Once Capital Markets Are Integrated, It Is Difficult for a Country

question 70

Multiple Choice

Once capital markets are integrated, it is difficult for a country to maintain a fixed exchange rate. Why?

• A)The market forces may be stronger than the exchange rate intervention that the government can muster.
• B)Portfolio managers will not invest in countries with fixed exchange rates.
• C)Because of the Tobin Tax.
• D)None of the above

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Definitions:

Financial Statements

Materials that present a snapshot of a business's financial health, detailing the balance sheet, income statement, and cash flow statement.

Common Voting Stock

Shares in a corporation that grant the holder the right to vote on corporate matters and potentially receive dividends.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, representing the premium paid over the fair value of the net identifiable assets of the business.

Par Value

The nominal or face value of a stock or bond as stated by the issuing company, which may differ from its market value.