1. Suppose that the current 90 day London interbank offer rate is 11% (all rates are stated on an annualized basis). If next period's LIBOR is 10.5%, then a Eurodollar rate priced at LIBOR plus 1% will cost =
2. Suppose the U.S. government imposes added taxes on interest paid on American bank deposits. What is the likely effect of this regulation?
a) raise Eurodollar interest rates
b) reduce Eurodollar interest rates
c) have no effect
d) capital flight
3. Which one of the following have NOT led to a closer relationship between interest rates in national and Euro currency money markets?
a) tax treaties that reduce the incidence of double taxation on foreign-source income
b) elimination of currency controls
c) reduced cost of transatlantic telecommunications
d) increased government regulation of U.S. interest rates
4. Which one of the following does NOT cause euro currency spreads to be narrower than in domestic money markets?
a) Eurobanks don't have to maintain reserves on Eurodollar deposits
b) Eurobanks face lower regulatory expenses
c) National banks are often required to lend money to certain borrowers at concessionary rates
d) U.S. Federal Reserve bank regulations to cap interest rates charged on loans in the U.S.