Finance-- the last unit

money deposited in a financial center outside the country whose currency is involved is called:

Eurocurrency

if US dollars are deposited in banks outside the US banking system, they are referred to as:

Eurodollars

what is the acronym for the interest rate most international banks charge one another for overnight Eurodollar loans?

LIBOR

if the market changes and stock prices instantly and fully reflect new information, which time path does such a change exhibit

an efficient market reaction

the use of local financing from the government of the foreign country where the operation is located:

can reduce political risk

the foreign exchange market allows for the trading of:

currencies

if the Japanese Yen is less expensive in the forward market than it is today, it is said to be selling at a ___________

discount

The price of one country's currency expressed in terms of another country's currency is called the:

exchange rate

the natural consequences of international operations in a world where relative currency values move up and down is called:

exchange rate risk

t/f: political risk refers only to problems for US companies caused by foreign governments

false

The use of __________ exchange agreements can help reduce the short term exposure to exchange rate risk

forward

the exchange rate in an agreement to exchange currency at some time in the future is called the _______ rate

forward

an efficient market is one in which any change in available information will be reflected in the company's stock price ___________.

immediately

an efficient market is one that fully reflects all available:

information

stock prices fluctuate from day to day because of:

information flow

if an international firm borrows money in the foreign country where it has operations it can reduce _________.

long run exchange rate exposure

why is it more challenging to manage long term exchange rate risk exposure than to hedge short term risks?

organized forward markets do not exist for long term needs of corporations

OPM stands for

other people's money

a red herring is another name for a:

preliminary prospectus

if a study of a firms financial information will not lead to gains in the market, then the market must be at least ________ efficient.

semi-strong form

Alpha Co. imports raw materials and uses forward contracts to reduce which of the following risks

short run exposure to exchange rate risk

the day to day fluctuations in exchange rates create:

short-term exchange rate risk exposure

a foreign bond refers to a bond;

that is issued in a single country, denominated in the currency of that country

which act sets forth the federal regulation for all new interstate securities issues?

the Securities Act of 1933

the market for venture capital refers to:

the private financial marketplace for new, high-risk firms

a firms registration statement to issue securities will typically include all of the following except:

the proposed price for the security

an advertisement published in financial newspapers such as the WSJ used during and after the registration waiting period is called a:

tombstone

when a US company calculates its accounting net income, it must report all income, including income from foreign operations, in dollars. This leads to _________ exposure to exchange rate risk

translation

whether a firm obtains capital by debt or equity financing depends on what 3 things ?

1) the firms growth prospects 2) the firms life-cycle stage 3) the size of the firm

financing by wealthy individuals or private investment groups is referred to as what 2 things?

1) venture capital 2) private equity

in interest rate swap involves swapping a __________ payment for a ___________ payment and vice versa

fixed rate; floating rate AND floating rate; fixed rate

the management of exchange rate risk should probably be centralized so that the firm has an understanding of;

its overall positions in foreign currency

what are some strategies for hedging long term exchange rate risk?

matchign foreign currency inflows and outflows

Private equity financing AFTER ground floor financing is termed ____________ financing

mezzanine

when is a new issue usually priced?

on the last day of the registration period

the efficient markets hypothesis contends that ___________ capital markets such as the NYSE are efficient

well-organized

match each information type to the form of market efficiency that identifies that type of information as being quickly and accurately reflected in stock prices. All information: _______ all public information: _______ historical stock prices: ________

1) All information: strong form efficiency 2) all public information: semi-strong form efficiency 3) historical stock prices: weak form efficiency

what 2 things refer to a firm with a large portion of its business outside of its parent country ?

1) a multinational 2) an international corporation

what 2 things are true about the venture capital (VC) market?

1) access to venture capital is very limited 2) personal contacts are important in gaining access to the VC market

a security issued in the US representing shares of a foreign stock is called an

American Depository Receipt

Gilts are securities issued by the:

British and Irish governments

CHAPTER 18

CHAPTER 18

PE firms provide financing for firms that otherwise would have difficulty raising capital such as what 3 types?

1) closely held private firms 2) start up firms 3) distressed firms

what 3 things are important considerations when choosing between venture capitalists?

1) financial strength 2) style 3) exit strategy

users of the foreign exchange market include what 3 things?

1) foreign exchange brokers who match buy & sell orders 2) speculators who try ot profit from changes in exchange rates 3) importers who pay for goods using foreign currencies

what are 5 financial factors that affect firms doing business globally?

1) foreign tax rates 2) exchange rate risk 3) foreign government intervention 4) differing interest rates 5) different accounting methods

what are 2 facts regarding the triangle arbitrage?

1) it is a profitable situation involving three separate currency exchange transactions 2) it helps keep the currency market in equilibrium

what are the 5 steps in issuing securities to the public in chronological order?

1) obtain approval from the firms board of directors 2) prepare and file a registration statement 3) prepare and distribute preliminary prospectus copies 4) determine a selling price 5) prepare and distribute a final prospectus

the different types of exchange rate risk include what 3 things?

1) short term exposure 2) long term exposure 3) translation exposure

currently, the spot exchange rate for the Swiss franc is SF 1=$1.10 or SF 1=$1.12 90 days forward. what 2 things are true

1) the dollar is selling at a discount to the Swiss franc 2) the Swiss franc is at a forward premium

what is the agreement for a spot exchange rate for the Norwegian krone?

6NKr for $1 settled in 2 day s

in an efficient market _______ investments have a _______ NOV

all; zero

the use of local financing from the government of the foreign country where the operation is located:

can reduce polital risk

the implicit exchange rate between 2 currencies when both are quotes in a third currency is called the:

cross-rate