International Financial Markets
Question Bank
Course Introduction
International Financial Markets explores the structure, functioning, and evolution of financial markets across the globe. The course delves into foreign exchange markets, international money and capital markets, and the instruments traded within them, such as currencies, equities, bonds, and derivatives. Students gain insight into the role of multinational institutions, regulatory frameworks, and the impact of macroeconomic and geopolitical events on global financial flows. Emphasis is placed on risk management strategies, international investment decisions, and the analysis of current trends and challenges shaping the interconnected global financial environment.
Recommended Textbook
Financial Markets and Institutions 12th Edition by Jeff Madura
Available Study Resources on Quizplus
26 Chapters
1664 Verified Questions
1664 Flashcards
Source URL: https://quizplus.com/study-set/219
Page 2
Chapter 1: Role of Financial Markets and Institutions
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/3240
Sample Questions
Q1) Which of the following is most likely to be described as a depository institution?
A) finance companies
B) securities firms
C) credit unions
D) pension funds
E) insurance companies
Answer: C
Q2) ____ concentrate on mortgage loans.
A) Finance companies
B) Commercial banks
C) Savings institutions
D) Credit unions
Answer: C
Q3) Which of the following is a money market security?
A) Treasury note
B) municipal bond
C) mortgage
D) commercial paper
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Determination of Interest Rates
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/3241
Sample Questions
Q1) For a given set of foreign interest rates, the quantity of U.S. loanable funds demanded by foreign governments or firms will be ____ U.S. interest rates.
A) positively related to B) inversely related to C) unrelated to D) none of the above
Answer: B
Q2) Assume that foreign investors who have invested in U.S. securities decide to increase their holdings of U.S. securities. This should cause the supply of loanable funds in the United States to____ and should place ____ pressure on U.S. interest rates.
A) decrease; upward B) decrease; downward
C) increase; downward D) increase; upward
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Structure of Interest Rates
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/3242
Sample Questions
Q1) An investor's tax rate is 30 percent. What must the before-tax yield on a security be to have an after-tax yield of 11 percent?
A) 7.7 percent
B) 15.71 percent
C) 130 percent
D) 11.00 percent
E) none of the above
Answer: B
Q2) Because interest rates may vary significantly across countries at a given point in time, investors do not monitor the term structures of interest rates in foreign countries unless they are interested in investing in a particular foreign country.
A)True
B)False
Answer: False
Q3) The forward rate is commonly used to represent the market's forecast of the future interest rate.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Functions of the Fed
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/3243
Sample Questions
Q1) ____ open market operations offset the impact of other conditions that affect the level of funds.
A) Active
B) Passive
C) Dynamic
D) Defensive
Q2) When the Fed purchases securities, the total funds of commercial banks ____ by the market value of the securities purchased by the Fed. This activity initiated by the FOMC's policy directiveisreferred to as a(n) ____ of money supply growth.
A) increase; loosening
B) decrease; tightening
C) decrease; loosening
D) increase; tightening
E) none of the above
Q3) Adjustment of the primary credit lending rate is the most common means by which the Fed controls the money supply.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Monetary Policy
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/3244
Sample Questions
Q1) If the Fed uses a passive monetary policy during weak economic conditions,
A) it increases the money supply substantially.
B) it reduces the money supply substantially.
C) it allows the economy to fix itself.
D) it purchases commercial paper and mortgage-backed securities.
Q2) Which of the following was not true of the eurozone during the Greek crisis?
A) Fear of a financial crisis throughout Europe discouraged investors and firms from moving funds into Europe.
B) By using a more stimulative monetary policy than it desired, the European Central Bank aroused concerns about potential inflation in the eurozone.
C) There was concern that the austerity conditions could weaken the country's economy further.
D) Greece, Spain, and Portugal focused their efforts on reducing tax rates in order to stimulate their economies.
