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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Market makers are companies that make large investments in governmental bonds.

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Question 3

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Commercial banks perform a direct connection function in capital markets.

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Question 4

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An investor purchases the right to receive a specified fixed stream of income from the corporation when he purchases a share of stock.

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Question 5

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A debt loan requires a corporation to repay a predetermined portion of the loan amount at regular intervals regardless of how much profit it is making.

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Question 6

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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 7

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The liquidity of the market is limited in a purely domestic capital market.

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Question 8

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

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Question 9

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The cost of capital is higher in a global market than in a purely domestic capital market.

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Question 10

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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 11

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The risk associated with a portfolio increases as the investor increases the number of stocks in her portfolio.

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Question 12

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

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Question 13

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Systematic risk refers to the movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy.

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Question 14

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The systematic risk is the level of diversifiable risk in an economy.

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Question 15

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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 16

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

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Question 17

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Financial services is an information-intensive industry.

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Question 18

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An integrated international capital market is less volatile compared to a nonintegrated market.

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Question 19

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Hedge funds position themselves to make "long bets" on assets that they think will increase in value.

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Question 20

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Global capital market often lack information about the fundamental quality of foreign investments.

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