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Exam 12: The Global Capital Market

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Question 21

True/False

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An investor purchases the right to receive a specified fixed stream of income from the corporation when he purchases a share of stock.

A) True
B) False

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Question 22

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Borrowers can hedge against foreign exchange risks by entering into a forward contract.

A) True
B) False

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Question 23

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The spread between the Eurocurrency deposit rate and the Eurocurrency lending rate is more than the spread between the domestic deposit and lending rates.

A factor that makes the Eurocurrency market attractive to both depositors and borrowers is its lack of government regulation.

Government limitations are more severe for securities denominated in foreign currencies than for domestic securities.

Eurobonds are _____.

Write a brief note on foreign exchange risks and the cost of capital.

Foreign bonds are sold within the borrower's country and are denominated in the currency of the country in which they are issued.

What are the advantages of global capital market in comparison with a purely domestic capital market?

When an investor purchases a corporate bond,he purchases the right to receive a _____.

Systematic risk refers to the movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy.

When value of U.S.dollars goes down,_____.

Explain Eurobonds with an example.

What are the financial advantages that make the Eurocurrency market attractive to both depositors and borrowers?

An integrated international capital market is less volatile compared to a nonintegrated market.

_____ are sold outside of the borrower's country and are denominated in the currency of the country in which they are issued.

Explain the two basic factors reflected by the relatively low correlation between the movements of stock markets in different countries.

Eurocurrency market is characterized by lack of government regulation.

The liquidity of the market is limited in a purely domestic capital market.

A capital market brings together those who want to invest money and those who want to borrow money.