1.
A currency swap broker is a swap bank who
A
is strictly an agent to take orders from her client
B
a currency speculator
C
A and B
D
uses his or her own account in completing transactions
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A currency swap broker is a swap bank who
is strictly an agent to take orders from her client
a currency speculator
A and B
uses his or her own account in completing transactions
A back-to-back loan usually involves ...............companies in ..........different countries.
four, four
three, three
A and B
two, two
Which of the following is not part of the new Financial Accounting Standards Board and the Securities and Exchange Commission's rules regarding off balance sheet transactions
all off balance sheet transactions must stop effective January 1, 2004.
the benefits of off balance sheet transactions must be reported.
companies are required to tell investors about the nature and purpose of off balance sheet transactions.
companies must add transactions to their balance sheet when they strand to absorb a majority of the expected benefits or losses from the bulk of expected returns.
Typically, parallel loans involve the following parties
two multinational firms
three multinational firms
two subsidiary firms
A and C
The shortcomings of parallel and back to back loans are
difficulty of finding counterparties
a non-compliance by one of the parties
difficulty of finding exact matching needs
All of the above
The origins of the swap market are usually regarded as an outgrowth of the following financial instruments
parallel loans
back to back loans
commercial paper
A and B
The first currency swap between the World Bank and IBM was arranged in 1981 by
Citicorp
BankAmerica
Solomon Brothers
Merrill Lynch
The basic motivations for swaps are shown below
to provide protection against future changes in exchange rates
to eliminate interest rate risks arising from normal commercial operations
to reduce financing costs
all of the above
The amount of outstanding interest rate swaps is ..............than that of outstanding currency swaps.
smaller
neither larger nor smaller
larger
two times larger
Proper risk management involves a three-stage process. Which of the following is one of those stages
select the right tools to execute the strategy
design an appropriate strategy for managing risks
All of the above
identify where the risks lie
Parallel and back to back loans attained prominence in the 1970s when
Japan had trade surpluses
the British government imposed taxes on foreign currency transactions
the British government devalued its currency
the U.S. had trade deficits
Mortgage companies may use interest rate swaps mainly because
they have long-term debt
they have mortgage loans
A and B
they have short-term liabilities and long-term assets
Interest rate swaps involve counterparties who want to
exchange debt for stock
exchange a short-term loan for a long-term loan
A and B
exchange a floating rate commitment for a fixed rate loan
Interest rate swaps are usually possible because international financial markets in different countries are
perfect
imperfect
A and B
efficient
Financial swaps are used by the following organizations
commercial banks
world organizations
all of the above
multinational companies
Financial swap markets have emerged in recent years because of the following reasons
interest rates fluctuate widely
forward markets may not function properly
all of the above
exchange rates fluctuate widely
Currency swaps overcome the shortcomings of parallel and back-to-back loans because of
their simplicity
their cost effectiveness
A and B
specialized swap dealers and brokers
Currency swaps involve
two currencies
foreign stocks
B and C
one currency
Comparative advantages usually exist because
US banks may not have the same information as British banks have
differences in risk
all of the above
market imperfections.
Call swaptions are attractive when interests are expected to
rise
stay the same
A and B
fall