Deck 12: International Equity Financing

Question 1

A private bourse is owned and operated by a ________ founded for the purpose of trading securities.

A) corporation
B) non-profit corporation
C) syndicate of traders
D) commercial bank

Answer 1

A

Question 2

When one corporation owns shares in another,the practice is known as ________.

A) cross-listing
B) cross-market
C) cross-holding
D) diversification

Answer 2

C

Question 3

________ is the total volume of trade done on an exchange measured in dollars during the year divided by the exchange's total market capitalization at the end of the year.

A) The bid-ask spread
B) Turnover
C) Liquidity
D) The credit spread

Answer 3

B

Question 4

What is the name of the important phenomenon that has led to globalization of exchanges around the world over the past two decades?

A) cross-holding
B) cross-market
C) securitization
D) cross-listing

Question 5

Which one of the following is one important characteristic of a private bourse?

A) Brokers are appointed by the government.
B) A single corporation acquires a monopoly over all stock market transactions.
C) It is owned and operated by a corporation founded for the purpose of trading securities.
D) Private exchanges, in many countries, do not usually compete with one another.

Question 6

Which one of the following is a false statement about Level I ADRs?

A) No new capital is being raised when firms list under this level.
B) These receipts trade over the counter in New York in pink sheet trading.
C) The OTC market is composed of a network of broker/dealers.
D) Transactions are completed in a centralized market place.

Question 7

What is the name given to the exchange where banks are the major,and sometimes only,security traders?

A) banker's bourses
B) banking syndicates
C) public bourses
D) private bourses

Question 8

Which one of the following is NOT a trading cost?

A) payment of brokerage commissions and other fees
B) The investor must buy from the trader at the trader's high sell price and must sell to the trader at the trader's low bid price.
C) When the market is not very liquid, and an investor's trade is a relatively large one, it can adversely affect the price the investor gets.
D) The price on the trade falls when the investor buys or rises when the investor sells.

Question 9

The ________ that attempted to separate commercial from investment banking practices by banks in the U.S.has been dismantled in recent years

A) U.S. Securities Exchange Commission
B) Maastricht Treaty
C) Shelf Registration Act
D) Glass-Steagall Act

Question 10

The stock markets of developing countries are often referred to as ________,and the young stock markets of the least developed countries are called ________.

A) external equity markets, frontier markets
B) emerging markets, frontier markets
C) external equity markets, emerging markets
D) emerging markets, undeveloped markets

Question 11

In the field of finance,the market where initial public offerings are made is known as the ________ market.

A) primary
B) secondary
C) money market
D) derivative

Question 12

All of the following are true about an American Depository Receipt EXCEPT:

A) the depositary bank converts all dividends and other payments into U.S. dollars.
B) there are no custodial fees.
C) shares are held in custody by a U.S. depository bank.
D) it represents a specific number of shares in the home market.

Question 13

Which of the following concepts refers to the process of converting exchanges from nonprofit,member-owned organizations to for-profit investor-owned and typically publicly traded companies?

A) demutualization
B) cross-listing
C) consolidation
D) alternative trading system

Question 14

What are the costs of cross-listing?

A) It exploits growth opportunities with additional foreign capital.
B) It reduces the cost of capital.
C) It increases the stock price.
D) It costs money paid in exchange fees and it may impose a high level of examination on the company's managers.

Question 15

With respect to stock market organization,what do the countries of Belgium,France,Spain,Italy and Greece have in common?

A) private bourse
B) public bourse
C) price-driven trading systems
D) order-driven trading systems

Question 16

When a firm issues shares in multiple foreign markets,sometimes simultaneously with distribution in the domestic market,the issue is part of the

A) external equity market.
B) Euro-equity market.
C) depositary receipt market.
D) emerging market.

Question 17

Which one of the following stock markets was almost 40% of the world's stock market capitalization at the end of 2005?

A) the United Kingdom
B) the United States
C) France
D) Japan

Question 18

The stock markets of the least developed countries are called ________ markets.

A) emerging
B) start-up
C) frontier
D) secondary

Question 19

________,unlike ADRs,can trade across many markets and settle in the currency of each market.

A) Global registered shares
B) Global depository receipts
C) Euro equities
D) Cross-listed stock

Question 20

________ trading systems,often found in foreign exchange markets,are good examples of markets in which market makers stand prepared to buy at their bid prices and sell at the ask or offer prices.

A) Order-driven
B) Price-driven
C) Cross-listed
D) Cross-holding

Question 21

Turnover is inversely related to the costs of trading stocks because

A) high trading costs cause investors to trade more.
B) low trading costs cause investors not to trade.
C) high trading costs cause investors to trade less.
D) low trading costs cause investors not to trade more.

Question 22

What is a price-driven trading system?

Question 23

As more global investors shift investment funds to emerging markets,what factors will drive expected returns?

Question 24

What are the most import characteristics of foreign securities that leads to diversification benefits?

Question 25

GDRs are like ADRs,but they can trade across many markets and

A) they are always associated with existing companies seeking to increase their shareholder base.
B) they are not associated with companies wanting to tap the equity market for the first time.
C) are primarily interested on raising additional capital.
D) settle in the currency of each market.

Question 26

In deciding where to invest your money,you read that Italy looks like it's well positioned to capitalize on the opening of Central Europe,especially since many of the countries joined Italy in the European Union.But the U.K.is experiencing weak growth high interest rates,and high inflation.Which of the two countries would be more attractive to invest in? Explain.

Question 27

What is the name of the effect related to market liquidity that occurs when a market lacks liquidity and an investor's trade is relatively large and results in an adverse effect on the price the investor gets?

A) turnover
B) blocked funds
C) demutualization
D) market impact

Question 28

What is distinguishes a public from a banker's bourse?

Question 29

How have global stock markets adjusted to competitive pressure from global investors?

Question 30

How are ADRs differentiated?

Question 31

Cross-listing of stocks and demutualization have led to the ________ of stock exchanges.

A) externalization
B) securitization
C) globalization
D) order-driven trading systems