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Multiple Choice Quiz
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1

Gross international bank lending is
A)net international bank lending minus depreciation.
B)total cross-border bank claims plus local claims in foreign currency.
C)total cross-border bank claims minus local claims in foreign currency.
D)net international bank lending minus total cross-border bank claims.
2

When banks in Europe lend among themselves, the interest rate which is charged is known as the
A)Eurocurrency rate.
B)LIBOR.
C)petrodollar rate.
D)derivatives rate.
3

As of 2003, the largest share of international debt securities is denominated in
A)Japanese yen.
B)U.S. dollars.
C)U.K. pounds.
D)euros.
4

The purpose of __________ is to reduce risk in international investors' portfolios.
A)international portfolio diversification
B)LIBOR
C)international portfolio consolidation
D)purchasing power parity
5

Over the past 15 years, the U.S. deposit rate tends to be __________ the LIBOR deposit rate; the U.S. lending rate tends to be __________ the LIBOR lending rate.
A)greater than; also greater than
B)greater than; less than
C)less than; greater than
D)less than; also less than
6

A financial contract whose value is linked to the value of an underlying asset such as a bond is commonly known as a(n)
A)derivative.
B)Eurodollar.
C)basis point.
D)option on swap.
7

To reduce or remove the risk of changes in the interest rate between now and some future time, financial institutions often engage in
A)maturity mismatching.
B)eurodollar interest swaps.
C)future rate agreements.
D)all of the above.
E)a and b only.
8

Institutions that, for a fee, assume risk by purchasing bonds from firms or governments are known as
A)Cayman Island raiders.
B)Derivatives.
C)bond underwriters.
D)eurodollar strips.
9

If the foreign nominal interest rate is 9% and the expected percentage appreciation of the foreign currency is 2%, then (assuming investors have perfect foresight) the domestic interest rate should be approximately equal to ________________ percent.
A)7
B)11
C)17
D)24
10

The value of global derivatives over the past 15 years has __________; by 2003 the majority of the value of global derivatives was in __________.
A)increased; exchange-traded instruments
B)increased; over-the-counter instruments
C)decreased; exchange-traded instruments
D)decreased; over-the-counter instruments





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