Question 1

The United States sells bonds that are denominated in dollars in Europe. This is an example of a

Accepted Answer

A)   foreign bond.
B)   Eurobond.
C)   micro bond.
D)   regulatory bond.E) All of the above
F) B) and C)

Question 2

By using the global capital market, investors have a much wider range of investment opportunities than in a purely domestic capital market.

Accepted Answer

A) True 
 B)False

Question 3

A ________ brings together those who want to invest money and those who want to borrow money.

Accepted Answer

A)   consumer market
B)   value chain
C)   supply chain
D)   capital marketE) All of the above
F) A) and B)

Question 4

Approximately two-thirds of all Eurocurrencies are

Accepted Answer

A)   Euro-yen.
B)   Euro-pound.
C)   Euro-euro.
D)   Euro-dollars.E) A) and B)
F) B) and C)

Question 5

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

Accepted Answer

Capital market loans to corporations are...

Question 6

According to some analysts, deregulation and reduced controls on cross-border capital flows are

Accepted Answer

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.E) All of the above
F) None of the above

Question 7

What makes Eurobonds more attractive than most major domestic bonds?

Accepted Answer

A)   presence of regulatory interference
B)   strong disclosure requirements
C)   favorable tax status
D)   protection from exchange risksE) A) and B)
F) All of the above

Question 8

The global capital market often lacks information about the fundamental quality of foreign investments.

Accepted Answer

A) True 
 B)False

Question 9

What are the drawbacks of the Eurocurrency market?

Accepted Answer

The Eurocurrency market has two drawback...

Question 10

The forward exchange market does not provide adequate coverage for long-term borrowings.

Accepted Answer

A) True 
 B)False

Question 11

Economist Martin Feldstein has coined the term "hot money" to pertain to long-term capital flows.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a drawback of the Eurocurrency market?

Accepted Answer

A)   Borrowing funds within its home country can expose a company to foreign exchange risk.
B)   There is a greater probability of a bank failure that would cause depositors to lose their money.
C)   The system is overregulated and, therefore, more costly.
D)   The higher interest rate received on home-country deposits reflects the costs of insuring against bank failure.E) A) and D)
F) A) and B)

Question 13

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.E) None of the above
F) All of the above

Question 14

Harvard economist Martin Feldstein argues that the lack of patient money is due to

Accepted Answer

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.E) A) and B)
F) B) and D)

Question 15

The cost of capital is the

Accepted Answer

A)   interest received on investments made by the company.
B)   price of borrowing money.
C)   difference between cost of inputs and outputs.
D)   total value of raw materials that a company uses.E) B) and C)
F) None of the above

Question 16

A purely domestic capital market faces the problem of

Accepted Answer

A)   foreign exchange risk.
B)   limited liquidity.
C)   lack of regulation.
D)   deregulated markets.E) A) and B)
F) A) and C)

Question 17

Discuss the impact of technology on the growth of the global capital market.

Accepted Answer

Financial services is an information-int...

Question 18

Investors who purchase a fixed-rate bond receive

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 19

What is a capital market? Define market makers.

Accepted Answer

A capital market brings together those w...

Question 20

________ perform a direct connection function in capital markets.

Accepted Answer

A)   Insurance brokers
B)   Investment banks
C)   Pension fund managers
D)   Commercial banksE) B) and C)
F) None of the above

Exam 12: The Global Capital Market

What are the drawbacks of the Eurocurrency market?

Correct AnswerverifiedThe Eurocurrency market has two drawback...View AnswerShow Answer

A purely domestic capital market faces the problem of

Correct AnswerverifiedShow Answer

A ________ brings together those who want to invest money and those who want to borrow money.

Correct AnswerverifiedShow Answer

By using the global capital market, investors have a much wider range of investment opportunities than in a purely domestic capital market.

Correct AnswerverifiedShow Answer

Harvard economist Martin Feldstein argues that the lack of patient money is due to

Correct AnswerverifiedShow Answer

According to some analysts, deregulation and reduced controls on cross-border capital flows are

Correct AnswerverifiedShow Answer

Investors who purchase a fixed-rate bond receive

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedCapital market loans to corporations are...View AnswerShow Answer

Approximately two-thirds of all Eurocurrencies are

Correct AnswerverifiedShow Answer

Which of the following is a drawback of the Eurocurrency market?

Correct AnswerverifiedShow Answer

Discuss the impact of technology on the growth of the global capital market.

Correct AnswerverifiedFinancial services is an information-int...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The global capital market often lacks information about the fundamental quality of foreign investments.

Correct AnswerverifiedShow Answer

What is a capital market? Define market makers.

Correct AnswerverifiedA capital market brings together those w...View AnswerShow Answer

The cost of capital is the

Correct AnswerverifiedShow Answer

What makes Eurobonds more attractive than most major domestic bonds?

Correct AnswerverifiedShow Answer

The United States sells bonds that are denominated in dollars in Europe. This is an example of a

Correct AnswerverifiedShow Answer

The forward exchange market does not provide adequate coverage for long-term borrowings.

Correct AnswerverifiedShow Answer

Economist Martin Feldstein has coined the term "hot money" to pertain to long-term capital flows.

Correct AnswerverifiedShow Answer

________ perform a direct connection function in capital markets.

Correct AnswerverifiedShow Answer

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The Eurocurrency market has two drawback...
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Capital market loans to corporations are...
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Financial services is an information-int...
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A capital market brings together those w...
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