eurobonds more attractive
than most major domestic bonds?
A.
Presence of a regulatory interference
B.
Strong disclosure requirements
C.
Favorable tax status
D.
Protection from exchange risks
A favorable tax status is one of the features of the Eurobond market that
make it an appealing alternative to most major domestic bond markets.
77.
_____ separated national equity markets from each other historically.
A.
Substantial regulatory barriers
B.
Fixed exchange rates
C.
Financial similarities
D.
Desire for high levels of profit
Historically substantial regulatory barriers separated national equity
markets from each other. Not only was it often difficult to take capital out of
a country and invest it elsewhere, but corporations also frequently lacked
the ability to list their shares on stock markets outside of their home
nations.
78.
When value of U.S. dollars goes down, _____.
A.
bonds that are denominated in dollar will produce more returns
B.
foreign depositors in the U.S will benefit
C.
foreign borrowers will garner benefits
D.
investors tend to favor bonds that are denominated in dollar
Movements in foreign exchange rates can substantially increase the cost of
foreign currency loans. In this case, the value of the loan goes down and the
borrowers have to pay less.
79.
ABB Bank is a financial corporation located in England and uses euro as its
official currency. The company borrows 1 million U.S. dollars from a bank
based in United States. ABB will be at a disadvantage if _____.
A.
Euro appreciates against all currencies
B.
U.S. dollar appreciates against Euro
C.
U.S. dollar depreciates against Euro
D.
fixed exchange rates are used for the transaction
Movements in foreign exchange rates can substantially increase the cost of
foreign currency loans. In this case, the cost of the loan will go up if U.S.
dollar appreciates against Euro. This will be disadvantageous to ABB Bank.
80.
_____ can inject risk into foreign currency borrowing.
A.
Movements in exchange rates
B.
Use of fixed-exchange rates
C.
Issue of domestic bonds
D.
Use of pegged exchange rates
Unpredictable movements in exchange rates can inject risk into foreign
currency borrowing, making something that initially seems less expensive
ultimately much more expensive.
Essay Questions