Question

In: Finance

Which one of the following statements is most correct about eurocurrencies? They are traded primarily outside...

Which one of the following statements is most correct about eurocurrencies?

They are traded primarily outside of Europe.

They are traded within the country of their denomination.

They are always issued in euros.

They are traded primarily in Europe.

They are traded outside the country of their denomination.

Which one of the following statements is correct about reinvoicing centers?

		They are commonly used by small firms
		They are subsidiaries of muntinational corporations and they consolidate currency hedging
		They add a mark-up to customer deliveries
		They are illegal in most countries
		They are subsidiaries of muntinational corporations created to increase sales

Toyota Motors of Japan has outsourced some of its business operations to TCS of India. This is an example of

		A licensing agreement
		A foreign direct investment
		An export agreement
		A joint venture
		A managerial contract

Expert Solution

Ques 1) Statement most correct about Euro currency is They are traded outside the country of their denomination.

Reasoning:

Eurocurrency is the type of currency held on deposit or traded outside its home market, i.e. other than the country which issues the currency. For Instance, A US dollar-denominated deposit in a Singapore Bank is Euro currency.

Statement 1)They are traded primarily outside of Europe: False

Euro here is just an analogy used and has nothing to do with Europe. A Euro prefix can be applied to any country currency for instance. we have Euro-yen when a yen is deposited in a Brazilian bank

Statement 2) They are traded within the country of their denomination: False

As discussed above, the Euro currency is traded or deposited outside the country of its denomination.Therefore, the statement is incorrect.

Statement 3) They are always issued in euros: False

We can use Euros prefix with any currency provided it is been traded outside its home market. For major Eurocurrency includes US dollar, yen, British pound, and Euros.

Statement 4) They are traded primarily in Europe: False

Euro currency are not Europe bound and can be for any country. Thus the statement is incorrect about EuroCurrency

Statement 5) They are traded outside the country of their denomination: True

The eurocurrency is the financial instrument traded outside of the country where it is legal tender, as discussed above in other parts. Therefore, the same is correct and makes the right the option for question

jeff jeffy answered 1 year ago

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