Limba Engleza Si Comunicare de Special It Ate 2

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ENGLISH FORBUSINESS

COMMUNICATION 2

A Course for 1st Year Distance Learning Students

(The Faculty of Finance, Insurance, Banking and

Stock Exchange)


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The ENGLISH FOR BUSINESS COMMUNICATION course is designed for 1st

year students of the Faculty of Finance, Insurance, Banking and Stock Exchange

enrolled in the Distance Learning Programme.

The aim of the course is to develop integrated communication skills in English, thus

enabling the students to develop their comprehension skills, as well as to present ideas

clearly on a variety of financial and business topics.

COURSE OBJECTIVES:

The main course objectives are:

to help students revise vocabulary structures; to familiarize students with financial and business concepts; to develop students comprehension of business and economics texts; to improve students ability to discuss financial matters; to develop students oral and written communication skills; to develop study and self-assessment skills.

COURSE STRUCTURE:

The course is structured into 4 units, each of which has a self-assessment test and

answer key appended to it.

STUDENT ASSESSMENT:

The course provides 2 categories of assessment tools:

end-of-unit self-assessment tests; tests administered by the professor.

GRADING:

two professor-administered written tests: 50%; homework file: 50%.


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COURSE REQUIREMENTS:

deadlines for homework files and self assessment-tests submission will berigorously met;

plagiarism and dishonesty will result in a zero (0) for that particular testpaper/ homework file.


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CONTENTS

Unit 1 RecruitmentObjectivesReadingVocabularySkills Focus WritingSelf-Assessment TestUnit 1 Answer Key

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Unit 2 The Foreign ExchangeObjectives

Lead-InReadingVocabularySelf-Assessment TestUnit 2 Answer Key

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Unit 3 Stocks and SharesObjectivesLead-In

ReadingVocabularySelf-Assessment TestUnit 3 Answer Key

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Unit 4 DerivativesObjectivesLead-InReadingVocabularySelf-Assessment TestUnit 4 Answer Key

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Bibliography .............................. 44


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UNIT 1

RECRUITMENT

OBJECTIVES

This unit will help you to:

prepare yourselves for obtaining the job you desire; write a Curriculum Vitae according to the commonly accepted European

criteria;

understand how information is structured in a letter of application; write a letter of application.

READING

1. Think of methods you consider useful in handling the stress of looking for ajob. Then read the article below and see if the strategies you thought of are

mentioned.

2. Read the text Beating Job Search Burnout and match the headings belowto the right paragraph:

a) Anticipate rejection;b) Assess your skills;c) Find an office;d) Stay positive;e) Take breaks.

Beating Job Search Burnout

As any job seeker can attest, searching for a position can be a full-time

task. If you're doing it right, the process will take up most of your time. And to

make matters worse, it doesn't have the benefit of a paycheck at the end of the


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week to make it all worthwhile. It can be hard not to get discouraged as you

wait for the phone to ring, check your email every hour, or run home to find

no new messages on your answering machine.

When you start to feel like you just can't send one more resume, write

another cover letter, or charm your way through your next interview, don't

despair. Every job seeker faces burnout at some point during the process. But

the more you manage your stress level, the easier it will be for you to stay

focused and not feel overwhelmed.

Are you curious how can you retain both your sanity and your motivation

during this challenging time? Here are some effective tips for how to beat job

search burnout:

____________________

The job search process is especially stressful if you are still unclear about

what type of job you want. Until you've honestly examined your interests,

skills and values, you're not likely to land to the right job. Knowing yourself

and the type of job you seek will help you to stay focused. It will also enhance

your networking efforts and interview performance. Additionally, it will

prevent you from wasting time and energy on positions that aren't the right fit

for you.

____________________

While no one likes to get rejected, try not to take it personally. No matter

how qualified you are, so are many other candidates. Getting passed over for a

job is not really about you, but about the staffing needs of the organization.

Keep in mind that the decision is not a reflection of who you are as a person.

____________________

Everyone deserves a day off now and then, even from a job search. Don't

feel guilty about taking an hour, a day, or even a week off to do something fun

for yourself, getting a break from the grind. Time off will help you recharge

your battery. You'll come back to your job search with a fresh perspective and

renewed motivation.

