Quiz 9 Flashcards
The monetary authority in each nation is called the
Central bank
The price of one currency expressed in terms of another is called the
Exchange rate
Want to countries exports exceeds imports this is called day
Trade surplus
The IMF plays an important role in addressing financial and monetary crisis worldwide. Name the three common crisis the IMF deals with
Currency crisis, country risk crisis, and foreign debt crisis
To help manage current evaluation worldwide, the IMF established a special type of international reserve known as the
Special drawing right
The institutional framework, rules, and procedures by which national currencies or exchange for one another is called the
International monetary system
When a government reduces the official value of its currency relative to other currencies, this is called a
Devaluation
In the mid-1990s, which country experienced over 400% per year inflation rate
Brazil
In a free market, the price of any currency is determined by
Supply and demand
Foreign currencies are traded on the
Foreign-exchange market
A ________ can be readily exchange for other currencies in the most convertible currencies are called ____
Convertible currency; hard currency
When the dollar is more expensive to European businesses, what effect does it have on them
All of the above
_______ is the risk that arises from the changes in the price of one currency relative to another
Currency risk
_____ is the buying and selling of government securities by central bank to maintain the exchange rate of a country’s currency at some acceptable level
Monetary intervention
Which of the following is considered foreign exchange
All of the above
Because currency convertibility is so strict and some developing countries, companies prefer to avoid using parentheses altogether instead receive payments in forms of products rather than cash
True
Chinese recession could not possibly trigger economic problems in the US because of the size of the US economy realtor to the Chinese economy
False
Nations prefer to hold hard currencies like the dollar and euro as reserves because of their strength and stability in comparison to other currencies, such as the Russian Rubel
True
The foreign-exchange market can easily be controlled by major governments like the US and Japan
Falls
The annual accounting of all economic transactions of the nation with all of their nations is calledtheir balance of trade
False
Because inflation is controlled by a government, it does not affect the demand and supply the country’s currency
False
The exchange rate does not vary over time and remains fixed
False
The major world banking centers are London, Paris, Berlin, and Hong Kong
False
The BISs role is to foster cooperation among central banks and other governmental agencies
True
Fluctuations in exchange rates motivate countries worldwide to coordinate their monetary policies at regular meetings of the G8
True
Inflation results in an increase in the price of goods and services, so that money actually buys more than an preceding years
False
China purchased nearly half of the US treasury securities making China the world largest investor in US government
True
And undervalued national currency can result in a trade deficit
False
A good example of a contagion is the sars crisis and East Asia in the late 1990s
False
The World Bank is a key player in the global financial system
True
Name the three major financial centers in the world
Tokyo, New York, and London
The issuance of shares of stock to raise capital for the investors and the use of retained earnings is called
Equity financing
The collective financial markets were firms in government to raise short-term financing is called
Global money market
The stock exchanges throughout the world were investors and for me to buy and sell shares of stock is called the
Global equity market
Strategic reduction of cash transfers within the MNE family through the illumination of offsetting cash flows is called
Multilateral netting
The exchange rate applicable to the trading of foreign currencies in which the current rate of exchange is used in delivery is considered immediate is called the
Spot rate
A country hospitable to business and inward investment because of its low corporate income taxes is called
Tax haven
Alone between the parent and it’s subsidiary, channeled through a large bank or other financial intermediary is called a
Fronting loan
Funds provided from sources inside the firm such as equity, loans, and trade credits are called
Intracorporate financing
______ comes from either loans from banks and other financial intermediaries or money raised from the sale of corporate bonds to individuals or institutions
Debt financing
A bond sold in a foreign country and denominated in the currency of the sellers on country is called
Eurobond
The international marketplace in which bonds are bought and sold, primarily through banks in stockbrokers is called the
New York Stock Exchange
Any currency deposited in the bank outside it’s country of origin is called
None of the above
Borrowing internationally is complicated by several reasons including
Cross national banking regulations
US dollars held in banks outside United States including foreign branches of us Banks is called
Euro dollars
Translation exposure is the currency risk that results when an MNE translates foreign-currency financial results into the functional currency of the parent from
True
Speculators or crunchy traders who seek to minimize the risk of exchange rate fluctuations, often by buying forwards or similar financial instruments
False
A currency option is an agreement to exchange one currency for another, according to a specified schedule
False
Because banks are often reluctant to extend credit to SMEs, firms may turn to government agencies like the export import Bank for the direct loans
True
The key advantage of participating in the global capital market is the ability to access funds for a larger pool of sources at competitive interest rates
True
The global capital market is the collective financial markets were firms and governments raise short-term financing
False
There are four primary sources of funds for international operations: equity financing, debt financing, intercorporate financing, and securitization
False
In terms of the value of shares traded, the largest stock exchanges in the world is the London Stock exchange
False
According to global trend, leading international investment destination today is the emerging markets like Brazil, China, and South Korea
True
One reason why the euro currency market is really used my firms is because these funds are subject to more stringent government regulations them in their own country banking systems
False
When Toyota sells yen denominated Vons in the US it is issuing foreign bonds
False
Transparency is the degree to which companies regularly and comprehensively reveal substantial information about their financial condition and accounting practices
True
Transaction exposure is the currency risk that firms face when I was standing accounts receivable are payable are denominated in euro currency
False
I’ll forward contract is a financial instrument used to buy or sell a currency at an agreed-upon exchange rate at the initiation of the contract for future delivery and settlement
True
Currency traders who seek profits by investing in parentheses with the expectation that they will rise in value in the future are called arbitragers
False
