Deck 12: International Financing and National Capital Market

Question 1

The cost of the heavy reliance on banks by Japanese and German companies is

A) less freedom of action
B) higher interest charges on loans
C) lower deposit rates
D) more control by the government

Answer 1

A

Question 2

Which one of the following is NOT a consequence of a well-functioning financial market?

A) greater capital accumulation
B) better projects get financed
C) lower cost of capital
D) most projects get financed

Answer 2

D

Question 3

Project finance is distinctive from other financings because the providers of the funding

A) look primarily to the cash flow from the project as the source of funds
B) use the parent's assets to secure the funds
C) merge the operations of the project with those of the parent
D) have no exit plans

Answer 3

A

Question 4

Argentina is seeking balance?of?payments financing from an international lending institution. Which of the following is most likely to provide such funding?

A) the World Bank
B) the International Monetary Fund
C) the International Finance Corporation
D) the International Development Agency

Question 5

The most preferred form of securities for funding by firms in the U.S. has been

A) debt
B) preferred stock
C) common stock
D) stock derivatives

Question 6

The difference between countries in terms of company controls can be categorized into market-oriented and _______ systems.

A) bank-centered
B) Anglo-Saxon
C) debt-denominated
D) keiretsu

Question 7

Which of the following banking practice would be found more often under the CEJ model of corporate governance?

A) emphasis on shareholder value
B) the importance of equity financing
C) control by institutional shareholders
D) universal banking

Question 8

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

A) financial innovation
B) regulatory arbitrage
C) private placement
D) capital productivity

Question 9

_______ is the process of replacing bank loans with securities issued in public markets.

A) a drawdown
B) securitization
C) capital productivity
D) regulatory arbitrage

Question 10

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

A) they are usually commercial bank loans
B) the presence of customized covenants
C) funds come from private investors
D) underwriting is required

Question 11

The most important source of funds used by companies around the world is

A) internally generated cash
B) short-term external funds
C) issues of new stock
D) public debt securities

Question 12

The most important change in Japanese corporate finance in recent years has been

A) the shift from internal funds to bank loans
B) the shift from internal funds to stock issues
C) the shift from external funds to internal funds
D) the dramatic rise in the payment of dividends

Question 13

Selling stock overseas is attractive to corporations because it

A) may raise the price of the company's stock
B) improves the company's visibility in local markets
C) provides a pool of patient investors who are not focusing exclusively on next quarter's profits
D) a and b only

Question 14

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

A) freer markets
B) widely available information
C) government capital controls
D) financial deregulation by governments

Question 15

Financial deregulation began in _______ in 1981 and in _______ in 1986.

A) Italy, Germany
B) England, France
C) the U.S., Japan
D) in the European Union, NAFTA

Question 16

Suppose the government of Brazil is planning to develop a major hydroelectric project in order to replace oil imports and conserve scarce foreign exchange, which of the following international lending agencies is most likely to provide financing for this project?

A) the World Bank
B) the International Monetary Fund
C) the International Finance Agency
D) the International Development Agency

Question 17

Which one of the following does NOT reflect the process of securitization?

A) new technology that has lowered the costs of compiling, accessing, and manipulating data
B) financial deregulation that requires more equity financing and higher cost of funds to banks
C) lower costs of accessing public markets directly
D) financial deregulation that made the search for funds less competitive for banks

Question 18

Suppose the government of Ghana is seeking concessionary financing to build 100 new schools, which of the following agencies is most likely to provide such financing?

A) the World Bank
B) the International Monetary Fund
C) the International Finance Corporation
D) the International Development Agency

Question 19

The globalization of financial markets does NOT reflect

A) financial deregulation, which spurs competition among markets
B) reductions in currency controls and other government restrictions on free flow of capital internationally
C) new technology that has lowered the cost of information
D) a greater dependence on government subsidies for exports

Question 20

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

A) secure property rights
B) high tariffs
C) contracts that are easily enforced
D) transparency in financial statements

Question 21

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

A) international securitization
B) international financial intermediation
C) international bank lending
D) international portfolio investment

Question 22

The process of securitization reflects all of the following EXCEPT

A) new technology that has lowered the costs of compiling, accessing, and manipulating data
B) financial deregulation that raised the cost of funds to banks
C) lower costs of accessing public markets directly
D) greater emphasis on customer relations

Question 23

Which of the following has been MOST helped by the decline in the cost of accessing the public financial markets?

A) smaller and less well-known companies
B) larger firms who have an extensive global presence
C) governments seeking to market their sovereign debt
D) developing economies

Question 24

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

A) foreign bond
B) foreign bank
C) a new issue of common stock
D) domestic banks

Question 25

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

A) Microsoft in the New York markets
B) Toyota on the Tokyo exchange
C) Apple stock on the London exchange
D) IBM common stock on the New York Stock Exchange

Question 26

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

A) samurai bond
B) shogun bond
C) convertible bond
D) equity warrants

Question 27

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

A) Asian Development Bank
B) World Bank
C) African Development Bank
D) European Bank for Reconstruction and Development

Question 28

Which of the following bonds would NOT be found on the foreign bond markets?

A) Yankee
B) municipal
C) samurai
D) shogun

Question 29

Which one of the following economic policies would the international financial markets tend to reward?

A) increased tariffs
B) reduced government ownership of private firms
C) a system of government currency controls
D) more government protection of infant-industries

Question 30

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.

A) World Bank
B) London banking market
C) New York bond market
D) Tokyo foreign bond market