Deck 18: International Banking, debt and Risk

Question 1

Eurobanks can offer a ________ rate on dollar loans and a ________ rate on dollar deposits than their domestic U.S.competitors.

A)higher, lower
B)lower, higher
C)lower, lower
D)higher, higher

Answer 1

B

Question 2

The key interest rate in the Eurocurrency market is the

A)London interbank offer rate.
B)Eurobank spread rate.
C)Prime rate.
D)C.D. rate.

Answer 2

A

Question 3

________ refers to the overall political and financial situation of a country,and the extent to which these conditions may affect the ability of a country to repay its debts.

A)Debt-rescheduling
B)IMF conditionality
C)Country risk
D)International debt

Answer 3

C

Question 4

To measure the amount of credit actually extended through the Eurobanks,we use

A)the net size of the market.
B)the gross size of the market.
C)total deposits minus interbank activities
D)Both A and C.

Question 5

The difference between a Euroloan interest rate and Eurodeposit interest rate is called

A)net interest rate.
B)the forward premium.
C)net profit rate.
D)the spread.

Question 6

Eurodollar deposits arising from OPEC trade surpluses are called

A)OECD-dollars.
B)OPEC-dollars.
C)petrodollars.
D)None of the above.

Question 7

Regarding IBFs,which of the following is correct?

A)not subject to reserve requirements
B)not subject to interest rate regulations
C)were created to permit U.S. banking offices to compete with offshore banks without having to use an offshore banking office
D)All of the above.

Question 8

The growth of the Eurodollar market is due to the ________ spreads offered by ________.

A)narrower, Eurobanks
B)narrower, governments
C)narrower, domestic banks
D)Both A and B

Question 9

________ is(are)department(s)of U.S.banks that are permitted to engage in Eurocurrency banking.

A)Eurobanks
B)The Paris Club
C)International Banking Facilities
D)Both A and C

Question 10

Which of the following is not a Eurocurrency claim?

A)A U.S.-dollar deposit by a London firm in a Cleveland bank
B)A sterling deposit by a London firm in a New York bank
C)A U.S.-dollar deposit by a London firm in a London bank
D)A Yen deposit by a New York firm in a London bank

Question 11

Country risk analysis involves a consideration of

A)forecasting future exchange rates.
B)future export growth.
C)the strength of political dissent.
D)Both B and C.

Question 12

An exchange of developing country debt for an ownership position in a developing country business is called

A)IMF conditionality.
B)indirect investment.
C)debt-equity swap.
D)debt-rescheduling.

Question 13

Which of the following is not a factor which would be relevant to country risk analysis?

A)political uncertainty
B)external debt
C)economic growth
D)none of the above.

Question 14

Voting power in the IMF is determined by a country's

A)political power.
B)quota.
C)size.
D)All of the above.

Question 15

The bulk of Eurocurrency Market transactions are denominated in

A)Eurodollars.
B)Eurosterling.
C)Euroeuros.
D)Euroyen.

Question 16

The international bank deposit and loan market is called the

A)International Banking Facilities.
B)Eurocurrency market.
C)Foreign exchange market.
D)IMF loans and deposits.

Question 17

Which of the following statements is true?

A)Eurobanks are able to create money.
B)Eurobanks accept deposits but not loans.
C)Eurobanks are essentially intermediaries.
D)Both A and C.

Question 18

Which of the following are true statements about IBFs?

A)IBFs are subject to reserve requirements.
B)IBFs are allowed to receive deposits from, and make loans to, nonresidents of the U.S. or other IBFs.
C)IBFs are subject to interest rate regulations.
D)All of the above.

Question 19

Which of the following is a Eurodollar claim?

A)A U.S.-dollar deposit by a London firm in a Kansas City bank
B)A Swiss-franc deposit by a German firm in a Swiss bank
C)A U.S.-dollar deposit by a New York firm in a London bank
D)A Canadian-dollar deposit by a London firm in a Toronto bank

Question 20

________ refers to the irregular meetings of creditor governments with debtor nations desiring rescheduling of debts.

A)The Paris Club
B)IMF "conditionality"
C)IBF
D)LIBOR

Question 21

The Eurocurrency market grew due to a lack of regulation,which permits greater efficiency in providing banking services.

Question 22

Eurobank spreads exceed U.S.spreads.

Question 23

Eurocurrency activities take place only in Europe.

Question 24

Which of the following is a factor that is relevant to country risk analysis?

A)political uncertainty
B)external debt
C)economic growth
D)all of the above.

Question 25

Which of the following financial institutions went bankrupt as a result of the financial crisis that began in 2008?

A)Lehman Brothers
B)Bank of America
C)Citigroup
D)JP Morgan

Question 26

The Paris Club refers to the irregular meetings of creditor governments with debtor nations.

Question 27

What does LIBOR stand for?

A)London Interbank Offer Rate
B)Least Integral Borrowing Order Rate
C)Local Interest Bank Ongoing Rate
D)Liberalized Interoffer Borrowing Rate

Question 28

Eurobanks are essentially intermediaries.

Question 29

Government corruption reduces economic growth around the globe,most commonly through widespread cash payments or gifts to receive a government service.

Question 30

What are Eurobanks and how are they different from domestic banks?

Question 31

Country risk analysis involves a consideration of only economic factors.

Question 32

The IMF lends at low interest rates and without preconditions.

Question 33

The United States is the top-ranked country with respect to country creditworthiness.

Question 34

International Banking Facilities (or IBFs)were established in 1981.

Question 35

Eurobank spreads are less than U.S.spreads.

Question 36

Which of the following countries received a loan from the IMF in November 2008?

A)Japan
B)China
C)Hungary
D)Mexico

Question 37

Eurodollars are mainly traded in Europe.

Question 38

The IMF granted in November of 2008 a $15 billion dollar loan to Hungary,which was at the time undergoing financial stress as a result of the global crisis.

Question 39

Eurobank activities cannot have any influence on domestic monetary practice since Eurodollars do not provide a means of payment.

Question 40

In recent years,"country risk analysis" has become an important part of international business. What do we mean by "country risk"? Briefly explain the factors that are involved in a country risk analysis.

Question 41

What is Islamic Banking?

Question 42

What is the role of the IMF for debtor nations experiencing repayment problems? The IMF has been criticized for imposing conditions that restrict economic growth and lower living standards in borrowing countries. Do you support this view? Why or why not? Briefly explain.

Question 43

Briefly discuss the following:
(a)Debt-equity swaps
(b)IMF "conditionality"
(c)LIBOR
(d)Petrodollars

Question 44

What are the reasons for the development and growth of the Eurodollar market?