Business Degree Certification Practice Test

What term is used to describe U.S. dollars deposited in a bank in Switzerland?

1. Foreign depository receipts

2. International exchange certificates

3. Eurocurrency

4. Eurodollars

The correct answer is: Eurocurrency

The term used to describe U.S. dollars deposited in a bank in Switzerland is Eurodollars. Eurodollars refer specifically to U.S. dollar-denominated deposits held in banks outside the United States, which can include banks in Switzerland and other countries. This financial arrangement allows for the use of U.S. dollars outside of the U.S. banking system, facilitating international trade and investment. Understanding Eurodollars is crucial, as they play a significant role in the global financial system, providing liquidity and enabling banks to manage currency risks due to their presence outside of the domestic U.S. market. Moreover, Eurodollars are not subject to U.S. banking regulations in the same way as domestic deposits, which can offer greater financial flexibility for both depositors and banks. The other provided terms do not specifically denote U.S. dollars in Swiss banks. Foreign depository receipts usually pertain to securities representing shares in foreign companies. International exchange certificates can refer to various financial instruments but do not specifically represent U.S. dollar deposits. Eurocurrency broadly refers to any currency deposited in banks outside of its country of origin, but Eurodollars specifically denote U.S. dollars in that context.