Financial Managment Ch. 21
A security issued in the US that represents shares of a foreign stock
(ADR) American Depository Receipt
Which of the following agreements is a spot exchange rate for the Norwegian krone?
6NKr for $1 settled in 2 days
Gilts are securities issued by the
British and Irish Governments
The implicit exchange rate between two currencies quoted in a third currency
Cross-Rate
A bond issued in multiple countries but denominated in a single currency
Eurobond
If U.S. dollars are deposited in banks outside the U.S. banking system, they are referred to as
Eurocurrency
Money deposited in a financial center outside of the country with the involved currency
Eurocurrency
Money deposited in a financial center outside the country whose currency is involved is called
Eurocurrency
One of the most significant complications faced daily by multinationals is
Foreign Exchange
The (blank) Interbank Offered Rate is the rate that most international banks charge one another for loans of Eurodollars overnight in the (blank) market.
London, London
The foreign exchange market allows for the trading of
currency
A (blank) is a bond issued in multiple countries, but denominated in a single currency, typically the issuer's home currency.
eurobond
International ______ rates, interest rates, and inflation rates are closely related.
exchange
The price of one country's currency expressed in terms of another country's currency is called the:
exchange rate
British and Irish government securities are called
gilts
The amount of foreign currency required to purchase one U.S. dollar is called the ______ exchange rate.
indirect
When two parties exchange a floating rate payment for a fixed rate payment, it is called a(n) _____ swap.
interest rate
Corporations with significant foreign operations are often called
multinations
The (blank) one currency based on another country's currency is known as the exchange rate.
price
A (blank) is an agreement to exchange two securities or currencies.
swap
(blank) arbitrage is a profitable situation involving three separate currency exchange transactions.
triangle
Which of the following are true concerning triangle arbitrage?
-Arbitrage opportunities can exist in either the spot or the forward markets. -It helps keep the currency market in equilibrium. -It is a profitable situation involving three separate currency exchange transactions.
Bonds that are issued in a single country and are usually denominated in that country's currency are called
Foreign Bonds
The number of U.S. dollars required to buy one unit of foreign currency is referred to as
a direct quote
The London Interbank Offer Rate is the cornerstone in pricing money markets and short-term debt because
interest rates are usually quoted as some spread over this rate
Unlike Eurobonds, (blank) , bonds are issued in a single country and are usually denominated in that country's currency.
foreign
A ______ trade is an agreement to exchange currency at some time in the future.
forward
Users of the foreign exchange market include
-foreign exchange brokers who match buy and sell orders -speculators who try to profit from changes in exchange rates -importers who pay for goods using foreign currencies
Which of the following refer to a firm with a large portion of its business outside of its parent country?
A multinational An international corporation