____________________

It can be depressing to spend your day at home in your pajamas, especially

when everyone else has somewhere to go each morning. For this reason, it's


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important for you to "go to work" as well. Find a location such as your local

library, career center or coffee shop, where you can spend several hours each

day dedicated to your job search. Bring a laptop or make sure they have the

computer capabilities that will meet your needs such as Internet access, email

and/or a printer. Also, a cell phone will enable you to check your messages, as

well as make any necessary calls.

____________________

The job search isn't all bad. It's merely a time of uncertainty, which can be

exciting. At any moment, the phone could ring and you might be offered a job

that takes you around the world or enables you to do what you love. Get

comfortable with ambiguity by remembering that your next big break is right

around the corner.

adapted from BeatingJobSearchBurnout.How to deal with the stress of

finding that perfect job by Jennifer Bobrow Burns

VOCABULARY

1. Match the words and expressions in the box with their explanation. There may be

more than one explanation for the same term:

assess; job seeker; burnout; paycheck; networking; positive; staff; break;land to something.

a. an opportunity for improving a situation, especially one which happensunexpectedly;

b. extreme tiredness usually caused by working too much;c. the group of people who work for an organization;d. meeting people who might be useful to know, especially in your job;e. get or achieve something good, especially in a way which seems easy or

unexpected;

f.

the amount of money a person earns;g. fully assured, confident;


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h. a time away from work or your regular activity;i. to value, to make a valuation of something;

j. someone who is looking for a job.

2. Put each of the words or phrases in the box in its correct place in the sentences

below:

assignment deadline employee employer goals interviews

job CVs seeker letters of application

The (1). search is like any other research project or (2). you have to

complete for school. You need to clarify your (3). in advance, have a(4)., and put it on your calendar. It is important to take pride in your

accomplishments, and reward yourself as you achieve each small goal you've set for

yourself. Even if as a job (5). you can't control the number of (6) . you

are offered, you can control the number of networking phone calls you make,

(7). and (8) . you send out, and hours you spend conducting research. If

you get organised, taking down detailed information about an upcoming job interview

whenever a potential (9). calls and not missing appointments, you increase

your chances of becoming an (10). in a good company.

SKILLS FOCUS WRITING

The European Curriculum Vitae

Study the CV below to see how information is presented and structured and complete

it by using the following headings:

Additional information Education and training

Work experience Personal information

Personal skills and competences Annexes

Desired employment/ Occupational field


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Curriculum

Vitae1.

First name/ Surname Cynthia Westland

Address 72 Harpenden Road, London, N9 8JETelephone 020 7434 8832 Mobile: 086 2222222

Fax 020 7434 8832

E-mail [email protected]

Nationality British

Date of birth December 17 1976

Gender Female

2. A Sales Representative position with an international trade organisation

based in London.

3.

2002-2004

Occupation or position held Sales Representative

Main activities and

responsibilities

Making contacts with existing and potential international customersServing and advising customers, ordering and displaying stock

Organising product presentations together with the marketing

department

Name and address of

employer

Chic, Paris, France

Type of business or sector International Sales womens fashion

1997-2001

Occupation or position held Sales Assistant

Main activities and

responsibilities

Serving and advising customers, ordering and displaying stock

Using the computerised till and taking payments

Name and address of

employer

No Name Shop, Fulham

Type of business or sector Sales womens fashion

4.

Dates 1996-2000

Title of qualification awarded BA (Hons) Business Studies and French

Principal

subjects/Occupational skills

covered

Subjects included marketing, industrial relations, economics, business law,

commercial French, decision making and strategic management.

Specialist areas: personnel and marketing. Final year thesis on qualitative

labour market research.

Name and type of

organisation providing

education and training

University of North London

Dates 1993-1996

Principal


covered

Subjects included French, Economics and History.
mailto:[email protected]:[email protected]


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Name and type of



St Francis Comprehensive School, Fulham

Level in national or

international classification

A levels - French (grade C), Economics (D), History (D)

Dates 1993

Principal


covered

Subjects included French, English, History and Maths.

Name and type of



St Francis Comprehensive School, Fulham

Level in national or

international classification

GCSEs - French(B), English (C), History (C), Maths (D)

5. ..

