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Exam 17: International Banking: Reserves, debt, and Risk

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Question 1

True/False

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By the 1990s,the British pound had replaced the U.S.dollar as the world's key currency.

A) True
B) False

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False

Question 2

Multiple Choice

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International trade and investment are most frequently financed by the U.S.dollar and the:

A) Japanese yen
B) British pound
C) Australian dollar
D) Swiss franc

E) B) and C)
F) None of the above

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Question 3

Multiple Choice

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Which of the following is not considered an "owned" reserve?

To reduce losses on developing country loans,commercial banks sometimes sell their loans,at a discount,to a developing country government for local currency which is then used to finance purchases of ownership shares in developing country industries.This practice is known as:

An advantage of international reserves is that they allow countries to sustain temporary balance-of-payments deficits until acceptable adjustment measures can operate to correct the disequilibrium.

Gold is currently the most widely used asset in the international monetary system.

When a deficit nation borrows from the International Monetary Fund,it purchases with its currency the foreign currency required to help finance the payments deficit.

A nation may experience debt-servicing problems because of

Eurocurrencies are deposits,denominated and payable in dollars and other foreign currencies,in banks outside the United States,primarily in London,the market's center.

Which indicator of international debt burden schedules interest and principal payments on long-term debt as a percent of export earnings?

Concerning international lending risk of commercial banks,____ is associated with possible changes in the exchange value of a nation's currency.

How can a bank reduce its exposure to the debt of developing nations?

All of the following exchange-rate systems require international reserves to finance balance-of-payments disequilibriums except:

Created by the International Monetary Fund,special drawing rights (SDRs)are unconditional rights to draw currencies of other nations,thus enabling countries to finance their current-account deficits.

Debt reduction

Eurodollars are:

The greater a nation's propensity to apply tariffs and quotas to key sectors,the greater will be the need for international reserves.

A country with a high debt/export ratio and a high debt service/export ratio would likely be considered as an attractive place in which to invest by foreign residents.

The demand for international reserves is negatively related to the level of world prices and income.

The U.S.dollar,Japanese yen,British pound,and Mexican peso are the major reserve currencies of the international monetary system.