FINANCE FIN 4604 FINAL. ALL EXAM REVISION QUESTIONS AND CORRECT ANSWERS (ALREADY GRADED A+) (2024 UPDATE)
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FINC - Finance
Institution
FINC - Finance
FINANCE FIN 4604 FINAL. ALL EXAM REVISION QUESTIONS AND CORRECT
ANSWERS (ALREADY GRADED A+) (2024 UPDATE).
London Interbank Offered Rate (LIBOR), - ANSWER- the reference rate in London for
Eurocurrency deposits.
There is a LIBOR for Eurodollars, Euro-Canadian dollars, Euroyen, and even euros....
FINANCE FIN 4604 FINAL. ALL EXAM REVISION QUESTIONS AND CORRECT
ANSWERS (ALREADY GRADED A+) (2024 UPDATE)
London Interbank Offered Rate (LIBOR), - ANSWER- the reference rate in London for
Eurocurrency deposits.
There is a LIBOR for Eurodollars, Euro-Canadian dollars, Euroyen, and even euros.
Euro Interbank Offered Rate (EURIBOR) is the: - ANSWER- rate at which interbank deposits
of the euro are offered by one prime bank to another in the euro zone.
Forward Rate Agreements is an: - ANSWER- interbank contract that involves two parties, a
buyer and a seller.
The buyer agrees to pay the seller the increased interest cost on a notational amount if interest rates
fall below an agreed rate.
The seller agrees to pay the buyer the increased interest cost if interest rates increase above the
agreed rate.
Forward rate agreements can be used to: - ANSWER- -Hedge assets that a bank currently owns
against interest rate risk.
-Speculate on the future course of interest rates.
At the end of the agreement period of a Forward Rate, - ANSWER- the loser pays the winner
an amount equal to the present value of the difference between the settlement rate (SR) and the
,agreement rate (AR), sized according to the length of the agreement period and the notational
amount.
FRAs are designed so: - ANSWER- the buyer will have the same future value of interest
expense for any value of LIBOR at maturity of the FRA.
Bearer bonds are: - ANSWER- bonds with no registered owner. As such they offer anonymity,
but they also offer the same risk of loss as currency
Registered bonds are: - ANSWER- bonds where the owner's name is registered with the issuer.
For example: U.S. security laws require Yankee bonds sold to U.S. citizens to be registered.
Eurobonds sold in the primary market in the United Staes: - ANSWER- may not be sold to U.S.
citizens. Of course, a U.S. citizen could buy a Eurobond on the secondary market.
A global bond is: - ANSWER- a very large international bond offering by a single borrower
that is simultaneously sold in North America, Europe, and Asia.
Global bonds denominated in U.S. dollars and issued by U.S. corporations trade as Eurobonds
overseas and domestic bonds in the U.S.
Straight Fixed-Rate Debt are: - ANSWER- "plain vanilla" bonds with a specified coupon rate
and maturity and no options attached.
Since most Eurobonds are bearer bonds, coupon dates tend to be annual rather than semi-annual.
vast majority of new international bond offerings are straight fixed-rate issues.
Floating-Rate Notes are: - ANSWER- -Just like an adjustable rate mortgage
, -Common reference rates are 3-month and 6-month U.S. dollar LIBOR.
-Since floating-rate notes reset every 6 or 12 months, the premium or discount is usually quite
small. ...as long as there is no change in the default risk..
Dual-Currency Bonds is a: - ANSWER- -straight fixed-rate bond with interest paid in one
currency and principal in another currency.
-Japanese firms have been big issuers, with coupons in yen and principal in dollars
-Good option for an MNC financing a foreign subsidiary
International Bond Market Credit Ratings focus on: - ANSWER- default risk, not exchange
rate risk.
Standard & Poor's Emerging Markets Database classifies a stock market as "emerging" if it meets
at least one of two general criteria: - ANSWER- -It is located in a low- or middle-income
economy as defined by the World Bank.
-Its investable market capitalization is low relative to its most recent GNI figures.
The equity markets of the developed world tend to be: - ANSWER- much more liquid than
emerging markets.
One measure of liquidity for a stock market is: - ANSWER- The turnover ratio=(Stock Market
Transactions/ Market Capitalization)'
The higher, the more liquid
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