MGT 302 Chapter 12 Clark

Currency exchange rates can affect a company's cost of capital. Many companies would rather borrow funds in their domestic currency to avoid foreign exchange ____ even if the Eurocurrency markets provide higher market rates

risk

Interest rates in domestic markets are much higher than interest rates in global markets because ?

the pool of investors in domestic markets are less than in global markets

Us firms that issue securities in the US have to comply with SEC regulation. If these firms issue securities in the Eurobond market, an advantage is limited ____ requirements , because they do not have to provide as much info

disclosure

The instruments used in capital markets are either ___ loans, in which a corporation sells stock to investors, or ___ loans in which a firm borrows money

equity/debt

A major feature of the Eurobond market is that it is heavily regulated?

false

What type of bonds pay investors an annual intereset payment and then the face value is added back at maturity

fixed-rate bond

What are the reasons for the rapid growth of the global capital market?

growth in info technology, and govmt deregulation

Private investments funds that make "long bets" or "short bets" on assets are called ____ funds

hedge

Since 1984, foreign holders of Eurobonds are exempt from ___ tax withheld interest payments, making it more feasible for u.s. corporations to sell EuroBonds directly to borrowers

income

Because of the limited regulation of the Eurobond market, there is a ___ cost of issuing these bonds

lower

Besides financial advantages, what is another factor that led to the growth of the Eurocurrency markets?

political events

The low correlation of the movement of stock markets in different countries reflects what two basic factors?

1) the countries pursue different macroeconomic policies and face different economic conditions 2) different stock markets are still somewhat segmented from eachother by capital controls

A foreign bond has what two main components?

1)denominated in issuing countries currency 2) sold outside of borrowers country

What benefits to global capital markets provide to investors and borrowers?

Increase investment opportunities for investors, increase supply of funds for borrowers

The global equity market allows firms to...

attract capital from initial investors, list their stock on , multiple exchanges, and raise funds by issuing debt or equity around the world

Capital markets match large corporations who want to invest their surplus cash with individuals who want to ___

borrow money

There is a _____ range of investment opportunities in a global capital market

broad

The cost of recording, transmitting, and processing information has __ since the 1960's

decreased

The global equity markets are facilitated by ___ and the advances in communication and info technoloy

deregulation

An investment bank is a type of ___ performer in the capital market

direct