Deck 7: Financial Markets

Question 1

Which city has played a central role in global finance for more than a century?

A)New York
B)Hong Kong
C)London
D)Seoul
E)Stockholm

Answer 1

C

Question 2

The two cities that have grown in prominence as central players in global finance more than any other city in recent years are:

A)Toronto and Mexico City
B)Madrid and Tokyo
C)New York and London
D)Hong Kong and Singapore
E)Bangkok and Seoul

Answer 2

D

Question 3

Established during the Bretton Woods agreement,fixed exchange rates were also known as:

A)Forward rates
B)Cross rates
C)Spot rates
D)An adjustable peg
E)A floating peg

Answer 3

D

Question 4

Because the global financial market is made up of hundreds of different financial institutions rather than a central location,it can best be described as what kind of market?

A)Informal
B)Impersonal
C)Distant
D)National
E)Traditional

Question 5

_______ rates are exchange quotations that do not include the U.S.dollar as one of the two currencies quoted.

A)Spot
B)Forward
C)Cross
D)Market
E)Expedited

Question 6

One way to characterize the global financial marketplace is through its assets,its institutions,and its:

A)Liabilities
B)Linkages
C)People
D)Culture
E)Currency

Question 7

Between 1880 and 1915,the global monetary system relied on a system of fixed rates of exchange between participating countries. This was the era of the:

A)Bretton Woods agreement
B)Diamond standard
C)Gold standard
D)Interwar years
E)Floating exchange rate

Question 8

A(n)__________ is the price of one country's currency in terms of another country's currency.

A)foreign currency exchange rate
B)asset exchange rate
C)institutional exchange rate
D)money market rate
E)LIBOR rate

Question 9

_________ exchange refers to contracts that provide for two parties to exchange currencies on a future date at an agreed-upon exchange rate.

A)Spot
B)Forward
C)Cross
D)Market
E)Expedited

Question 10

Nancy recently invested in U.S.Treasury bonds to give to her young nieces and nephews. These bonds are examples of what component of global financial markets?

A)Liabilities
B)Linkages
C)Institutions
D)Assets
E)Currency

Question 11

The _________ has been the focal point of most currency trading since the 1940s.

A)Euro
B)Japanese yen
C)Chinese yuan
D)British pound
E)U)S.dollar

Question 12

Carol recalls that during the 1980s,a single currency dominated. More recently however,she recalls how that same currency performed sluggishly in the later half of the 1990s. The currency that fits this description is the:

A)Euro
B)British pound
C)American dollar
D)Chinese yuan
E)Japanese yen

Question 13

What shook up the financial world during the Nixon administration in 1971?

A)The U.S.resorted back to the gold standard
B)The U.S.fixed the dollar to the Japanese yen
C)The U.S.abandoned fixed exchange rates
D)The IMF was disbanded
E)The World Bank was disbanded

Question 14

The Bretton Woods agreement resulted in the establishment of what two organizations?

A)World Bank and International Monetary Fund
B)European Union and World Bank
C)International Monetary Fund and World Trade Organization
D)European Union and World Trade Organization
E)International Monetary Fund and European Union

Question 15

During the economic depression of the 1930s,world trade:

A)Grew slowly,thanks to the stability of the gold standard
B)Slowed,as many countries resorted to isolationist policies
C)Became nonexistent
D)Was not affected
E)Grew rapidly,thanks to massive government bailouts

Question 16

While on vacation in Madrid,Sam enters a Spanish bank to exchange his U.S.dollars for Euros. The exchange is finalized in a matter of moments. This activity is an example of:

A)Spot rate
B)Forward rate
C)Cross rate
D)Counter market exchange
E)Expedited exchange

Question 17

Which currency is experiencing dramatic growth in the post-2000 global business landscape?

A)Japanese yen
B)Chinese yuan
C)British pound
D)Swiss franc
E)U)S.dollar

Question 18

The Bretton Woods agreement of 1944 got its name from:

A)The Director of the U.S.Treasury
B)Britain's economic leader
C)An acronym of the seven countries represented
D)It's proximity to Great Britain
E)The city in which the conference was held

Question 19

The market for _______ is the largest financial market in the world

A)credit default swaps
B)securities
C)government bonds
D)derivatives
E)foreign exchange

Question 20

In 1999,which three currencies dominated,with 70 percent of all global currency trading?

