chapter 9 international business

The exchange rate between the euro (€) and the dollar is €0.8461/$. Which of the following is the correct direct quote on the dollar?

$1.1819/€

A bond issued by a Venezuelan company, denominated in U.S. dollars, and sold in Britain, France, and Germany is an example of a ________.

Eurobond

British pounds of a British trading company that are deposited in a U.S. bank are called ________.

Europounds

The ease with which bondholders and shareholders may convert their investments into cash is called ________.

Liquidy

________ refers to shares of ownership in a company's assets that give shareholders a claim on the company's future cash flows.

Stock

The world's three most important financial centers are ________.

Tokyo, London, and New York

A(n) ________ is a system that allocates financial resources in the form of debt and equity according to their most efficient uses.

capital market

Bonds sold outside the borrower's country and denominated in the currency of the country in which they are sold are called ________.

foreign bonds

Eurobonds are popular because ________.

governments of nations in which they are sold do not regulate them

Scenario: Trader's Paradise Trader's Paradise is a global merchant that sells a variety of products. The company operates in forty-eight different countries (some developed, some developing) and some former communist countries. The company faces substantial risks given the differing conditions in foreign exchange markets. To insure against potential losses that result from adverse changes in exchange rates, Trader's Paradise should use currency ________.

hedging

The unbundling and repackaging of hard-to-trade financial assets into more liquid, negotiable, and marketable financial instruments is called ________.

securitization

Which of the following is an exchange rate that requires delivery of the traded currency within two business days?

spot rate

An exchange rate of ¥117.87/$ indicates ________.

that 117.87 yen buys one dollar

Scenario: ABC Software ABC Software is a producer of educational software for children below the age of twelve. The company has operations in Switzerland and would like to expand its foreign operations with a new facility in China. If ABC Software holds a currency option to purchase Swiss francs at SF 1.67/$ in 30 days, at the end of which the exchange rate is SF1.70/$, then ABC Software ________.

would not exercise its currency option

Foreign bonds issued in the U.S. are called ________.

yankee bonds