fin/571 Eurodollars are “deposits of U.S. dollars in banks

Eurodollars are “deposits of U.S. dollars in banks located outside the United States.” However, you should emphasize that Eurodollars are not actual U.S. currencies deposited in a bank, but are bookkeeping entries on a bank’s ledger. These deposits are loaned to the Euro bank’s U.S. affiliate to meet liquidity needs, or the funds might be loaned to a corporation abroad that needs the loan denominated in U.S. dollars. Money does not normally leave the country of its origination; merely the ownership is transferred to another country.You agree with the following statement?A dollar-denominated Eurobond (defined in an earlier chapter as: bonds issued in many countries but denominated in a single currency) is free of exchange rate risk for a U.S. investor, regardless of where it is issued. A foreign bond would be subject to this risk if it is not issued in the U.S. The reason is that the Eurobond pays interest in U.S. dollars, but the foreign bond pays interest in the currency of the country in which it was issued.


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