The Global Capital Market

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Question 1
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A capital market brings together those who want to invest money and those who want to borrow money.

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Question 2
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Debt loans include cash loans from banks and funds raised from the sale of corporate bonds to investors.

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Question 3
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The cost of capital is the difference between cost of inputs and outputs.

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Question 4
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By using the global capital market, investors have a much wider range of investment opportunities than in a purely domestic capital market.

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Question 5
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Investors can reduce the level of risk by diversifying a portfolio internationally.

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Question 6
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The relatively low correlation between the movements of stock markets in different countries indicates that countries face different economic conditions.

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Question 7
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Using floating exchange rates will help countries reduce the risk of investing in foreign assets.

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Question 8
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Financial services is an information-intensive industry.

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Question 9
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The cost of recording, transmitting, and processing information has doubled with advancements in technology since 1964.

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Question 10
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Financial services has historically been the most tightly regulated of all industries.

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Question 11
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The Eurocurrency market has been one cause of a decrease in global financial regulations.

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Question 12
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The globalization of capital has been universally seen as a positive development.

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Question 13
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Economist Martin Feldstein has coined the term "hot money" to pertain to long-term capital flows.

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Question 14
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The global capital market often lacks information about the fundamental quality of foreign investments.

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Question 15
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If the international capital market continues to grow, financial intermediaries likely will provide less quality information about foreign investment opportunities.

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Question 16
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Eurocurrency can be created anywhere in the world.

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Question 17
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Banks charge borrowers a lower interest rate on Eurocurrency borrowings than for borrowings in the home currency.

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Question 18
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The spread between the Eurocurrency deposit rate and the Eurocurrency lending rate is more than the spread between the domestic deposit and lending rates.

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Question 19
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Governments give banks less freedom when they deal in foreign currencies.

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Question 20
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Depositors are not protected against bank failures in the Eurocurrency market.

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