Deck 11: International Debt Financing

Question 1

The hedging strategy that offsets foreign assets with foreign liabilities is known as ________ hedge.

A) an income-statement
B) balance-sheet
C) decentralized debt
D) decentralized equity

Answer 1

B

Question 2

The sources of funds for a multinational corporation and its subsidiaries can be subdivided into two categories,________ and ________.

A) internally-generated, externally generated
B) retained earnings, internally-generated
C) capital markets-generated, externally generated
D) retained earnings, externally-generated

Answer 2

A

Question 3

What is the name given to a small service facility that is staffed by a parent bank personnel and designed to assist the clients of the parent bank in their dealings with information about local business practices and credit evaluation of the MNC's foreign customers?

A) offshore banking center
B) foreign branch of a bank
C) representative office
D) international banking facility

Answer 3

C

Question 4

Which type of bond is issued in a domestic market by a borrower overseas,denominated in the domestic currency,marketed to domestic residents,and regulated by the domestic authorities?

A) international bond
B) domestic bond
C) Eurobond
D) foreign bond

Question 5

The long-term debts of eurobanks are known as ________.

A) LIBOR loans
B) syndicates
C) eurocredits
D) euronotes

Question 6

What is the name given to the banks that perform both traditional commercial banking and investment banking functions?

A) merchant banks
B) universal banks
C) full-service banks
D) affiliate banks

Question 7

Which type of bond is denominated in one or more currencies but is traded in external markets outside the borders of the countries issuing the currencies?

A) international bond
B) domestic bond
C) Eurobond
D) foreign bond

Question 8

________ is the packaging of assets or obligations such as mortgages or car loans,into securities for sale to third parties.

A) Eurocredits
B) Floating-rate notes
C) Asset securitization
D) Demutualization

Question 9

What is the name given to the straight fixed-rate bond issued in one currency which pays coupon interest in that same currency,but the promised repayment of principal at maturity is denominated in another currency?

A) international bond
B) dual-currency bond
C) equity-related bond
D) foreign bond

Question 10

The ________ is the discount rate or internal rate of return that equates the present value of all the future interest rate and principal payments to the net proceeds received by the issuer.

A) all-in-cost
B) internal rate of return
C) LIBOR rate
D) floating-rate note

Question 11

International banks created facilities for sales of short-term,negotiable promissory notes,called ________.

A) eurocredits
B) euro commercial paper
C) euro-MTNs
D) euronotes

Question 12

Value at risk measures the dollar loss that a given portfolio position can experience with ________ probability over a given length of time.

A) 1%
B) 3%
C) 5%
D) 10%

Question 13

Which type of bond is issued and traded within the internal market of a single country and denominated in the currency of that country?

A) dragon bond
B) domestic bond
C) Eurobond
D) foreign bond

Question 14

A balance-sheet hedging strategy would offset ________ with ________.

A) depreciating currencies, appreciating currencies
B) foreign revenues, foreign expenses
C) foreign assets, foreign liabilities
D) floating exchange rates systems, fixed exchange rate systems

Question 15

In a(n)________ the bulk of the financial activity is with nonresident counterparties.

A) representative office
B) offshore banking center
C) correspondent bank
D) foreign branch of a bank

Question 16

Which of the following represent liabilities to a bank?

A) deposits it accepts from its customers and securities it buys
B) deposits it accepts from its customers, the borrowing it does in security markets and its equity capital
C) the borrowing it does in security markets and the loans it provides
D) loans to customers

Question 17

Which one of the following is NOT an external source of corporate funding?

A) bank loan
B) retained earnings
C) debt security
D) equity

Question 18

Which kind of bond is a small but growing component of the international bond market and consists of two closely related securities?

A) international bond
B) domestic bond
C) equity-related bond
D) foreign bond

Question 19

Banks that operate in the Eurocurrency markets are known as ________.

A) eurobanks
B) eurocredit banks
C) euronote banks
D) international banking facilities

Question 20

Which one of the following statements is true for the centralized debt denomination model?

A) The debts for both the parent company and its foreign subsidiaries are denominated in the home currency of the parent company.
B) The debt service payments are denominated in the currency in which the subsidiary's revenues are received.
C) The debts for both the parent company and its foreign subsidiaries are denominated in the currency of the largest subsidiary.
D) The debt service payments are denominated in the currency in which the subsidiary's revenues are received which does not balance foreign assets against foreign liabilities.

Question 21

Which one of the following would NOT contribute to the positive creditworthiness of the firm?

A) the firm's financial structure
B) its profitability
C) the number of bank accounts it holds
D) the stability of its cash flows

Question 22

Which one of the two main segments of the international bond market has the least local regulation? Why?

Question 23

Why is there a need for international banking regulation?

Question 24

What are the three main sources of financing for any firm?

Question 25

How is the final payment made for a dual-currency bond?

Question 26

When an MNC issues low interest rate bonds in another country,what is the ultimate cost of the debt?

A) government actions
B) interest rates in the global markets
C) currency movements
D) purchasing power

Question 27

How has Basel II affected the capital charge of a loan to another bank and a loan to a large MNC?

Question 28

Which of the following bonds is least subject to the regulations of any particular country?

A) domestic bonds
B) foreign bonds
C) domestic debentures
D) dragon bonds

Question 29

Which one of the following markets does an international bank participate in that a domestic bank would not?

A) eurocurrency
B) loan syndicates
C) spot currency
D) forward currency

Question 30

Why are eurocredits not offered by any one bank?

A) They are typically regulated by the government to exclude single banks.
B) They are typically very large and banks prefer to share the risk with other banks.
C) The denominations are too large for any one bank's ability to fund the loan.
D) Single banks are less likely to profit from them.

Question 31

How are the transactions in the global bond market in reality a simultaneous transaction in two separate markets?

Question 32

What are the major features of the proposed Basel III?

Question 33

Of the two: a foreign branch and a subsidiary bank,which one is more subject to U.S.regulations? Why?