Question 1

The process of securitization reflects

Accepted Answer

Securitization involves the bundling of loans or assets into securities that can be sold to investors. This process has been facilitated by new technology that has lowered the costs of compiling, accessing, and manipulating data. Financial deregulation has also played a role by allowing banks to access public markets directly, which has led to increased competition and higher funding costs. Therefore, all of the options given (A, B, and C) contribute to the process of securitization.

Question 2

If the current 180?day inter-bank Eurodollar rate is 15% (all rates are stated on an annualized basis. and next period's LIBOR is 13%, then a Eurocurrency loan priced at LIBOR plus 1% will cost

Accepted Answer

The Eurocurrency loan is priced at LIBOR plus 1%, which means the interest rate for this period will be 13% + 1% = 14%. The current 180-day inter-bank Eurodollar rate of 15% is not used in this calculation. Therefore, the answer is 16% this period (14% + 2% markup) and 14% next period (13% + 1% markup).

Question 3

Why are privately placed bonds more difficult to sell than publicly issued bonds?

Accepted Answer

Privately placed bonds typically come with customized covenants, which can make them less attractive to investors who value standardization and uniformity. Additionally, the pool of potential buyers is limited to private investors, rather than the larger pool of potential buyers in the public market for publicly issued bonds. However, underwriting may or may not be required for privately placed bonds, and they can also be structured as traditional bonds rather than commercial bank loans.

Question 4

Suppose that the current 90?day London interbank offer rate is 11% (all rates are stated on an annualized basis..If next period's LIBOR is 10.5%, then a Eurodollar rate priced at LIBOR plus 1% will cost

Accepted Answer

The Eurodollar rate is calculated by adding the specified percentage (in this case, 1%) to the LIBOR rate. Therefore, for this period with a LIBOR of 11%, the Eurodollar rate would be 12% (11% + 1%). For the next period, with a LIBOR of 10.5%, the Eurodollar rate would be 11.5% (10.5% + 1%).

Question 5

As the cost of gathering information on foreign firms continues to come down, ___ should become an increasingly more cost? effective means of raising funds internationally.

Accepted Answer

International securitization involves pooling various types of financial assets and selling them as securities to investors, which can be more cost-effective as information costs decrease.

Question 6

The globalization of financial markets reflects

Accepted Answer

The globalization of financial markets is the result of financial deregulation, reductions in currency controls and other government restrictions on the free flow of capital internationally, as well as new technology that has lowered the cost of information. Therefore, option D, which includes all three options, is the best choice.

Question 7

The process of securitization reflects

Accepted Answer

Securitization involves the pooling of cash flows from a group of assets and issuing securities backed by those assets. This process has become more popular due to advances in technology, which have made it easier to compile and manipulate data. Additionally, financial deregulation has raised the cost of funds to banks, leading them to seek alternative sources of funding such as securitization. Lastly, securitization provides a way for issuers to access public markets directly, which can result in lower costs. Therefore, all of the options listed in the question contribute to the process of securitization.

Question 8

The globalization of financial markets reflects

Accepted Answer

The globalization of financial markets is the result of all three factors mentioned in the answer choices: financial deregulation, reductions in currency controls and other government restrictions on the free flow of capital internationally, and new technology which has lowered the cost of information. These factors have led to increased competition among markets and greater connectivity between them, facilitating the internationalization of finance.

Question 9

Which one of the following factors does NOT promote well-functioning financial markets?

Accepted Answer

High tariffs typically hinder trade and can create inefficiencies in financial markets by limiting access to foreign investment and goods. Therefore, high tariffs do not promote well-functioning financial markets. The other factors listed (secure property rights, easily enforceable contracts, and transparency in financial statements) are all essential for promoting well-functioning financial markets.

Question 10

Which one of the following new issues of stock has the greatest probability of lowering its cost of equity capital?

Accepted Answer

The answer of Which one of the following new issues...

Question 11

S. company has the following choices of financial markets in which to raise capital. Which one will it most often prefer?

Accepted Answer

The answer of S. company has the following choices of...

Question 12

Global growth in the financial markets is driven by each of the following EXCEPT:

Accepted Answer

Government capital controls restrict the flow of capital and can hinder growth in financial markets, while the other choices facilitate it.

Question 13

Which one of the following is the MOST obvious example of the globalization of financial markets?

