Reference no: EM13855021

1. Factoring require that the bank have a very good knowledge of the industry and the credit worthiness of clients.

TRUE or FALSE

2. A bank confirming a letter of credit issued by another bank is called the advising bank.

TRUE or FALSE

3. Forfeit financing and factoring are very similar.

TRUE or FALSE

4. In a D/A draft or time draft bankers are instructed to collect funds upon delivery of the merchandise to the importer.

TRUE or FALSE

5. A revocable letter of credit offers better protection to exporters.

TRUE or FALSE

6. When importers buy in a consignment basis they assume all the risk.

TRUE or FALSE

7. International collections are the more complex involvement of banks in international trade.

TRUE or FALSE

8. A revolving credit agreement:

a. Permits clients to borrow on demand an unlimited amount

b. Permits clients to borrow on demand up to a certain maximum amount

c. Is generally a committed credit facility

d. A and C

e. B and C

9. Balance of payments borrowings:

a. Involve the financing of infrastructure projects

b. Are primarily concerned with budgetary deficits

c. Concern the financing of current-account deficits not offset by private capital inflows

d. A and B

e. A, B and C

10. The role of the Agent in loan syndication includes:

a. Assuring compliance with the terms of the loan agreement

b. Collecting funds from participating banks and disbursing to the borrower

c. Fixing of the interest rate against the floating base as per the agreement

d. Computing interest and principal due from the borrower and distributing to lenders

e. All of the above

11. An unadvised guidance line:

a. Assist bank clients in managing their financial needs

b. Is disclosed to clients as soon as it is approved by the bank

c. Is increased at the bank's discretion

d. Is decreased at the bank's discretion

e. C and D

12. Government borrowing abroad may be perform by:

a. The central bank and/or the ministry of finance

b. Government-owned authorities or corporations

c. Parastatals

d. As needed by local banks

e. A, B and C

13. The growth of infrastructure financing is linked to material advantages over other more traditional forms of lending because:

a. Makes economically viable large projects that otherwise will outstrip the financial capabilities of the firms involved

b. Enhances sponsors borrowing capacity in the view of prospective lenders

c. It may permit a greater degree of bank risk reduction through loan portfolio diversification

d. None of the above statements are true

e. All of the above statements are true

14. For banks, the most lucrative of infrastructure financing is:

a. Trade finance income

b. The open account income

c. Consignment income

d. Fee income

e. A, B and C

15. The basic transactions services related to the financing of international trade are:

a. Cutting information and transaction costs for importers and exporters

b. Making payments for international transactions

c. Providing foreign exchange and risk-shifting services

d. All of the above

e. None of the above

16. The basic credit services provided by international banks to finance the international trade are:

a. Direct credit to imposters and/or exporters

b. Providing credit backstops for some of the risks involved in international trade

c. Cutting information and transaction costs for importers and exporters

d. A and B

e. A, B and C

17. Usually foreign treasury securities are _________________ and are __________________

a. Available in bearer form, subject to withholding tax on interest paid

b. Not available in bearer form, subject to withholding tax on interest paid

c. Available in bearer form, not subject to withholding tax on interest paid

d. No available in bearer form, not subject to withholding tax on interest paid

e. None of the above are valid choices

18. Spot contracts bind two parties to deliver one currency for another usually within ______________ business days

a. 10

b. 2

c. 5

d. 1

e. 30

19. Spot contracts are sold by:

a. Brokers

b. Dealers

c. Banks

d. Government agencies

e. A, B and C

20. In the Euromarket a nonbank borrower is expected to pay a _________________ of _______________ over __________________

a. Discount, ¼ % Libor

b. Premium, ¼ % Libor

c. Discount, ¼ % Libid

d. Premium, ¼ % Libid

e. Discount, ½ % Libid

21. Euro Commercial Paper (ECP):

a. Is exempt from maturity restrictions

b. Is exempt from use-of proceeds restrictions

c. Is offered in bearer form

d. A, B and C

e. A and C

22. The Eurocurrency marker is:

a. Informal

b. Unregulated

c. Over the counter

d. None of the above are true

e. All of the above are true

23. The original Eurodollar depositors included:

a. The Soviet Union

b. England

c. France

d. Eastern-bloc countries

e. A and D

24. Banks will charge the _____________ price for selling a currency to its customers and pay the  ___________ price for buying a currency from its customers

a. Bid, ask

b. Ask, bid

c. Binding, forward

d. Forward, binding

e. Bid, forward

25. Some syndicated loans use deliveries to protect borrowers and lenders from interest rate risk.

TRUE or FALSE

26. Over subscribed loan participants are prorated among interested participating banks.

TRUE or FALSE

27. When a syndicated loan is over subscribed, the borrower will have to make with a lower amount.

TRUE or FALSE

28. After signing the loan agreement, lead banks usually wait three months before collecting management fees.

TRUE or FALSE

29. Syndicated loans are kept on banks' books because they are fairly illiquid.

TRUE or FALSE

30. For relatively unknown companies, sums raised through syndicated lending tend to be smaller than borrowing directly from large commercial banks.