Mother tongue English

Other languages

Self-assessment Understanding Speaking Writing

European level Listening Reading Spoken interaction Spoken production

French C2 Professional user C2 Professional user C2 Professional user C2 Professional user B2 Independent userGerman B1 Independent user A2 Basic user A2 Basic user B1 Independent user A1 Basic user

(*)Common European Framework of Reference (CEF) level

Social skills and competences Communication and teamwork skills acquired while fulfilling my previous job

responsibilities.

Organisational skills and

competences

In my quality as a Sales Representative for Chic, Paris, I organised product

presentations, supervising the members of the staff involved and selecting the

materials.

Computer skills and

competences

Good knowledge of Microsoft Office packages, particularly Word, Excel and

Power Point

6. References available upon request

7. You will find a letter of application attached to the Curriculum Vitae


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Senders name

Address (Street number and name/

City and zip code/ Country)

Date of writing

Receivers name

Title

Company name

Company address (Street number and name/ City and zip code/ Country )

Dear Mr./ Ms.

1st paragraph: Explain why you are writing; identify the position and your source of

information.

2nd paragraph: Outline your strongest qualifications and show how they match the

position requirements. As much as possible, provide evidence of your related work,

extracurricular, and academic experiences and accomplishments. Refer to your

enclosed CV.

3rd paragraph: Convince the employer that you have the personal qualities and

motivation to succeed. Relate your interests and qualities to your knowledge of the

company.

4th paragraph: Express your availability for an interview and indicate how and when

you can be contacted. Thank the reader for his/her consideration.

Sincerely,

(Handwritten signature)

Your name, typed

The Letter of Application

A letter of application is a standard document and you have to know how to writesuch a professional document in order to increase your chances of being selected for a

job interview. Below you can see what are the elements that have to be included in aletter of application and the order in which they appear, as well as their right place onthe page.


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Cynthia Westland

72 Harpenden Road

London N9 8JE

UK

15th

September

Michael Page

Sales Manager

FashionWorld UK

83 Oak Street

London N6 3JE

UK

Dear Mr. Page

() Although I had an excellent relationship with my previous employers, I felt that my career

prospects with them were limited and that I could make a better use of my skills and

professional experience with a more dynamic company. This is why I would particularly enjoy

the chance to be one of the members of your team.

() I am writing to apply for the position of Sales Representative which you advertised last

week in the International Herald Tribune.

() If you consider that my qualifications and previous experience match your requirements, I

should be available to attend a job interview at any time.

() As you will notice on my enclosed curriculum vitae, my personal and professional interests

match the requirements of the job you are offering. I have 7 years experience in sales in the

fashion industry, two of which have been in France as a Sales Representative. My

responsibilities have included all types of sales-related activities, serving and advising

customers, making contacts with clients and organizing product presentations.

Yours sincerely,

Cynthia Westland

Cynthia Westland

Now read the letter of application below and try to put the jumbled paragraphs in the

right order:


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SELF-ASSESSMENT TEST

Complete the sentences below by adding the right preposition where one is needed:

a. Searching . a job can be a tiresome and overwhelming process, so it isimportant that people learn how to manage their stress level while looking

. the right position.

b. Every job seeker faces ., so you shouldnt think that you are the onlyperson feeling discouraged from time to time during the job seeking process.

c. If done well, the task of finding a job can take . most of peoples time.d. While waiting . the phone to ring job seekers should not despair, any

phone call can be the one they were hoping ..

e. You shouldnt start seeking . a job before you carefully assess yourself,making a list of your strengths and weaknesses.

f. If you do not perform a proper research of the company where you want to work,this will prevent you . being able to impress your would-be employer with

your analytical knowledge.

g. Before applying for a job, you should consider carefully whether that job reallymeets . your personal and professional needs.

h. The sooner you understand that getting passed . for a job shouldnt betaken as a personal offence, the faster you will be able to try again.

i. Coming back . your job search efforts after a rejection can be difficult, butit is the only way in which you can succeed in finding the perfect position.

j. Job seekers who know how to manage . their stress level have betterchances in succeeding to impress their potential employers during job interviews.


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UNIT 1 ANSWER KEY

Reading

Ex. 2.

The headings should be placed in the text in the following order: Assess your skills;

Anticipate rejection; Take breaks; Find an office; Stay positive.

