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