tb03 - Kirt C. Butler, Multinational Finance, 3rd edition...

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Kirt C. Butler, Multinational Finance , 3 rd edition PART II The International Financial Environment Chapter 3 International Financial Markets True/False 1. Liquidity refers to the ease with which you can exchange one asset for another of equal value. ANS: True. 2. The primary difference between short- and long-term versions of a particular financial asset is in how easily the asset can be transported to another location. ANS: False. The primary difference is in the liquidity of the market. 3. The two kinds of financial markets are money markets and interest rate markets. ANS: False. The statement mixes two dimensions: maturity (money versus capital markets) and type of instrument (e.g., debt versus equity markets). 4. In an intermediated debt market, a financial institution such as a commercial bank channels loanable funds from savers to borrowers. ANS: True. 5. In a non-intermediated debt market, a financial institution such as a commercial bank channels loanable funds from savers to borrowers. ANS: False. Borrowers appeal directly to savers without using a financial intermediary. 6. Debt placed in an internal market is denominated in the currency of a host country and placed within that country. ANS: True. 7. Debt placed in an external market is placed outside the banking system. ANS: False. External market debt is placed outside the country issuing a currency. 8. Internal credit markets are markets for deposits and loans by local residents and hence are governed by the rules and institutional conventions of the local government. ANS: True. 9. External credit markets trade interest rate contracts denominated in a currency but traded outside the borders of the country issuing that currency. ANS: True. 10. Money markets are markets for financial assets and liabilities of short maturity, considered to be less than one year. ANS: True. 11. Capital markets are markets for financial assets and liabilities with maturities greater than one year. ANS: True. 13
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Kirt C. Butler, Multinational Finance , 3 rd edition 12. International commercial banks are the major market makers in the currency markets. ANS: True. 13. The most active market makers in the market for spot foreign exchange are the major investment banks such as Salomon Smith Barney and Goldman Sachs. ANS: False. The major market makers are the large commercial banks. 14. In the spot market, trades is conducted in a single spot or location. ANS: False. Trade is conducted at commercial banks worldwide. 15. In the forward currency markets, trades are made for future delivery according to an agreed- upon delivery date, exchange rate, and amount. ANS: True.
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This note was uploaded on 12/07/2011 for the course FINS 3616 taught by Professor Curry during the One '10 term at University of New South Wales.

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tb03 - Kirt C. Butler, Multinational Finance, 3rd edition...

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