Q3) According to the theory of rational expectations, higher inflationary expectations encourage businesses and households to reduce their demand for loanable funds.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Money Markets
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/3245
Sample Questions
Q1) Money market security values are less sensitive to interest rate movements than bonds.
A)True
B)False
Q2) ____ are the most active participants in the federal funds market.
A) Savings and loan associations
B) Securities firms
C) Credit unions
D) Commercial banks
Q3) T-bills and commercial paper are sold
A) with a stated coupon rate.
B) at a discount from par value.
C) at a premium about par value.
D) A and C
E) none of the above
Q4) Securities with maturities of one year or less are classified as
A) capital market instruments.
B) money market instruments.
C) preferred stock.
D) none of the above
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Bond Markets
Available Study Resources on Quizplus for this Chatper
74 Verified Questions
74 Flashcards
Source URL: https://quizplus.com/quiz/3246
Sample Questions
Q1) Corporate bonds usually pay interest on an annual basis.
A)True
B)False
Q2) Treasury bond dealers
A) quote an ask price for customers who want to sell existing Treasury bonds to the dealers.
B) profit from a very wide spread between bid and ask prices in the Treasury securities market.
C) may trade Treasury bonds among themselves.
D) make a primary market for Treasury bonds.
Q3) The key difference between a note and a bond is that note maturities are usually less than one year, while bond maturities are one year or more.
A)True
B)False
Q4) Bond dealers specialize in small transactions (less than $100,000) in order to enable small investors to trade bonds.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Bond Valuation and Risk
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/3247
Sample Questions
Q1) Systemic risk could be avoided if all financial institutions would use derivative securities as a means of insuring against the default of the debt securities that they hold.
A)True
B)False
Q2) If interest rates consistently rise over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond's default risk.)
A) consistently increase
B) consistently decrease
C) remain unchanged
D) change in a direction that cannot be determined with the above information
Q3) Other things held constant, bond prices should increase when inflationary expectations rise.
A)True
B)False
Q4) A zero-coupon bond makes no coupon payments.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Mortgage Markets
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/3248
Sample Questions
Q1) The higher the level of equity invested by the borrower, the higher the probability that the loan will default.
A)True
B)False
Q2) A __________ is a privately negotiated contract that protects investors against the risk of default on particular debt securities such as mortgage-backed securities.
A) default insurance contract
B) default risk swap
C) credit default swap
D) collateralized debt obligation
Q3) Mortgage lenders normally charge a higher initial interest rate on adjustable-rate mortgages than on fixed-rate mortgages.
A)True
B)False
Q4) Speculators sell credit default swaps to benefit from the default of specific subprime mortgages.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Stock Offerings and Investor Monitoring
Available Study Resources on Quizplus for this Chatper
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/3249
Sample Questions
Q1) ____ are not barriers to corporate control to eliminate agency problems.
A) Leveraged buyouts
B) Antitakeover amendments
C) Poison pills
D) Golden parachutes
Q2) Normally, only the owners of preferred stock are permitted to vote on certain key matters concerning the firm, such as the election of the board of directors.
A)True
B)False
Q3) Most individual investors attend road shows of firms that are about to go public before they purchase shares at the time of an IPO.
A)True
B)False
Q4) Venture capital funds commonly exit their investment in a business by
A) receiving dividends from the business .
B) engaging in a credit default swap with the business.
C) selling shares of the business when the business engages in an IPO.
D) repurchasing shares of their own stock in the secondary market.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Stock Valuation and Risk
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/3250
Sample Questions
Q1) The demand by foreign investors for the stock of a U.S. firm sold on a U.S. exchange may be higher when the dollar is expected to ____, other things being equal. (Assume the firm's operationsareunaffected by the value of the dollar.)
A) strengthen
B) weaken
C) stabilize
D) B and C
Q2) If the returns of two stocks are perfectly correlated, then
A) their betas should each equal 1.0.
B) the sum of their betas should equal 1.0.
C) their correlation coefficient should equal 1.0.
D) their portfolio standard deviation should equal 1.0.
