International Finance And Treasury - Study Mode

[#121] Situation in which claims by financial institutions than claims issued by corporations is more considerable for investors is classified as
Correct Answer

(A) asset transformers

Explanation

Solution: Situation in which claims by financial institutions than claims issued by corporations is more considerable for investors is classified as asset transformers. Asset transformation is the process of creating a new asset (loan) from liabilities (deposits) with different characteristics by converting small denomination, immediately available and relatively risk free bank deposits into loans–new relatively risky, large denomination asset–that are repaid following a set schedule.

[#122] Reduction of risk by holding large number of securities in portfolio of assets is classified as
Correct Answer

(A) diversification

Explanation

Solution: Reduction of risk by holding large number of securities in portfolio of assets is classified as diversification. A diversified investment is a portfolio of various assets that earns the highest return for the least risk. A typical diversified portfolio has a mixture of stocks, fixed income, and commodities.

[#123] Bonds which are denominated in dollars and are issued in canters of London and Luxemburg are classified as
Correct Answer

(B) Eurodollar bonds

Explanation

Solution: Bonds which are denominated in dollars and are issued in canters of London and Luxemburg are classified as Eurodollar bonds. A Eurodollar bond is a U.S.-dollar denominated bond issued by an overseas company and held in a foreign institution outside both the U.S. and the issuer's home country. Eurodollar bonds are an important source of capital for multinational companies and foreign governments. A Eurodollar bond is a type of Eurobond.

[#124] Financial intermediaries offering savings plans to individuals and funds are exempted from taxation are considered as
Correct Answer

(C) pension funds

Explanation

Solution: Financial intermediaries offering savings plans to individuals and funds are exempted from taxation are considered as pension funds. Pension funds are investment pools that pay for employee retirement commitments. Funds are paid for by either employees, employers, or both. Corporations and all levels of government provide pensions. The fund managers invest these contributions conservatively.

[#125] Ability of an asset to be converted in to cash very quickly is classified as
Correct Answer

(C) liquidity

Explanation

Solution: Ability of an asset to be converted in to cash very quickly is classified as liquidity. Financial liquidity refers to how easily assets can be converted into cash. Assets like stocks and bonds are very liquid since they can be converted to cash within days. However, large assets such as property, plant, and equipment are not as easily converted to cash.