International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Why if your income is in local currency and you issue a bond in dollars, this might be a risky decision? Explain
What type of banking risk includes deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks.
a.
Credit Risk
b.
Liquidity Risk
c.
Foreign Exchange Risk
d.
Interest Rate Risk
a) What is the difference between a Foreign Bond and a Eurobond? Explain you answer with examples.
b) Define Equity, Debt and Derivative.
c) Describe the main types of non-bank Financial Institutions (FI). Give two examples of non-bank FI’s that are allowed to accept deposits.
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- Which of the following facilitates trading of short term corporate bonds in an economy? Select one: A. Capital Market B. All of the given options C. Money Market D. Foreign Exchange Marketarrow_forwardBriefly explain how banks can optimize their position through managing their use of currencies?arrow_forwardWhich of the following is not a main core function of the financial system?a. Provide a payments system for the exchange of goods and services.b. Provide mechanisms to separate funds for smaller-scale investmentc. Provide the channels to transfer funds and economic resources across industriesd. Provide ways to manage uncertainty and mitigate risk According to the market segmentation theory of the term structure,a. the interest rate for bonds of one maturity is determined by the supply and demand for bonds of that maturity.b. bonds of one maturity are not substitutes for bonds of other maturities; therefore, interest rates on bonds of different maturities do not move together over time.c. investors' strong preference for short-term relative to long-term bonds explains why yield curves typically slope downward.d. only A and B of the above. Costs associated with the correspondent bank process include:a. Interestb. Currency conversion spreadc. Reputation costsd. Payroll costsarrow_forward
- Which of the following is a matured money market instrument widely used in the USA, Europe and Asia where both cash and securities are the motivators? a. Commercial Papers b. Treasury Bills c. Repurchase Agreements d. Certificate of Depositsarrow_forwardWhat is sovereign risk and what is the difference between rescheduling and repudiation? What is total debt service ratio and how is it calculated? Find the total debt service ratio of a country. See if you can also find an example of a country, or countries, that Western banks currently have exposure to.arrow_forwardExplain foreign exchange risks and operational risks faced by banks operating in the financial sector, and discuss how a risk management tool can be used to mitigate such risks.arrow_forward
- A bank engaged in the foreign currency business is normally exposed to currency risk, but will also be exposed to these additional risks except: a. Liquidity risk b. Market risk c. Credit risk d. Interest rate riskarrow_forwardIn addition to default risk, what key risk do investors in foreign bonds face? Explain.arrow_forwardExplain the following: Liquidity management currency issue lender of last resort financial supervision Management of foreign currency reserves Determination of exchange rate policyarrow_forward
- Exchange rate risk is a. The risk associated with the use of debt financing by companies b. The risk of doing business in a particular industry or environment c. The risk of loss due to imports and exports dominated in other currencies d. The uncertainty about the time element, the price concession, and the conversion to cash. ************************** correct answer please.arrow_forwardDiscuss the similarities and differences between a bond repurchase agreement anda sale and buyback transaction. How do repos done by securities dealers differ from those done by central banks?arrow_forwardWhich below is not one of the factors determining the mix of banks loan? * a. Market size b. Regulations c. Characteristics of currency d. Characteristics of Market Areaarrow_forward
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