A)U)S.dollar,euro,Japanese yen
B)Euro,Japanese yen,Chinese yuan
C)U)S.dollar,euro,British pound
D)Euro,British pound,Swiss franc
E)U)S.dollar,Indian rupee,Japanese yen

Question 21

__________ is a bank deposit in a currency other than the currency of the country where the bank is located.

A)Greenback-currency
B)Peso-dollar
C)Peso-currency
D)Eurodollar
E)Eurocurrency

Question 22

The ________ eliminated the barriers between commercial and investment banks.

A)Alt-A lending rule
B)Warsaw pact
C)Glass-Steagall act
D)LIBOR policy
E)Monroe doctrine

Question 23

A(n)________ is the sale of debt or equity to a large investor,which is normally a one-time transaction in which the buyer intends to hold it until maturity or until it is repurchased by the firm.

A)private placement
B)eurobond
C)eurodollar
D)secured bond
E)derivative

Question 24

________ intervention is buying or selling a government's own currency to alter the current value of that currency.

A)Fixed
B)Divine
C)Coordinated
D)Financial
E)Direct

Question 25

_________ is the theory that the price of internationally traded commodities should be the same in every country,and hence the exchange rate between the two currencies should be the ratio of prices in the two countries.

A)Theory of International Finance
B)Purchasing Power Parity
C)Law of One Price
D)Big Mac Index
E)Whopper Theory

Question 26

The seeds of the 2007-2009 global financial crisis sprouted in what sector?

A)Real estate
B)Oil
C)Retail
D)Agriculture
E)High technology

Question 27

A(n)___________ bank is an unrelated bank (by ownership)that is based in a foreign country.

A)wholly owned
B)affiliate office
C)branch
D)representative office
E)correspondent

Question 28

The most common type of financial transaction involves:

A)Domestic borrowers and domestic currency
B)Foreign borrowers and domestic currency
C)Domestic borrowers and foreign currency
D)Foreign borrowers and foreign currency
E)Foreign borrowers and a combination of domestic and foreign currency

Question 29

For Andrew,a Greek citizen,one of the benefits of joining the European Union and adopting the euro is:

A)Greater changes in currency rates
B)Reduced exchange rate uncertainty
C)Deflation in currency
D)Decreased price-based competition
E)Less migration between EU countries

Question 30

_________ is the theory that the relative prices of any single good between countries,expressed in each country's currency,is representative of the proper or appropriate exchange rate value.

A)Theory of International Finance
B)Purchasing Power Parity
C)Law of One Price
D)Big Mac Index
E)Whopper Theory

Question 31

The interest rate that is used most frequently in international loan agreements today is:

A)Annual percentage rate
B)Fixed rate
C)Silver rate
D)Gold rate
E)LIBOR

Question 32

Sigmond Sigmund is an American business manager who is interested in raising capital in Mexican peso denominations to get the start-up money needed to build a factory in Mexico City. In Mexico,this can be categorized as what type of financial transaction?

A)Domestic borrower and domestic currency
B)Foreign borrower and domestic currency
C)Domestic borrower and foreign currency
D)Foreign borrower and foreign currency
E)Foreign borrower and a combination of domestic and foreign currency

Question 33

A(n)________ is owned by whoever is holding it,with no master registration list being held by government authorities who then track the interest income.

A)secured bond
B)eurobond
C)bearer bond
D)derivative
E)coupon bond

Question 34

The source of capital most commonly used by businesses of all types is:

A)Credits
B)Debt
C)Bonds
D)Equity
E)Derivatives

Question 35

Salina is holding a large quantity of U.S.dollars on account in a bank in Singapore. The correct term for these U.S.dollars is:

A)Greenback-dollar
B)Asian currency
C)Peso-currency
D)Eurodollar
E)Eurocurrency

Question 36

A bank that is stationed overseas and serves as a sales office for another bank can best be described as what?

A)Wholly owned
B)Affiliate office
C)Branch
D)Representative office
E)Correspondent

Question 37

In 1999,11 countries banded together to form a new single currency,the:

A)Euro
B)Rupee
C)Yuan
D)Renminbi
E)Gold bullion

Question 38

What is the primary purpose of exchange rates?

A)To promote globalization
B)To protect the home economy
C)To barter
D)To trade
E)To visit new locales

Question 39

Representatives of large nations recently met to determine how much each country should buy or sell in other countries' currencies in order to raise the value of the Chinese yuan. This hypothetical meeting is an example of:

A)Fixed intervention
B)Divine intervention
C)Coordinated intervention
D)Financial intervention
E)Direct intervention

Question 40

Capital to fund business comes in two varieties:

A)Debt and assets
B)Assets and equity
C)Equity and derivatives
D)Debt and equity
E)Derivatives and credits

Question 41

Leading up to World War I,the U.S.dollar was the dominant currency.