Q3) The ____ is not a measure of a stock's risk.
A) stock's price volatility
B) stock's return
C) stock's beta
D) value-at-risk method
E) All of the above are measures of a stock's risk.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Market Microstructure and Strategies
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/3251
Sample Questions
Q1) The size of the spread on stocks that have relatively little trading is
A) smaller to reflect the lower degree of uncertainty.
B) the same as that of stocks with higher volumes of trading.
C) wider to reflect the higher degree of uncertainty.
D) not affected by trading volume.
Q2) The short interest represents the amount of interest that borrowers owe on loans used to purchase stock.
A)True
B)False
Q3) Under the present margin requirements, at least ____ percent of an investor's invested funds must be paid in cash.
A) 20
B) 30
C) 40
D) 50
E) none of the above
Q4) Trading halts are intended to prevent insider trading.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Financial Futures Markets
Available Study Resources on Quizplus for this Chatper
60 Verified Questions
60 Flashcards
Source URL: https://quizplus.com/quiz/3252
Sample Questions
Q1) Clarke Company plans to satisfy cash needs in nine months by selling its Treasury bond holdings for $4 million. However, Clarke is concerned that interest rates might increase over the next threemonths. To hedge against this possibility, Clarke plans to sell Treasury bond futures. Thus, Clarke sells ____ futures contract for a price of 99-12. Assuming that the actual price of the futures contract declines to 97-20, Clarke would make a ____ of $____ from closing out the futures position.
A) 40; profit; $76,800
B) 40; loss; $76,800
C) 50; profit; $70,000
D) 40; profit; $70,000
E) none of the above
Q2) A financial institution that maintains some Treasury bond holdings sells Treasury bond futures contracts. If interest rates increase, the market value of the bond holdings will ____, and theposition in futures contracts will result in a ____.
A) increase; gain
B) increase; loss
C) decrease; gain
D) decrease; loss
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Options Markets
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/3253
Sample Questions
Q1) Assuming the same expiration date, an option with a ____ exercise price has a ____ call option premium and a ____ put option premium.
A) higher; higher; higher
B) higher; higher; lower
C) higher; lower; higher
D) lower; lower; higher
E) none of the above
Q2) The ____ is the most important exchange for trading options.
A) New York Stock Exchange (NYSE)
B) Chicago Board Options Exchange (CBOE)
C) Boston Options Exchange
D) NYSE MKT
Q3) An increase in uncertainty results in a higher implied standard deviation for the stock, which means that the writer of an option requires a higher premium to compensate for the anticipated increase in the stock's volatility.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Swap Markets
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/3254
Sample Questions
Q1) If a U.S. institution in a forward swap would like to lock in the fixed rate that it will pay when the swap period begins, it is probably concerned that interest rates will ____; the counterpartyis likely adversely affected by ____ interest rates.
A) increase; increasing B) increase; declining C) decrease; declining D) decrease; increasing E) none of the above
Q2) When a bank participates in a swap of fixed interest rate payments for floating-rate payments, or a swap of currencies, it
A) can match up two parties but cannot take a position in the swap.
B) can match up two parties or can take a position in the swap.
C) cannot match up two parties and cannot take a position in the swap.
D) cannot match up two parties but can take a position in the swap.
Q3) The option on a callable swap would most likely be exercised if interest rates
A) rise.
B) fall.
C) remain constant.
D) remain somewhat stable.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Foreign Exchange Derivative Markets
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/3255
Sample Questions
Q1) The primary advantage of currency options over forward and futures contracts is that they provide a right rather than an obligation to purchase or sell a particular currency at a specified pricewithin a given period.
A)True
B)False
Q2) Generally, a ____ home currency can ____ domestic economic growth.
A) weak; dampen
B) strong; stimulate
C) strong; dampen
D) A and B
Q3) The following information refers to Fresno Bank and Champaign Bank.
A)True
B)False
Q4) When a government influences factors, such as inflation, interest rates, or income, in order to affect currency's value, this is an example of A) direct intervention.