Accepted Answer

The rise of the Euromarkets, where banks located in Europe began to accept deposits and make loans denominated in currencies other than their own, was a significant and obvious example of the globalization of financial markets. This development allowed for greater cross-border capital flows and helped to integrate financial markets around the world.

Question 14

Which one of the following securities in the foreign bond markets has the least amount of risk to the investor?

Accepted Answer

The answer of Which one of the following securities in...

Question 15

Suppose the French government imposes an interest rate ceiling on French bank deposits. What is the likely effect of this regulation?

Accepted Answer

By imposing an interest rate ceiling on French bank deposits, the supply of loanable funds would decrease as banks have less incentive to gather deposits due to the limited interest they can offer. Consequently, this would reduce the total supply of funds available in the market, which would push upwards the Eurofranc interest rates.

Question 16

One reason for the multicurrency clause in the euro markets is to avoid

Accepted Answer

The multicurrency clause in the euro markets is designed to avoid exchange rate risk, as it allows investors to conduct transactions in currencies other than the euro. This helps reduce their exposure to fluctuations in the value of the euro and other currencies. The clause also facilitates cross-border investment and trade, by making it easier for investors to move funds across different currencies and countries.  The other choices do not relate to the purpose of the multicurrency clause.

Question 17

Which one of the following banks is considered the most important in the development bank industry?

Accepted Answer

The World Bank is considered the most important development bank due to its larger scale of operations and influence in global development financing. It provides financial and technical assistance to developing countries and is owned by 189 member countries. The other listed banks also play important roles in regional development but do not have the same level of global impact as the World Bank.

Question 18

A multinational corporation attempting to secure an airport construction project involving billions of dollars in cost would be best advised to apply to the _________ for funding.

Accepted Answer

The World Bank is an international organization that provides loans and grants to countries for development projects. It has a focus on supporting infrastructure development, including airports. As the airport construction project involves billions of dollars in cost, a multinational corporation would require significant funding. World Bank funding would not only provide the necessary financial support but also add credibility to the project, making it more attractive to other investors. The other options (London banking market, New York bond market, and Tokyo foreign bond market) may provide funding, but they are not specifically tailored to supporting development projects in developing countries, which is where airports often need to be built.

Question 19

Debt denominated in a foreign currency that is launched, priced and traded in Asia is referred to as a _________ bond.

Accepted Answer

The answer of Debt denominated in a foreign currency that...

Question 20

When the overwhelming majority of investors would be willing to pay more for the shares of a well-governed company, ___________ is improved.

Accepted Answer

When investors are willing to pay more for shares of a well-governed company, it means there is an increase in capital productivity, which is the efficiency in generating returns on invested capital. This, in turn, can lead to higher profits and higher return on investment for shareholders.

Quiz 12: International Financing and National Capital Markets

The process of securitization reflects

If the current 180?day inter-bank Eurodollar rate is 15% (all rates are stated on an annualized basis. and next period's LIBOR is 13%, then a Eurocurrency loan priced at LIBOR plus 1% will cost

Why are privately placed bonds more difficult to sell than publicly issued bonds?

Suppose that the current 90?day London interbank offer rate is 11% (all rates are stated on an annualized basis..If next period's LIBOR is 10.5%, then a Eurodollar rate priced at LIBOR plus 1% will cost

As the cost of gathering information on foreign firms continues to come down, ___ should become an increasingly more cost? effective means of raising funds internationally.

The globalization of financial markets reflects

The process of securitization reflects

The globalization of financial markets reflects

Which one of the following factors does NOT promote well-functioning financial markets?

Which one of the following new issues of stock has the greatest probability of lowering its cost of equity capital?

S. company has the following choices of financial markets in which to raise capital. Which one will it most often prefer?

Global growth in the financial markets is driven by each of the following EXCEPT:

Which one of the following is the MOST obvious example of the globalization of financial markets?

Which one of the following securities in the foreign bond markets has the least amount of risk to the investor?

Suppose the French government imposes an interest rate ceiling on French bank deposits. What is the likely effect of this regulation?

One reason for the multicurrency clause in the euro markets is to avoid

Which one of the following banks is considered the most important in the development bank industry?

A multinational corporation attempting to secure an airport construction project involving billions of dollars in cost would be best advised to apply to the _________ for funding.

Debt denominated in a foreign currency that is launched, priced and traded in Asia is referred to as a _________ bond.

When the overwhelming majority of investors would be willing to pay more for the shares of a well-governed company, ___________ is improved.