Connect 12
One result of the trend toward international equity investment is the internationalization of ______ ownership.
corporate
As an investor puts more stocks in his or her portfolio, the risk of the portfolio _____.
declines
What are the two main characteristics of a foreign bond?
denominated in issuing country's currency sold outside the borrower's country
The global equity markets are facilitated by ______ and the advances in communication and information technology.
deregulation
The removal of capital controls were in place until the global financial crisis of 2008-2009. As the crisis unfolded, some wondered if ______ was partly to blame.
deregulation
Because non-US firms do not have to comply with the SEC regulations, the limited ____ requirements make the Eurobond market more attractive than issuing dollar-denominated bonds in the US.
disclosure
A bond that is issued by a German corporation, denominated in US dollars, and sold to investors outside the US by an international syndicate of banks is an example of a(n) ______.
eurobond
What is the most common type of bond in the global bond market?
fixed-rate bond
What type of bond pays the investor an annual interest payment and then the face value is added back at maturity?
fixed-rate bond
A bond sold outside a borrower's country and denominated in the issuing country's currency is called a(n) _____ bond.
foreign
Within the Eurocurrency market, banks are allowed much more freedom from regulation when considering _____ currencies.
foreign
The predominant factor that complicates the ability of an investor to reduce total risk by diversifying their portfolio in the global capital market is _____.
foreign exchange risk
What are the two reasons given for the rapid growth of the global capital market?
government deregulation growth in information technology
Unpredictable movements in exchange rates are likely to _____ the risk associated with foreign currency borrowing.
increase
What are two reasons a company might choose to broaden their stock ownership by listing their stock on a foreign market?
might be a prelude to issuing stock in that market to raise capital might be used as a way to facilitate future acquisitions of foreign companies
To help curb the global financial crisis of 2008-2009, _____ regulations were put in place for certain sectors of the financial services industry.
more
Which two groups would issue eurobonds?
multinational corporations sovereign governments
Regulatory barriers to national equity markets initially began to fall during the _____.
1980s
What financial institution takes cash deposits and then lends to borrowers?
Commercial bank
True or false: When depositors use an unregulated banking system such as the Eurocurrency market, the probability of bank failure is greater than in a regulated system.
T
The low correlation between the movement of stock markets in different countries reflects two basic factors. What are these two factors?
The countries pursue different macroeconomic policies and face different economic conditions. Different stock markets are still somewhat segmented from each other by capital controls.
What is an accurate description of the correlation between the movement of stock markets in the world's four largest equity markets?
There is a low correlation between the movement of stock markets in the world's four largest equity markets.
How are hedge funds regulated?
They operate largely out of existing regulatory boundaries.
How do volatile floating exchange rates affect investments in foreign assets?
Volatile floating exchange rates create additional risk.
True or false: Eurobonds are not within the regulatory domain of any single nation.
T
What are the three major appealing features of the Eurobond market?
Absence of regulatory interference Less stringent disclosure requirements Favorable tax status
How do borrowers and investors view a global capital market?
Both borrowers and investors consider it a benefit.
True or False: A British firm can borrow money from domestic sources or go to the global capital markets. The interest rates will probably be lower in the global capital markets because of the higher pool of funds.
T
True or False: A Eurocurrency is a currency that is banked only in Europe.
F
Which statement accurately describes a feature of the Eurobond market?
It has a favorable tax status.
Which statement accurately depicts the current growth of the global capital market?
It is growing quickly.
What is the main factor that makes Eurocurrency markets attractive to both borrowers and depositors?
Lack of government regulation
Government regulation tends to _____ the cost of capital in most domestic capital markets.
raise
When a British bank accepts a deposit in pounds sterling, it must set aside a fraction of that money to be kept in an account at the Bank of England. All industrialized countries operate with this type of __________ requirement.
reserve
Forward exchange markets are more likely to lower risk with ______ borrowings.
short-term