INTERNATIONAL BANKING

1. Which of the following is not included in the definition of International

Banking?

a. A bank accepts deposits of foreign currencies from its residents

b. A bank issues loans in foreign currencies

c. A bank headquartered in one country lends to the residents of another country

d. A bank deposits money in foreign banks

ANSWER: A. A bank accepts deposits of foreign currencies from its residents

2. Which of the following is a bank unique to every country?

a. Bank for International Settlements

b. International Finance Corporation

c. Export Import Bank

d. Asian Development Bank

ANSWER: C. Export Import Bank

3. Which of the following is a bank for all central banks?

a. International Bank for Reconstruction and Development

b. International Monetary Fund

c. Bank for International Settlements

d. Asian Development Bank

ANSWER: C. Bank for International Settlements

4. Which of the following leads to customization of products?

a. Different legal systems

b. Currency risk

c. Host country regulations

d. Cultural differences

ANSWER: D. Cultural differences

5. Which of the following is a legitimate reason for international investment?

a. Dividends from a foreign subsidiary are tax exempt in the United States

b. Most governments do not tax foreign corporations

c. There are possible benefits from international diversification

d. International investments have less political risk than domestic investments

ANSWER: C. There are possible benefits from international diversification

6. Interest-rate parity refers to the concept that, where market imperfections are
few.

a. The same goods must sell for the same price across countries

b. There is an offsetting relationship between interest rate differentials and differentials

in the forward spot exchange market

c. There is an offsetting relationship provided by costs and revenues in similar market

environments

d. None of the above

ANSWER: B. There is an offsetting relationship between interest rate differentials

and differentials in the forward spot exchange market

7. The forward market is especially well-suited to offer hedging protections

against

a. Translation risk exposure

b. Transactions risk exposure

c. Political risk exposure

d. Taxation

ANSWER: B. Transactions risk exposure

8. Suppose that the Japanese yen is selling at a forward discoutn in the forward-
exchange market. This implies that most likely,

a. This currency has low exchange-rate risk

b. This currency is gaining strength in relation to the dollar

c. Interest rates are higher in Japan than in the United States

d. Interest rates are declining in Japan

ANSWER: C. Interest rates are higher in Japan than in the United States

9. All of the following are hedges against exchange-rate risk, EXCEPT

a. Balancing monetary assets and liabilities

b. Use of spot market

c. Foreign-currency swaps

d. Adjustment of funds commitments between countries

ANSWER: B. Use of spot market

10. Balance of Payment is a _______________.

a. Statement

b. Account

c. Summary

d. Both Statement and Account

ANSWER: D. Both Statement and Account

11. _____________ investor makes risk free profit.

a. Hedger

b. Speculator

c. Arbitrageur

d. Bull

ANSWER: C. Arbitrageur

12. Two institutes created by BWS are ____________.

I. IMF II. World Bank III. Asian Development Bank IV. NATO

a. I & IV

b. II & III

c. I & II

d. III & IV

ANSWER: C. I & II

13. Fixed Exchange Rate is permanently fixed.

a. The statement is true

b. The statement is false

c. The statement is either true or false

d. The answer is none of the above

ANSWER: B. The statement is false

14. Bid Rate is a rate at which bank __________.

a. Sells
b. Negotiates

c. Trades

d. Buys

ANSWER: D. Buys

15. Ask Rate is a rate at which bank ____________.

a. Buys

b. Sells

c. Negotiate

d. Trade

ANSWER: B. Sells

16. Which of the following can explain the concept of International Banking?

a. A bank in one country, which undertakes activities that involves it in some form of
financial and banking business (e.g., loans/financing, advisory services, issuance of
securities/bonds/sukuks) in home country.

b. The transactions with foreigners and domestic residents relating to: Deposit and
lending/financing in domestic &, local currencies.

c. The transactions with foreigners and domestic residents relating to: Facilitating
international trade finance for clients.

d. The transactions with foreigners and host residents relating to: Offering investment
banking services such as borrow or lend money in Eurocurrency markets & underwrite
Eurobonds and foreign bonds.

ANSWER: C. The transactions with foreigners and domestic residents relating to:
Facilitating international trade finance for clients.

17. Who is/are the possible party(s) involved in International Banking?

a. Institutional Clients such as Perodua Sdn Bhd

b. Individual Clients such as Air Asia Berhad

c. Corporate - Coca-Cola Sales Berhad

d. None of the above

ANSWER: C. Corporate - Coca-Cola Sales Berhad

18. What is/are the difference(s) between local and foreign banks

a. Regionally coverage

b. Typically of deposits they accept

c. The medium of exchange accepted

d. All of the above

ANSWER: D. All of the above

19. What are the essentials of International Banking?

a. Integration, Liberalization & Globalization

b. Institutional, Corporate & Individual Clients

c. Information services, Prestige & Banking

d. None of the them

ANSWER: A. Integration, Liberalization & Globalization

20. Allows interchange of values, aligns with rapid development & generates
interdependence

a. Liberalization

b. Integration

c. Connectivity

d. Globalization
ANSWER: A. Liberalization

21. Connectivity - integrated financial systems improves risk-sharing

opportunities, specializes in the most productive sectors - increases economic
efficiency.

a. Liberalization

b. Integration

c. Connectivity

d. Globalization

ANSWER: B. Integration

22. No bias - equality, free competition, increases efficiency in the long run.

a. Liberalization

b. Integration

c. Connectivity

d. Globalization

ANSWER: A. Liberalization

23. What kind of integrations could happen through the operation of International
Banking?

a. National Integration

b. Knowledge Integration

c. Regional Integration

d. All of the above

ANSWER: D. All of the above

24. A headquarter bank in a home country can offer financing to residents of host
country through:

a. Cross-border lending

b. Local lending by affiliates established in the host country

c. Lending booked by an affiliate

d. All of the above

ANSWER: D. All of the above

25. The euro is the name for ______________.

a. A currency deposited outside its country of origin

b. A bind sold internationally outside of the country in whose currency the bond is
denominated

c. A common European currency

d. A type of sandwich

ANSWER: C. A common European currency