TRUE or FALSE

31. The Eurobond market is subject to self-imposed standards of practice

TRUE or FALSE

32. Yankee bonds, Samurai bonds, and Bulldog bonds are all foreign bonds

TRUE or FALSE

33. Foreign bonds must comply with the capital market registration an distribution requirements of the countries where they are issued

TRUE or FALSE

34. Average maturity of Eurobonds is usually more than 10 years

TRUE or FALSE

35. Eurobond are usually listed in the New York stock exchange

TRUE or FALSE

36. An example of a coupon swap is a swap between a rate indexed to U.S. Treasuries and one indexed to Libor

TRUE or FALSE

37. A Collateral Debt Service Obligation (CDO) is not considered a credit derivative

TRUE or FALSE

38. No principal is exchanged in interest rate swaps

TRUE or FALSE

39. Credit Default Swaps (CDSs) are essentially insurance policies

TRUE or FALSE

40. Sellers of CDSs (Credit Default Swaps) benefit if a company defaults on its debt obligations

TRUE or FALSE

41. The U.S. bookbuilding method of underwriting is used in the Euromarket without any significant differences

TRUE or FALSE

42. The process of convergence towards an international regulatory norm of international equity markets was finally achieved in the year 2011

TRUE or FALSE

43. International Accounting Standards does not appears to be a target for additional international regulations

TRUE or FALSE

44. Although it is highly regulated the Euro-equity market has a low cost of issuance, and the presence of a large pool of international investment funds

TRUE or FALSE

45. To succeed in international business a financial firm must offer three basis services: sales coverage, research, and market timing

TRUE or FALSE

46. The U.S. bookbuilding method of underwriting is used in the Euromarket but with some important differences:

a. The market does not require any waiting period while registration procedures are completed

b. The lead manager is unable to rely upon the pre-pricing order book as much as in the United States

c. It is more difficult to maintain a fixed offering price during the underwriting period, as some underwriters will sell their unsold shares in the interdealer market

d. None of the above

e. All of the above

47. Issuers use the Euro-equity market because:

a. They want to tap a different investor base

b. They want to tap a larger investor base

c. Their domestic markets may be insufficient for their needs

d. They want to avoid domestic regulations and expenses

e. All of the above

48. The world equity markets are not nearly so well integrated as the debt markets because:

a. Debt issues are "commodities" defined by quality, maturity, and the yield curve

b. Swap markets permit arbitrage activity that eliminates price differences for the same commodity in other markets

c. Equities are different because each stock is different

d. A, B and C

e. A and B

49. Issuers may tap equity markets in other countries through ________________ to supplement domestic investor interest

a. An international tranche

b. A consensus agreement

c. An underwritten agreement

d. B and C

e. A and B

50. From the issuer's point of view, the negatives associated with the U.S. underwriting procedures are:

a. The market risk stays with the seller of the shares while the issue is prepared for the market

b. The result of an underwriting is not assured and the seller must rely on the underwriter's best efforts in distributing the shares

c. Underwriting procedures are designed to obtain the highest price for the seller of the securities

d. A and B

e. B and C

51. A Eurobond is:

a. Not necessarily issued in euros

b. Not necessarily issued in Europe

c. Issued by the European Central Bank

d. Held mostly by foreign banks operating in Europe

e. A and B

52. When foreigners issue yen-denominated bonds registered with the Japanese Ministry of Finance they are called:

a. Imperial bonds

b. Tokyo bonds

c. Samurai bonds

d. Foreign bonds

e. Asian bonds

53. The Eurobond market is:

a. A very traditional market

b. Highly regulated

c. Mostly for European companies

d. Over 100 years old

e. Highly innovative

54. Eurobonds and foreign bonds together are referred to as:

a. International bonds

b. Global bonds

c. Worldwide bonds

d. Flexible bonds

e. Transfer bonds

55. The Eurobond market is:

a. Virtually unregulated

b. Subject to self-imposed standards of practice

c. Listed on the London and Luxembourg stock exchange

d. All of the above

e. A and C

56. The risks of derivate include:

a. Counterparty, risk, liquidity risk, market risk

b. Operational risk, settlement risk, systemic risk

c. Unsystematic risk, operational risk, settlement risk

d. A and B

e. A and C

57. Currency swaps:

a. Involve only the contractual exchange of interest payment obligations

b. Are mutual obligations to exchange principal and interest payment obligations

c. Involve only the exchange of principal obligations

d. Are always exercised on the first day of the month

e. Are always exercised on the last day of the month

58. Credit default swaps (CDSs) are essentially:

a. Fixed rate obligations

b. Floating rate obligations

c. Insurance policies

d. Forward rate agreements

e. All of the above

59. Banks use swaps:

a. To lower their cost of funds, improve lending profits, and manage funding gaps

b. For swapping opportunities from their loan book

c. To satisfy requirements of clients

d. All of the above

e. None of the above

60. Competitors in the market for swaps and other derivatives include:

a. Banks and investment banks

b. Finance companies and insurance companies

c. Dealers from the U.S., U.K., continental Europe, and Asia

d. A and C

e. A, B and C