int. Business (Chpt. 12)

The low correlation between the movement of stock markets in different countries reflects two basic factors. What are these two factors?

- Different stock markets are still somewhat segmented from each Other by capital controls. - The countries pursue different macroeconomic policies and face different economic conditions.

What are two drawbacks of the Eurocurrency markets?

- Foreign exchange rate risk - Higher probability of bank failure

What benefits do global capital markets provide to investors and borrowers? Choose all that apply.

- Increase the investment opportunities for investors - Increase the supply Of funds for borrowers

What are the three major appealing features of the Eurobond market?

- Less stringent disclosure requirements - Absence of regulatory interference - Favorable tax status

The global equity markets allow firms to BLANK Choose all that apply.

- Raise funds by issuing equity or debt globally - List stock on multiple exchanges - Attract capital from international investors

A foreign bond has two main components. Choose those that apply.

- sold outside the borrower's country - denominated in issuing country's currency

A bond unden.vritten by an international syndicate of banks and placed in countries that are not representative of the currency the bond is denominated is a(n) BLANK

Eurobond

Any currency banked outside of its country of origin is a Eurocurrency. Which currency makes up about two-thirds Of all Eurocurrencies?

Eurodollar

Which financial institution directly connects investors and borrowers and charges a commission for performing this function?

Investment Bank

Capital controls can affect the correlation between the movement of stock markets in different countries. What is an example of a capital control?

Limits on the amount of a firm's stock that a foreigner can own

Which of the following accurately describes 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.

A BLANK market matches those who want to invest with those who want to borrow money.

capital

The Eurocurrency market experienced growth initially because it offered financial advantages to investors who wanted to BLANK

deposit and borrow other currencies

Marta's company sells stock to investors. What type Of capital market loan is this?

equity

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 called a(n) BLANK

eurobond

Across many nations, BLANK (financial/agricultural) services have been the most highly-regulated of all industries.

financial

What is the most common type Of bond in the global bond market?

fixed-rate bond

Which markets allows firms to attract international investors, list securities on multiple exchanges, and issue securities around the world?

global equity

Private investment funds that make "long bets" or "short bets" on assets are called BLANK funds.

hedge

Interest rates in domestic markets are BLANK (higher/lower) than in global markets because the pool of investors in domestic markets is BLANK (larger/smaller) than in global markets.

higher smaller

Martin Feldstein identified patient money as facilitating global capital markets, but BLANK money as not being beneficial to global capital market due its short-term nature chasing temporary gains.

hot

Since 1984, foreign holders of Eurobonds are exempt from BLANK tax withheld from interest payments, making it more feasible for U.S corporations to sell Eurobonds directly to borrowers.

income

Within the Eurocurrency market, banks can Offer higher interest rates on deposits than on deposits made in the home currency. What makes this possible?

lack of government regulation