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An exam question paper for the m.sc. Finance and m.sc. International banking and finance courses, specifically for the module ag902 - international banking and capital markets. The paper consists of five questions, each with multiple parts, covering topics such as currency derivatives, arbitrage, eurocurrency market, and eurobonds. Students are required to answer three questions within the given time frame and following certain instructions. Dated may 29, 2009.
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Calculators must not be used to store text and/or formulae nor be capable of communication. Invigilators may require calculators to be reset. Please write clearly as illegible writing cannot be marked. Failure to follow these requirements will lead to a deduction of marks.
To Be Completed (please write clearly)
Registration Number 2008
Finance Int. Banking & Fin
(10 marks) (TOTAL 33 1/3 MARKS)
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Q3. a) Discuss the origins of the Eurocurrency market.
(10 marks)
b) Explain the factors that have been responsible for the growth of the Eurocurrency market. (13 1/3 marks)
c) Explain what is meant by a syndicated loan and assess the advantages and disadvantages of this form of lending. (10 marks) (TOTAL 33 1/3 MARKS)
Q4. a) Differentiate between the foreign bond market and the Eurobond market. (10 marks)
b) Explain the basis of the competitive advantage of the Eurobond market in relation to the domestic bond market. (10 marks)
c) Explain the arrangements for issuing a Eurobond. (13 1/3 marks) (TOTAL 33 1/3 MARKS)
Q5. a) Explain what is meant a euro-bank and discuss the nature of its assets and liabilities. (8 marks)
b) Explain what is meant by LIBOR. (5 marks)
c) Explain the nature and role of the inter-bank market. (10 marks)
d) Explain what is meant by the grey market for Eurobonds. (10 1/3 marks) (TOTAL 33 1/3 MARKS)
Q6. Explain what is meant by a note issuing facility and consider its advantages and disadvantages to the issuer and underwriters. (33 1/3 MARKS)
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Q7. a) Scottish Water plc has negotiated terms for a Eurodollar loan of $800m with a maturity of seven years. The interest on the loan will be LIBOR plus 1.20 per cent, with the loan being reset on a six monthly basis. LIBOR for the next six months is 4.70 per cent. There is also a front end fee of 1.75 per cent of the nominal proceeds from the loan. (10 marks)
b) A company has negotiated an arrangement to issue $120 million in euro-commercial paper. The discount rate is 7.60 per cent calculated on a 360 day basis and the maturity of the paper is 90 days. Determine the proceeds the company can anticipate and the effective rate of borrowing. (10 marks)
c) Explain what is meant by commercial paper and comment on the nature of the issues. (13 1/3 marks) (TOTAL 33 1/3 MARKS)
End of Paper