Question 42

The 2007-2009 global financial crisis originated in the petroleum industry.

Question 43

The 1980s and 1990s saw the growth of the Japanese yen as a pillar of size and strength.

Question 44

For the most part,adoption of the euro has led to a more destabilized Europe,particularly for the countries that have adopted the single currency.

Question 45

Although debt markets have been the center of activity in the international financial markets over the past three decades,there are signs that international equity capital is becoming more popular.

Question 46

Coordinated intervention is a currency value management method whereby the central banks of the major nations simultaneously intervene in the currency markets in hopes of changing a currency's value.

Question 47

The __________ is designed to shift the risk of default to a third party.

A)collateralized debt obligation
B)bond
C)security
D)derivative
E)credit default swap

Question 48

The primary purpose of exchange rates is to facilitate trade among countries.

Question 49

A correspondent bank is one that operates as a sales office for another bank.

Question 50

According to mortgage loan categories in the U.S.,which of the following is considered the most risky category?

A)Prime
B)C+
C)Alt-A
D)Subprime
E)Flipping

Question 51

_________ refers to supporting the home-country financial and nonfinancial firms first,and all others second.

A)Financial mercantilism
B)Protectionism
C)Privatization
D)Economic justification
E)Nationalism

Question 52

Since the 1940s,the British pound has been the focal point of most currency trading.

Question 53

The purchasing power parity theory states that the relative prices of any single good between countries,expressed in each country's currency,is representative of the proper or appropriate exchange rate value.

Question 54

The Bretton Woods agreement of 1944 led to the establishment of a bank that would provide funding for long-term development projects - the International Monetary Fund.

Question 55

Not confined to banks in Europe,eurodollars are U.S.dollars deposited in banks outside the United States.

Question 56

Spot rates are contracts that provide for two parties to exchange currencies on a future date at an agreed upon exchange rate.

Question 57

The global financial marketplace can be characterized by its assets,institutions,and linkages.

Question 58

_______ is the process of turning an illiquid asset into a liquid saleable asset.

A)Privatization
B)Securitization
C)Condemnation
D)Collateralization
E)Defaulting

Question 59

Carlos is writing a report on the 2007-2009 financial crisis,where he must outline at least one method that may help resolve the crisis. Which of the following would be most likely to be included in his report?

A)Government deregulation in the finance sector
B)Packaging related real estate assets into secured assets
C)Relaxing credit quality standards of consumers
D)Increasing use of derivatives
E)Restricting capital mobility

Question 60

In the months following President Nixon's announcement of departure from the gold standard in 1971,the international monetary system was in chaos.

Question 61

__________ is the process of turning an illiquid asset into a liquid saleable asset.

Question 62

A(n)________ bank is an unrelated bank (by ownership)based in a foreign country.

Question 63

The 2007-2009 global financial crisis also resulted in a credit crisis in which lending of all kinds slowed dramatically.

Question 64

According to the __________,the relative prices of any single good between countries expressed in each country's currency is representative of the proper or appropriate exchange rate value.

Question 65

A(n)________ is a bond owned officially by whoever is holding it.

Question 66

__________ is the theory that the price of internationally traded commodities should be the same in every country.

Question 67

To avoid another global financial crisis,many countries and regulatory agencies are considering expansions on capital mobility.

Question 68

Describe the global financial marketplace in terms of its three categories. How do they relate to the health and stability of the global financial market?

Question 69

Describe the launch of the euro and the outcomes after a decade.

Question 70

A loan that is rated as Alt-A is considered the least risky based on credit quality.

Question 71

The ___________ is a standard for international currencies in which currency values were stated in terms of gold.

Question 72

__________ intervention is the process governments use to alter the current value of their currency by buying or selling their own currency in the market using reserves of other major currencies.

Question 73

As a result of the 2007-2009 financial crisis,derivatives are no longer in use in the global financial marketplace.

Question 74

_________ is the government policy to protect and promote the home-country financial and non-financial companies first.

Question 75

Describe the purpose and outcome of the Bretton Woods agreement of 1944.

Question 76

The __________ agreement involved a meeting between government representatives from 44 of the Allied Powers to plan for the postwar international monetary system.

Question 77

________ rates are contracts that provide for two parties to exchange currencies with delivery in two business days.

Question 78

_________ is a bank deposit in a currency other than the currency of the country where the bank is located.

Question 79

The ________ is the price of any one country's currency in terms of another country's currency.

Question 80

A collateralized debt obligation (CDO)is a portfolio of debt instruments that is packaged as an asset-backed security.