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Chapter 12
International Banking Issues and Country Risk Analysis
1. The foreign bank representative office .
A. accepts deposits
* B. obtains local market information
C. makes loans
D. issues letters of credit
E. trades Eurodollars
2. The foreign correspondent bank is a form of .
A. branch banking
B. subsidiary bank
* C. informal banking relationship
D. consortium banking
E. none of the above
3. Which of the following is not a major characteristic of the foreign banking subsidiary?
A. its own charter
B. its own board of directors
C. its own stockholders
* D. all banking officers from the parent bank
E. none of the above
4. The Clearing House Interbank Payments System (CHIPS) .
A. accepts international deposits
B. makes international loans
C. clears foreign exchange transactions
* D. moves dollars between New York offices of financial institutions
E. moves foreign currencies between New York and Hong Kong
5. The Clearing House Payments Assistance System (CHPAS) .
A. accepts international deposits
B. makes international loans
C. clears foreign exchange transactions
* D. moves funds between London offices of most financial institutions which handle foreign exchange trades
E. all of the above
6. An international syndicated loan is made by a group of .
* A. banks from different countries
B. corporations from different countries
C. countries
D. US banks
E. Japanese banks
7. A country risk analysis does not include .
A. political risk
B. economic risk
C. objective criteria
* D. company financial analysis
E. none of the above
8. The World Bank classifies the debt burden of developing countries according to a set of _____ ratios.
A. five
B. four
C. three
D. seven
* E. two
9. Country risk rankings can be found in the following journal ___.
A. IMF Staff Papers
* B. Euromoney
C. the Journal of International Business Studies
D. Multinational Business Review
E. Journal of Finance
10. Two financial service firms and assign letter ratings to indicate the quality of sovereign-government bonds.
A. Dow Jones Company and Moody's Investor Service
B. Standard & Poor's and Dow Jones Company
C. Citibank and Moody's Investor Service
D. J.P. Morgan and Citibank
* E. Moody's Investor Service and Standard & Poor's
11. The international debt crisis of the 1980s started when the following countries could not make international debt payments .
A. Mexico, Brazil, and Taiwan
* B. Brazil, Mexico, and Argentina
C. Argentina, Brazil, and Korea
D. Taiwan, Korea, and Mexico
E. all of the above
12. The Asian financial crisis of 1997 started in .
A. Korea
* B. Thailand
C. Malaysia
D. Indonesia
E. Philippines
13. The causes of the Asian financial crisis fall into one of two theories __ .
A. the fundamental view and the pessimistic view
B. the pessimistic view and the panic view
C. the panic view and the optimistic view
D. the pessimistic view and the optimistic view
* E. the fundamental view and the panic view
14. A country risk analysis involves the following assessment .
A. political risk
B. economic risk
C. legal risk
* D. both A and B
E. A, B, and C
15. To solve the Asian financial crisis of 1997, crisis countries took the following actions .
A. closed many ailing banks
B. cleaned up non-performorming loans
C. encouraged surviving banks to merge with other banks
* D. all of the above
E. none of the above
16. A consortium bank _____ .
A. does not have its own charter
* B. is a permanent group of banks that handle large international loans
C. is usually owned by shareholder banks from the same country
D. is an information arrangement in which a bank in a country maintains deposit balances with banks in foreign countries and looks to them for services and assistance
E. has little contact with its parent banks
17. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) ____.
A. does not include Asian and Latin American banks
B. has vastly increased the multiplicity of formats used by banks in different parts of the world
* C. represents a common denominator in the international payment system and uses the latest communication technology
D. causes banks to execute international payments more expensively
E. is infrequently used
18. Lenders, borrowers, the International Monetary Fund, and the World Bank worked together to overcome the debt crisis of the 1980s by all of the following but ____ .
A. rescheduling debt
B. refinancing debt
C. providing additional loans
* D. creating broad economic policies
E. all of the above
19. All of the following statements apply to Brady bonds except ____ .
A. they are guaranteed by US Treasury bonds purchased by debtor countries
B. they are highly marketable
C. they are largely credited with solving the decade-long global debt crisis of the 1980s
D. originated from the Brady Plan, named after US Treasury Secretary Nicholas Brady
* E. maintain the original debt maturity of the debtor country
20. The panic view theory of the cause of the Asian Financial Crisis of 1997 supports all of the following statements but ____ .
A. the Asian crisis was not caused by problems with economic fundamentals
B. there were no visible warning signs of the impending crisis
C. a swift change in expectations was the catalyst for the crisis
D. the crisis was caused by international investors’ irrational behavior
* E. the IMF’s fiscal and monetary policies after the crisis greatly assisted in containing the spread of the crisis
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