BUS 280 - Chapter 12 Assessment

A _____ brings together those who want to invest money and those who want to borrow money.

Capital market

Which of the following statements is true of debt loans?

Debt loans should be repaid at regular intervals.

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

Foreign bonds

What is an advantage that banks have when they deal with foreign currencies?

Governments give banks more freedom when dealing with foreign currencies

_____ perform a direct connection function in capital markets.

Investment banks

Which of the following is true of fixed-rate bonds?

Investors get back the face value of the bond at maturity of fixed-rate bonds.

Which of the following is true of the Eurobond market?

There are less stringent disclosure requirements than in most domestic bond markets.

Foreign bonds sold in the United States are

Yankee bonds

A Eurocurrency is

any currency banked outside of its country of origin.

The relatively low correlation between the movement of stock markets in different countries indicates that1

countries pursue different macroeconomic policies

Eurodollars are

dollars banked outside of the United States

One drawback of the Eurocurrency market is

exposure to foreign exchange risk.

A purely domestic capital market faces the problem of

limited liquidity

Hedge funds position themselves to make ________ bets on assets that they think will ________.

long; increase in value

According to some analysts, deregulation and reduced controls on cross-border capital flows are

making individual nations more vulnerable to speculative capital flows.

The systematic risk of the stock market is the

movement in a stock portfolio's value that is attributable to the individual selections made for that portfolio.

The Eurocurrency market is attractive to both depositors and borrowers because

of its lack of government regulation.

The cost of capital is the

price of borrowing money

Entering into a forward contract will

raise the borrower's cost of capital

Investors are able to reduce risks by diversifying an investment portfolio internationally, and the risk reduction effects would be greater if not for

volatile exchange rates associated with the current floating exchange risk regime.