ch13 - Multinational Financial Management Alan Shapiro 9th...

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1 Multinational Financial Management Alan Shapiro 9 th Edition Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton
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CHAPTER 13 The Euromarkets
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3 THE EUROCURRENCY MARKETS THE EUROMARKETS -the most obvious example of the globalization of financial markets A. The Eurocurrency Market 1. Composed of eurobanks who accept/maintain deposits of foreign currency 2. Dominant currency: US$
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4 THE EUROCURRENCY MARKETS B. Growth of Eurodollar Market caused by restrictive US government policies, especially 1. Reserve requirements on deposits 2. Special charges and taxes 3. Required concessionary loan rates 4. Interest rate ceilings 5. Rules which restrict bank competition.
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5 THE EUROCURRENCY MARKETS C. Eurodollar Creation involves 1. A chain of deposits 2. Changing control/usage of deposit
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6 THE EUROCURRENCY MARKETS 3. Eurocurrency loans a. Use London Interbank Offer Rate: LIBOR as basic rate b. Six month rollovers c. Risk indicator: size of margin between cost and rate charged.
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ch13 - Multinational Financial Management Alan Shapiro 9th...

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