Hi. For each of the questions, please provide answers and thorough real-world explanations.

Suppose South Korea limits the amount of deposits made in South Korea that can be used to make loans in other countries. This would be in support of which reason for regulating international banks?

A.

Protecting the safety of depositor funds

B.

Promoting stable growth in money and credit

C.

Providing foreign currency controls

D.

Protecting domestic financial institutions

E.

Restricting the outflow of scarce capital

Suppose Bank of America holds assets denominated in yen of 150 million and liabilities denominated in yen of 90 million. They also have yen purchases of 70 million and yen sales of 50 million. What is Bank of America's net exposure to currency risk?

A.

+ 150 million yen

B.

+ 60 million yen

C.

+ 80 million yen

D.

- 80 million yen

E.

- 60 million yen

Suppose Bank of America holds assets denominated in yen of 150 million and liabilities denominated in yen of 90 million. They also have yen purchases of 70 million and yen sales of 50 million. When would Bank of America experience a loss in the currency market?

A.

When the yen declines in value relative to U.S. dollars

B.

When the yen increases in value relative to U.S. dollars

C.

When U.S. dollar declines in value relative to the yen

D.

When the euro declines in value

E.

None of the options is correct.

Suppose Citibank holds assets denominated in euros of 120 million and liabilities denominated in euros of 180 million. They also have euro purchases of 40 million and euro sales of 70 million. What is Citibank's net exposure to currency risk?

A.

+ 120 million euros

B.

- 90 million euros

C.

+ 90 million euros

D.

- 60 million euros

E.

+ 60 million euros

Suppose Citibank holds assets denominated in euros of 120 million and liabilities denominated in euros of 180 million. They also have euro purchases of 40 million and euro sales of 70 million. When would Citibank experience a loss in the currency market?

A.

When the euro declines in value relative to the dollar

B.

When the dollar increases in value relative to the euro

C.

When the yen increases in value

D.

When the euro increases in value relative to the dollar

E.

None of the options is correct.

Suppose a U.S. bank borrows money in London while a British company borrows money in New York. At the end of the loan period the U.S. company needs pounds to repay their loan and the British company needs dollars to repay their loan. Which of the following might be a good tool for these companies to reduce their currency risk?

A.

Currency futures contract

B.

Currency option contract

C.

Interest rate futures contract

D.

Interest rate swap contract

E.

Currency swap contract

Which of the following is a reason for the growth of the currency swap market in recent years?

A.

It has helped thousands of businesses and governments hedge currency risk.

B.

It has provided central banks with a new instrument to trade.

C.

It has helped shape money and credit conditions in various countries.

D.

It has helped strengthen home nations' economies.

E.

All of the options are reasons for the growth of the currency swap market in recent years.

A multinational company raises short-term credit through London's financial district. They are most likely using:

A.

Eurocommercial paper (ECP)

B.

Depository receipt (DR)

C.

Note issuance facility

D.

Currency swap

E.

None of the options is correct.