Vocabulary

Ex. 1.

1.i; 2.j; 3.b; 4.f; 5.d; 6.g; 7.c; 8.a,h; 9.e.

Ex. 2.

1.job; 2.assignment; 3.goals; 4.deadline; 5.seeker; 6.interviews; 7.CVs; 8.letters of

application; 9.employer; 10.employee.

Skills focus writing

European Curriculum Vitae

The headings should appear in the CV in the following order:

1. Personal information;

2. Desired employment/ Occupational field;

3. Work experience;

4. Education and training;

5. Personal skills and competences;

6. Additional information;

7. Annexes.


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Cynthia Westland72 Harpenden Road

London N9 8JE

UK

15th

September

Michael Page

Sales Manager

FashionWorld UK

83 Oak StreetLondon N6 3JE

UK

Dear Mr. Page

I am writing to apply for the position of Sales Representative which you advertised last week

in the International Herald Tribune.

As you will notice on my enclosed curriculum vitae, my personal and professional interests

match the requirements of the job you are offering. I have 7 years experience in sales in the

fashion industry, two of which have been in France as a Sales Representative. Myresponsibilities have included all types of sales-related activities, serving and advising

customers, making contacts with clients and organizing product presentations.

Although I had an excellent relationship with my previous employers, I felt that my career

prospects with them were limited and that I could make a better use of my skills and

professional experience with a more dynamic company. This is why I would particularly enjoy

the chance to be one of the members of your team.

If you consider that my qualifications and previous experience match your requirements, I

should be available to attend a job interview at any time.

Yours sincerely,

Cynthia Westland

Cynthia Westland

Letter of application

The correct order of the paragraphs is presented in the letter of application below:

Self-assessment test

a. for, for; b. ; c. up; d. for, for; e. ; f. from; g. ; h. over; i. to; j. .


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UNIT 2

THE FOREIGN EXCHANGE

OBJECTIVES


recognize the basic functions and activities performed by the FOREX Market; have a go at acquiring highly specialized market terminology used by foreign

exchange dealers.

LEAD-IN

1. Read the words below. If you are not familiar with their meaning, you are

advised to use a dictionary:

banknotes

barter

coinage

fiduciary issue

forgery

gold reserves

issue

mint

monetary policy

promissory notes

sound money

watermark


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2. Use the words to complete the text The history of the foreign exchange market:

The History of the Foreign Exchange

In the days before money was created, traders exchanged one type of goods for

another. This was called (1) .. trade. Later, countries produced units made of gold.

This was called (2) .. and was produced in a (3) .. . Originally, the total value of

metal coins produced by a country was backed by its (4) .. and was called (5) ...

However, in some countries the amount of gold held by a country does not

correspond to the value of coins in circulation, but may instead represent securities.

This system is called the (6) .. .

The main disadvantage of using money made of metal was that it was difficult to

transport. So, traders began using documents which promised to pay a sum of money

in exchange for goods. These documents were called (7) .. .

Banks also began to (8) .. papers to clients to confirm that they had deposited

money in the bank. These papers were issued in standardized amounts and were

called (9) .. .

To prevent (10) .. or the copying of banknotes, banks adopted a number of

security devices such as a design on the sheets of paper used to make money. This

design is called a (11) .. .

Nowadays, each country has its own system of safeguarding the currency. This

system is called (12) .. .

(from Pratten, J., Banking English, Unit 5, Foreign Exchange and Money

Matters,p. 57)


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READING

Read the text below:

Foreign Exchange

Foreign exchange dealing is, as the name implies, the exchange of the currency of

one country for the currency of another. The rate of exchange is the value of one

unit of the foreign currency expressed in the other currency concerned.

With the growth of global trade, many companies need foreign currencies to pay

producers in other countries. A British company with a supplier in Germany, for

example, will probably use sterling to buy Euros from its bank in order to pay an

invoice from the German company. The bank buys the Euros from another bank at a

particular rate and provides them to its customer at a higher rate, thus making a

profit. Similarly, a bank may make gains on buying and selling currencies on the

inter-bank market. Making a profit on the transaction is the basic idea of foreign

exchange dealing.

