Chapter 12 Global Final (6)

Which of the following are among the best examples of market makers?

Commercial banks

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

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

Exposure to foreign exchange risk

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

Foreign bonds

_____ position themselves to make "long bets" on assets that they think will increase in value, and "short bets" on assets that they think will decline in value.

Hedge funds

_____ refers to movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy, rather than factors specific to an individual firm.

Systematic risk

According to a study by Bruno Solnik:

a fully diversified portfolio that contains stocks from many countries is less than half as risky as a fully diversified portfolio that contains only U.S. stocks.

A eurocurrency

can be created anywhere in the world.

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

capital market

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.

Market makers are:

financial service companies that connect investors and borrowers.

According to data from the Bank for International Settlements,

international equity issues were actually higher in 2007.

The cost of capital:

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

Companies with historic roots in one nation are broadening their stock ownership by listing their stock in the equity markets of other nations because of all of the following reasons, except:

it helps in decreasing the company's visibility with local employees, customers, suppliers, and bankers.

According to the text, various studies have confirmed that despite casual observations different national stock markets appear to be:

only moderately correlated.

According to Harvard economist Martin Feldstein _____ supports long-term cross-border capital flows.

patient money

Economist Martin Feldstein argues that the lack of patient money is due to the

relative paucity of information that investors have about foreign investments.

In 1997, the stock markets of several Asian countries, including South Korea, Malaysia, Indonesia, and Thailand, lost over 50 percent of their value in response to the Asian financial crisis, while at the same time the S&P 500 increased in value by over 20 percent. This indicates that:

relatively low correlation exists between the movement of stock markets in different countries.

All of the following are benefits of global capital markets, except:

they have higher cost of capital as compared to purely domestic capital markets.