46) Capital markets in foreign countries:

A. offer lower returns than those obtainable in the domestic capital markets.
B. provide international diversification.
C. in general are becoming less integrated due to the widespread availability of interest rate and currency swaps.
D. all of the choices.



47) A bond sold simultaneously in several different foreign capital markets, but denominated in a currency different from the country in which the bond is issued, is called a(n):

A. international capital bond.
B. world bond.
C. floating bond.
D. Eurobond.



48) Which of the following statements about exchange rates is true?

A. Exchange rates were fixed prior to establishing a floating-rate international currency system, and all countries set a specific parity rate for their currency relative either to the Canadian or to the U.S. dollar.
B. Day-to-day fluctuations in exchange rates currently are caused by changes in parity rates.
C. A floating-rate international currency system has been operating since 1973.
D. All of the choices.



49) A spot transaction occurs when one currency is:

A. immediately exchanged for another currency.
B. traded for another at an agreed-upon future price.
C. deposited in a foreign bank.
D. exchanged for another currency at a specified price.



50) The interplay between interest rate differentials and exchange rates such that both adjust until the foreign exchange market and the money market reach equilibrium is called the:

A. balance of payments quantum theory.
B. arbitrage markets theory.
C. purchasing power parity theory.
D. interest rate parity theory.



51) If the quote for a forward exchange contract is greater than the computed price, the forward contract is:

A. undervalued.
B. at equilibrium.
C. overvalued.
D. a good buy.



52) An important (additional) consideration for a direct foreign investment is:

A. political risk.
B. maximizing the firm’s profits.
C. attaining a high international P/E ratio.
D. all of the above.



53) One reason for international investment is to reduce:

A. price-earnings (P/E) ratios.
B. beta risk.
C. portfolio risk.
D. advantages in a foreign country