Global Business Chapter 12

can be created anywhere in the world.

A eurocurrency

capital market

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

patient money

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

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.

According to a study by Bruno Solnik:

international equity issues were actually higher in 2007

According to data from the Bank for International Settlements,

only moderately correlated.

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

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

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

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

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

declines rapidly in the beginning.

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

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

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:

relative paucity of information that investors have about foreign investments.

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

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

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:

financial service companies that connect investors and borrowers.

Market makers are:

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

The cost of capital:

Eurobonds

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.

Commercial banks

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

Exposure to foreign exchange risk

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

Foreign bonds

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

Hedge funds

_____ 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.

Systematic risk

_____ 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.