B) indirect intervention.
C) a freely floating system.
D) a pegged system.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Commercial Bank Operations
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/3256
Sample Questions
Q1) All other things being equal, when banks issue new stock, they
A) increase reported earnings per share.
B) decrease their ability to absorb operating losses.
C) dilute the ownership of the bank.
D) A and B
Q2) ____ is (are) not a major source of funds for commercial banks.
A) Deposit accounts
B) Borrowed funds
C) Commercial loans
D) Bank capital
E) All of the above are sources of funds for commercial banks.
Q3) When a bank obtains funds through a ____, the provider of the funds receives collateral.
A) retail CD
B) NOW account
C) repurchase agreement
D) money market deposit account
Q4) A bank's sources of funds represent liabilities or equity of the bank.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Bank Regulation
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/3257
Sample Questions
Q1) Which of the following was not achieved by the Depository Institutions Deregulation and Monetary Control Act of 1980?
A) removed interest rate ceilings on deposits
B) allowed banks to offer NOW accounts
C) increased competition among depository institutions
D) allowed interstate banking for depository institutions in most states
Q2) In making loans to a single customer, commercial banks ____ restricted to a maximum percentage of their capital, and they ____ allowed to use borrowed or deposited funds to purchase common stock.
A) are; are
B) are; are not
C) are not; are
D) are not; are not
Q3) The ____ is the fund used to cover insured depositors.
A) Deposit Insurance Fund
B) Federal Deposit Insurance Corporation Fund
C) Bank Depository Insurance Fund
D) Financial Institution Insurance Fund
E) none of the above
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Bank Management
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/3258
Sample Questions
Q1) In a regression analysis using a bank's stock return, an interest rate proxy, and market returns, a ____ coefficient for the interest rate variable suggests that the bank's performance is ____affected by ____ interest rates.
A) positive; adversely; rising
B) positive; favorably; declining C) negative; adversely; rising D) negative; favorably; rising
Q2) Durango Bank has $2 million in rate-sensitive liabilities and $3 million in rate-sensitive assets. Durango's gap is ____, and Durango is probably more concerned about a(n) ____ in interest rates.
A) -$1 million; increase
B) -$1 million; decrease
C) $1 million; increase
D) $1 million; decrease
E) none of the above
Q3) For most banks, the average duration of liabilities exceeds the average duration of assets, so the duration gap is positive.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 21
Chapter 20: Bank Performance
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/3259
Sample Questions
Q1) If a bank has long-term fixed-rate assets and short-term liabilities, and interest rates increase over time, its net interest margin should A) decrease
B) increase
C) stay the same.
D) either A or B, depending on whether the asset maturities exceed 10 years
Q2) Interest income generated from all a bank's assets is called A) net interest margin.
B) the spread.
C) gross interest income.
D) net interest income.
Q3) During the credit crisis, the level of ____ was much higher than in other periods.
A) interest income
B) income expenses
C) noninterest expenses
D) loan loss provisions
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Thrift Operations
Available Study Resources on Quizplus for this Chatper
68 Verified Questions
68 Flashcards
Source URL: https://quizplus.com/quiz/3260
Sample Questions
Q1) Which of the following was not a major reason for the savings institution crisis in the late 1980s?
A) large losses on real estate loans
B) large losses on loans to less-developed countries
C) fraud
D) illiquidity
E) increased interest expenses
Q2) Money market deposit accounts (MMDAs) are
A) trust accounts managed by savings institutions.
B) checking accounts that do not pay interest.
C) accounts offered primarily by money market funds.
D) deposit accounts offering limited checking and close-to-market interest rates.
Q3) ____ are the primary asset of savings institutions.
A) Mortgages
B) Cash balances
C) Investment securities
D) Business loans
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Finance Company Operations
Available Study Resources on Quizplus for this Chatper
29 Verified Questions
29 Flashcards
Source URL: https://quizplus.com/quiz/3261
Sample Questions
Q1) When interest rates increase, finance companies tend to use more long-term debt to lock in their cost of funds over an extended period of time.
