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AGB 302 Module 4 Chapter 12 Exam Questions and Answers
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AGB 302 Module 4 Chapter 12 Exam Questions and Answers
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AGB 302 Module 4 Chapter 12 ExamQuestions and Answers
Why do capital markets exist? - Answer -Capital markets bring together investors and
borrowers
Investors - Answer -corporations with surplus cash, individuals, and non-bank financial
institutions
Borrowers - Answer -individuals, companies, and governments
markets makers - Answer -the financial service companies that connect investors and
borrowers, either directly (investment banks) or indirectly (commercial banks)
capital market loans can be.... - Answer -equity or debt
Who Are the Main Players in Capital Markets? - Answer -investors, market makers,
borrowers
What makes the global capital market attractive? - Answer -Borrowers benefit from the
additional
supply of funds global capital markets
provide
lowers the cost of capital
the price of borrowing money or the rate of
return that borrowers pay investors
Investors benefit from the wider range of
investment opportunities
diversify portfolios and lower risk
But, volatile exchange rates can make
what would otherwise be profitable
investments, unprofitable
, How Have Global Capital Markets Changed Since 1990? - Answer -Global capital markets
have grown rapidly
the stock of cross-border bank loans was just
$3,600 billion in 1990, $7,859 billion in 2000,
$33,913 billion in 2012
the international bond market has grown from
$3,515 billion in 1997, $5,908 billion in 2000,
$21,979 billion in 2012
Why is the Global Capital Market Growing? - Answer -1. Advances in information
technology
2. Deregulation by governments
Advances in information technology - Answer -the growth of international communications
technology and advances in data processing capabilities
24-hour-a-day trading
so, shocks that occur in one financial market
spread around the globe very quickly
Deregulation by governments - Answer -has facilitated growth in international capital
markets
governments have traditionally limited foreign
investment in domestic companies, and the
amount of foreign investment citizens could
make
since the 1980s, these restrictions have been
falling
Deregulation began in the U.S., then moved to
Great Britain, Japan, and France
Many countries have dismantled capital controls
making it easier for both inward and outward
investment to occur
The 2008-2009 global financial crisis raised
questions as to whether deregulation had gone
too far
What Are the Risks of the Global Capital Markets? - Answer -can have a destabilizing
effect on economies
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