The Global Capital Market (MGT 5260)

The relatively low correlation between the movements of stock markets in different countries reflects all of the following basic factors except

Barriers to cross-border capital flows drastically increase the ability of capital to roam the world freely in search of the highest risk-adjusted return

A eurocurrency

Can be created anywhere in the world

As an investor increases the number of stocks in her portfolio, the portfolio's risk:

Declines rapidly in the beginning

Analysts who believe that the globalization of capital has serious inherent risks argue that

Due to deregulation and reduced controls on cross-border capital flows, individual nations are becoming more vulnerable to speculative capital

These are international bonds, normally underwritten by an international syndicate of banks and placed in countries other than the one in whose currency the bond is denominated.

Eurobonds

Market makers are

Financial service companies that connect investors and borrowers

_____ are sold outside of the borrower's country and are denominated in the currency of the country in which they are issued.

Foreign bonds

All of the following are benefits of global capital markets, except that they

Have higher cost of capital as compared to purely domestic capital markets

The cost of capital

Is the price of borrowing money, which is the rate of return that borrowers must pay investors

Which of the following is a drawback of the eurocurrency market?

It exposes a company to foreign exchange risk

Which of the following is a drawback of the eurocurrency market?

Probability of failure resulting in loss of deposits

Which of the following is not a trend toward deregulation that facilitated the growth of the international capital market?

Restrictions on the entry of foreign securities houses in Japan and Japanese banks not being allowed to open international banking facilities

In the financial services industry, growth of international communications technology has facilitated all of the following except

The emergence of a segregated international capital market

According to data from the Bank for International Settlements,

The global capital market is growing at a rapid pace

All of the following statements regarding the effects of exchange rates on international portfolio diversification are true, except

The volatile exchange rates associated with the current floating exchange rate regime increase the risk-reducing effects of international portfolio diversification

Which of the following statements regarding barriers to cross-border capital flows is not true?

They are no longer responsible for the relatively low correlation between the movements of stock markets in different countries

Identify the incorrect statement pertaining to commercial banks.

They bring investors and borrowers together but do not charge commissions for it

Which of the following is not likely to be a reason for investors to use the global capital market?

They have a higher cost of capital as compared to purely domestic capital markets

Why do many companies borrow funds in their domestic currency even though the eurocurrency markets may offer more attractive interest rates?

To avoid foreign exchange risk

In late 1997, a deal brokered by the _____ removed many of the restrictions on cross-border trade in financial services and facilitated further growth in the size of the global capital market.

World Trade Organization