A)True
B)False
Q2) Overall, the liquidity risk of finance companies is higher than that of other financial institutions.
A)True
B)False
Q3) Finance companies differ from commercial banks, savings institutions, and credit unions in that they
A) do not rely heavily on deposits as a source of funds.
B) focus on financing acquisitions by companies.
C) focus on providing residential mortgages.
D) use most of their funds to purchase stocks
Q4) Finance companies participate in the ____ market to reduce interest rate risk. A) money
B) bond
C) options
D) swap
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Mutual Fund Operations
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/3262
Sample Questions
Q1) Money market funds invest mostly in
A) stocks.
B) long-term bonds.
C) real estate.
D) short-term securities.
Q2) Which of the following statements is incorrect?
A) A mutual fund is usually run by an investment company.
B) Mutual funds with lower expense ratios tend to outperform other funds with a similar investment objective.
C) For each mutual fund, all expenses charged and reflected in the expense ratio are always valid.
D) The SEC requires that a majority of the directors of a mutual fund board be independent.
Q3) Which of the following is incorrect about money market funds (MMFs)?
A) The credit risk of MMFs is normally perceived to be lower than that of corporate bonds.
B) MMFs have higher interest rate risk than bond funds.
C) MMFs normally generate positive returns over time.
D) All of the above are correct.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 24: Securities Operations
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/3263
Sample Questions
Q1) The SEC's Regulation Fair Disclosure (FD):
A) requires firms to disclose any significant information to the SEC before making public announcements.
B) requires firms to disclose any significant information to the Federal Reserve before releasing it to the public.
C) requires firms to disclose any significant information simultaneously to all market participants.
D) prohibits insiders at firms from trading on significant inside information.
Q2) The Federal Reserve intervened to help securities firms during the credit crisis in order to reduce the potential adverse effects of systemic risk.
A)True
B)False
Q3) After a target firm is acquired, the acquirer may sell off divisions of the target that are not compatible with the acquirer's business. This process is known as A) bridging.
B) asset stripping.
C) greenmail.
D) none of the above.
To view all questions and flashcards with answers, click on the resource link above.
26
Chapter 25: Insurance Operations
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/3264
Sample Questions
Q1) Which of the following statements is incorrect?
A) Insurance provides a payment to the insured under conditions specified by the insurance policy contract.
B) Individuals who are less exposed to specific conditions that cause financial damage are more likely to purchase insurance against those conditions.
C) Insurance can cause the insured to take more risks because they are protected.
D) Insurance companies employ underwriters to calculate the risk of specific insurance policies.
Q2) Property and casualty (PC) insurance companies may use cash flow underwriting, in which they tend to lower their premium prices as interest rates rise.
A)True
B)False
Q3) ____ insurance covers losses due to dishonest employees.
A) Key employee
B) Credit line
C) Malpractice
D) Fidelity bond
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Pension Fund Operations
Available Study Resources on Quizplus for this Chatper
20 Verified Questions
20 Flashcards
Source URL: https://quizplus.com/quiz/3265
Sample Questions
Q1) In recent years, defined-contribution plans have commonly been replaced by defined-benefit plans.
A)True
B)False
Q2) Taking speculative positions in stock options is generally not considered appropriate for retirement funds because of the high degree of risk involved.
A)True
B)False
Q3) Projective funding limits the manager's discretion, allowing only investments that match future payouts.
A)True
B)False
Q4) A ____ plan allows a firm to know with certainty the amount of funds to contribute. The ____ plan allows a firm to know with certainty the amount of benefits that must be provided.
A) defined-benefit; defined-benefit
B) defined-contribution; defined-contribution
C) defined-contribution; defined-benefit
D) defined-benefit; defined-contribution
To view all questions and flashcards with answers, click on the resource link above. Page 28