Finance-- the last unit
money deposited in a financial center outside the country whose currency is involved is called:
Eurocurrency
if US dollars are deposited in banks outside the US banking system, they are referred to as:
Eurodollars
what is the acronym for the interest rate most international banks charge one another for overnight Eurodollar loans?
LIBOR
if the market changes and stock prices instantly and fully reflect new information, which time path does such a change exhibit
an efficient market reaction
the use of local financing from the government of the foreign country where the operation is located:
can reduce political risk
the foreign exchange market allows for the trading of:
currencies
if the Japanese Yen is less expensive in the forward market than it is today, it is said to be selling at a ___________
discount
The price of one country's currency expressed in terms of another country's currency is called the:
exchange rate
the natural consequences of international operations in a world where relative currency values move up and down is called:
exchange rate risk
t/f: political risk refers only to problems for US companies caused by foreign governments
false
The use of __________ exchange agreements can help reduce the short term exposure to exchange rate risk
forward
the exchange rate in an agreement to exchange currency at some time in the future is called the _______ rate
forward
an efficient market is one in which any change in available information will be reflected in the company's stock price ___________.
immediately
an efficient market is one that fully reflects all available:
information
stock prices fluctuate from day to day because of:
information flow
if an international firm borrows money in the foreign country where it has operations it can reduce _________.
long run exchange rate exposure
why is it more challenging to manage long term exchange rate risk exposure than to hedge short term risks?
organized forward markets do not exist for long term needs of corporations
OPM stands for
other people's money
a red herring is another name for a:
preliminary prospectus
if a study of a firms financial information will not lead to gains in the market, then the market must be at least ________ efficient.
semi-strong form
Alpha Co. imports raw materials and uses forward contracts to reduce which of the following risks
short run exposure to exchange rate risk
the day to day fluctuations in exchange rates create:
short-term exchange rate risk exposure
a foreign bond refers to a bond;
that is issued in a single country, denominated in the currency of that country
which act sets forth the federal regulation for all new interstate securities issues?
the Securities Act of 1933
the market for venture capital refers to:
the private financial marketplace for new, high-risk firms
a firms registration statement to issue securities will typically include all of the following except:
the proposed price for the security
an advertisement published in financial newspapers such as the WSJ used during and after the registration waiting period is called a:
tombstone
when a US company calculates its accounting net income, it must report all income, including income from foreign operations, in dollars. This leads to _________ exposure to exchange rate risk
translation
whether a firm obtains capital by debt or equity financing depends on what 3 things ?
1) the firms growth prospects 2) the firms life-cycle stage 3) the size of the firm
financing by wealthy individuals or private investment groups is referred to as what 2 things?
1) venture capital 2) private equity
in interest rate swap involves swapping a __________ payment for a ___________ payment and vice versa
fixed rate; floating rate AND floating rate; fixed rate
the management of exchange rate risk should probably be centralized so that the firm has an understanding of;
its overall positions in foreign currency
what are some strategies for hedging long term exchange rate risk?
matchign foreign currency inflows and outflows
Private equity financing AFTER ground floor financing is termed ____________ financing
mezzanine
when is a new issue usually priced?
on the last day of the registration period
the efficient markets hypothesis contends that ___________ capital markets such as the NYSE are efficient
well-organized
match each information type to the form of market efficiency that identifies that type of information as being quickly and accurately reflected in stock prices. All information: _______ all public information: _______ historical stock prices: ________
1) All information: strong form efficiency 2) all public information: semi-strong form efficiency 3) historical stock prices: weak form efficiency
what 2 things refer to a firm with a large portion of its business outside of its parent country ?
1) a multinational 2) an international corporation
what 2 things are true about the venture capital (VC) market?
1) access to venture capital is very limited 2) personal contacts are important in gaining access to the VC market
a security issued in the US representing shares of a foreign stock is called an
American Depository Receipt
Gilts are securities issued by the:
British and Irish governments
CHAPTER 18
CHAPTER 18
PE firms provide financing for firms that otherwise would have difficulty raising capital such as what 3 types?
1) closely held private firms 2) start up firms 3) distressed firms
what 3 things are important considerations when choosing between venture capitalists?
1) financial strength 2) style 3) exit strategy
users of the foreign exchange market include what 3 things?
1) foreign exchange brokers who match buy & sell orders 2) speculators who try ot profit from changes in exchange rates 3) importers who pay for goods using foreign currencies
what are 5 financial factors that affect firms doing business globally?
1) foreign tax rates 2) exchange rate risk 3) foreign government intervention 4) differing interest rates 5) different accounting methods
what are 2 facts regarding the triangle arbitrage?
1) it is a profitable situation involving three separate currency exchange transactions 2) it helps keep the currency market in equilibrium
what are the 5 steps in issuing securities to the public in chronological order?
1) obtain approval from the firms board of directors 2) prepare and file a registration statement 3) prepare and distribute preliminary prospectus copies 4) determine a selling price 5) prepare and distribute a final prospectus
the different types of exchange rate risk include what 3 things?
1) short term exposure 2) long term exposure 3) translation exposure
currently, the spot exchange rate for the Swiss franc is SF 1=$1.10 or SF 1=$1.12 90 days forward. what 2 things are true
1) the dollar is selling at a discount to the Swiss franc 2) the Swiss franc is at a forward premium
what is the agreement for a spot exchange rate for the Norwegian krone?
6NKr for $1 settled in 2 day s
in an efficient market _______ investments have a _______ NOV
all; zero
the use of local financing from the government of the foreign country where the operation is located:
can reduce polital risk
the implicit exchange rate between 2 currencies when both are quotes in a third currency is called the:
cross-rate