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Finance 4550 > Chapter 2 In Class Notes > Flashcards

Chapter 2 In Class Notes Flashcards

1
Q

capital markets vs money markets

A

capital markets are long term and money markets are short-term

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2
Q

two types of capital markets

A

debt and equity

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3
Q

2 types of euromarkets

A

euro$Markets & Euro Bond markets

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4
Q

List 3 reasons euromarkets are popular

A

Lack of regulation
anonymity
private

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5
Q

immediately exchange currencies

A

Foreign exchange

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6
Q

List 2 money markets that are international

A

Euro commercial papers

euro CD’s

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7
Q

What are the 4 main areas in international markets

A
  1. Foreign Exchange
  2. Money Markets
  3. Bond Markets
  4. Equity Markets
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8
Q
  1. Electronic, over the counter. There is no location. It is dominated by large banks. Used by Multi National corporations, pension funds, insurance companies, mutual funds, and governments. Anybody that has need for large amounts of money.
  2. large and liquid. inexpensive
  3. Banks - intermediary - market maker provide liquidity, quote bid and ask prices.
  4. Government - they manipulate the value of their currency
A

Foreign Exchange market- inter bank market

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9
Q

Why reasons would the government have in foreign exchange markets

A

They manipulate value of their currency

Store and Value

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10
Q

What are the 3 biggest currencies that account for more than 50%.

A

USD, Euro, and Janpanese

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11
Q

2 ways currencies can be reported

A

Indirect and direct

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12
Q

explain direct currency reporting

A

expresses value of foreign currency in terms of domestic currency

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13
Q

What does EURUSD=1.25 mean

A

1 Euro = 1.25 USD

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14
Q

What is the base currency on the previous card

A

EUR

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15
Q

Explain indirect

A

expresses value of domestic currency in terms of a foreign currency

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16
Q

If we have a bid by 1.5511-1.5514 what does that mean.

A

1.5511 is the bid. 1.5514 is the ask

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17
Q

How do you find the spread on the previous card.

A

(Ask - Bid)/Ask

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18
Q

Does the purchaser use the ask or the bid price.

A

The ask

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19
Q

Does the seller use the ask or the bid price

A

the bid

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20
Q

How to find actual amount paid toward USD purchase

A

USD’s wishing to purchase * asking price + commission on other currency = #### BRL (the Brazilian currency)

21
Q

How to find midpoint

A

(Bid + Ask)/2

22
Q

How to find hypothectical amount paid without transaction costs

A

USD wishing to purchase * midpoint = #### BRL

23
Q

relate one foreign currency to another foreign currency

A

cross rate

24
Q

How to find transaction costs

A

Actual amount paid toward USD Purchase - hypothetical amount paid without transactions

25
Q

How to find transaction cost percent

A

transaction costs/hypothetical amount without transaction costs

26
Q

What are the 3 international classification codes

A
  1. non-resident in domestic currency (cross-border)
  2. Resident in foreign currency (foreign exchange)
  3. non-resident in foreign currency (foreign exchange, cross-border)
27
Q

What is Euro $

A

Foreign currency transaction in USD

28
Q

What is the Euro Euro

A

foreign currency transaction in Euro

29
Q

What is the Euro Yen

A

foreign currency transaction in Yen (JPY)

30
Q

What is the Euro Pound

A

foreign currency transaction in Great Britain Pound

31
Q

What is the LIBOR

A

Rate charged by banks in overnight markets to borrow money from each other.

32
Q

In the past LIBOR > T-Bill rate, but

A

now you can find some corporate rates that are lower. This never happens. That is saying a corporation has less risk than a treasury bill

33
Q

International Debt Market

A 
Med Term ( 1-5 years)
Long Term (> 5 years)
34
Q

Floating rate- coupon linked to LIBOR

A

Euro credit

35
Q

Euro - note has a _____ rate

A

fixed

36
Q

Foreign bond

A

foreign issuer in local currency

Ex: us govt issues GBP (great britain pound) in England

37
Q

Yankee Bond

A

USD in US by foreign government

38
Q

Samurai Bond

A

JPY in Japan by foreign government

39
Q

Euro Bond

A

Foreign issuer in Issuer’s currency

Ex: US MNC issuing USD bond in Japan

40
Q

Euro bonds avoid regulatory scrutiny.

A

True because they don’t abide by only one countries regulations.

41
Q

unregistered bond vs registered

A

You can not have unregistered bonds in the US. Unregistered means nobody is tracking them.

42
Q

An unregistered bond is not called a bearer bond

A

False

43
Q

About _____ currencies are fixed rate

A

75%

44
Q

20% of currencies are at a ______ rate

A

floating rate

45
Q

____% are convertible bonds.

A

5%

46
Q

Issued simultaneously in multiple regions. Can be in multiple currencies

A

Global Bonds

47
Q

What is the global equity daily

A

$30 billion

48
Q

Foreign exchange market amount daily

A

1 trillion daily

Finance 4550 (7 decks)

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