IV. Internationalization of Financial Markets

Question 1

The extraordinary growth of foreign financial markets has been the result of what?

Answer 1

• large increases in the pool of savings in foreign countries (Japan)
• deregulation of foreign financial markets

Question 2

T or F. The internal bond market of a country can be divided into two parts: the domestic bond market and the foreign bond market.

Answer 2

True

Question 3

_______ is where issuers domiciled in the country issue bonds and where those bonds are subsequently traded.

Answer 3

Domestic bond market

Question 4

This is where bonds of issuers not domiciled in the country are issued and traded.

Answer 4

Foreign bond market

Question 4

T or F. Foreign bonds can be denominated only from the currency of the country it was issued.

Answer 4

False. It can be denominated by any currency.

Question 4

Who are the issuers of the foreign bonds?

Answer 4

Central government and their subdivisions, corporations, and supranationals.

Question 5

T or F. Bonds in the foreign sector of a bond market should only be called by their formal names.

Answer 5

False. They also have nicknames
- Foreign bonds (US Market): Yankee bonds
- Sterling-denominated bonds (UK foreign bond market): Bulldog bonds

Question 6

_____ is an entity that is formed by two or more central governments through international treaties.

Answer 6

supranational

Question 7

Why is supranational important? what does it promote?

Answer 7

It promotes economic development for its member countries

Question 7

Give examples of supranational.

Answer 7

• International Bank for Reconstruction and Development (IBRD) or World Bank
• Inter-American Development Bank

Question 8

What are the distinguishable features of an external bond market?

Answer 8

• they are underwritten by an international syndicate
• at issuance, they are offered simultaneously to investors in a number of countries
• they are issued outside the jurisdiction of any single country
• they are in an unregistered form

Question 9

Who is entitled to issue the Eurodollar bond in any country other than the US if the Eurodollar bond is denominated in U.S. dollars and is issued in Japan by an Australian company?

Answer 9

The Australian company

Question 10

This is also known as the International Bond Market, or more popular as the Eurobond market.

Answer 10

External bond market

Question 10

______ is issued in a currency other than the currency of the country or market in which it is issued.

Answer 10

Eurobond

Question 11

Who issues a Eurobond? and under what category is it denominated?

Answer 11

Issuer: International syndicate
Category: currency of denomination

Question 12

T or F. Eurobonds are attractive financing tools as they give issuers the flexibility to choose the country in which to offer their bond according to the country’s regulatory constraints

Answer 12

True

Question 13

In many countries that have a bond market, the largest sector is often bonds issued by a country’s central government. These bonds are referred to as _______.

Answer 13

sovereign bonds

Question 14

T or F. A government can issue bonds in the Eurobond market or the foreign sector of another country’s bond market.

Answer 14

True

Question 15

T or F. While the currency denomination of
a government security is typically the currency of the issuing country, a government can issue bonds denominated
in any currency.

Answer 15

True.

Question 16

__________ are foreign currencies deposited in banks outside the home country.

Answer 16

Eurocurencies

Question 16

What are the most important Eurocurencies?

Answer 16

Eurodollars

Question 17

What prompted the development of mutual funds specializing in trading in foreign stock markets in the United States?

Answer 17

Increased Interest in foreign stocks.

Question 18

T or F. Foreigners, particularly the Japanese, are only providing funds to corporations in the United States.

Answer 18

False. They also help finance the federal government.