Currencies can be bought or sold in the FOREX market either for immediate

delivery, that is at the spot rate, or for delivery later, at a forward rate. The

forward market is useful for companies, since if a company knows that it will need a

particular foreign company to pay a bill in four weeks time, for example, a forward

deal enables it to protect itself against future adverse movements in the exchange

rate which would have otherwise had the effect of making the foreign goods more

expensive. When dealing in foreign exchange, normally by telephone, the bank

quotes both the selling and buying rate of a currency at which it is prepared to

transact business. Settlement for a spot transaction is two working days later.

Thus if a contract is made on Monday, the seller delivers the amount sold and

receives payment on Wednesday. Similarly if the contract is made on Tuesday,

value is Thursday. Currency traded in this way is delivered to the buyers account


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with a bank in the main centre, or one of the main centres, for the currency in

question. In the case of sterling, for example, this is London. The buyer decides the

bank where his or her account is to be credited.

The foreign exchange dealer fills in a dealing slip containing basic information such

as the date and time of the deal, the contracting party, the amount and rate agreed on,

the date ofsettlement, and the place ofdelivery of the currency dealt in. As soon as

a foreign exchange transaction has been carried out, both banks send a written

confirmation containing the basic information mentioned above. Any discrepancies

may thus be detected quickly.

A bank holding debts or claims in a foreign currency is itself exposed to an

exchange risk, unless the debts and claims neutralize each other by being of equal

size and by having roughly the same maturity dates. Dealers therefore aim for a

balanced total position. If the amount of a banks claims in dollars, for example, is

larger than the total debts in dollars, than the bank has a long position, but if the

debts are larger than the claims, the bank is short in dollars. As long as the total

position balances, there is no risk for the bank.

(from Corbett, J., English for International Banking and Finance, Unit 3 Foreign

Exchange, pp. 18-19 )

VOCABULARY

1. Match the words in bold face type in the text above with their Romanian

counterpart. Remember, though, that most professionals worldwide use these words

in English.

1.to have a balanced position

2. settlement

3. forward rate

a) scaden

b) rata unei tranzacii la vedere

c) creane


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4. spot rate

5. to be short in dollars

6. value date

7. dealing slip

8. claims

9. maturity

10. to have a long position

d) stingerea datoriei, plata

e) a avea excedent valutar

f) a avea acoperire

g) data valutei

h) a avea deficit valutar (pe dolari)

i) rata unei tranzacii la termen

j) foaia de tranzacie

2. Complete the text below with the following words: big figure, spot, value date,

base currency, deal slip, cable, spread, cross rates.

Currency dealing

When dealers talk about a (1) .. deal, they mean a purchase or sale of one currency

for another, with the delivery date two working days after the dealing day. The

delivery date is often called the (2) .. , the day funds are delivered to your account.

When referring to currency prices, a dealer may ask for a (3) .. , the sterling/dollar

quote, or he may want to know the (4) .. ,the first three digits of a quote. When

giving quotes between two currencies, dealers may refer to the (5) .. , that is the

currency quoted first. If more than two currencies are involved, dealers talk about

(6) .. , the rate between currency A and currency B, calculated from the market

rates between A and B and C.

Before making a purchase or sale, dealers will calculate the (7) .. , their margin on

the deal. On completion of a deal the dealer will complete the (8) .. , a piece of

paper which records vital details about the deal, i.e. amount, currency, and

counterparty.


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Match each of the terms below with the right explanation:

a) netting

b) best order

c) hot money

d) Bretton Woods system

e) premium

f) fluctuate

g) issue

h) fiduciary issue

i) firm

j) promissory note

k) pip

l) The Royal Mint

m) legal tender

n) intra-day limit

o) coinage

p) forward

r) spread

s) devaluation

t) sound money

u) intervention

v) future

w) swap

x) option

y) intaglio

1. A contract obliging one party to buy, and the other to sell, a specific currency fora fixed price at a future date.

2. The minimum price change in floating foreign exchange rates.3. The production of money backed by securities, not gold.


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4. A set of monetary units made stamped metal.5. The practice of dealing only for the net amounts in a currency where a

counterparty has a two-way cash-flow.

6. A contract which gives the holder the right to purchase property or assets during aspecific period at an agreed price.

7. A method of fixing the major currencies against the dollar, used until 1973.8. A method of producing banknotes which creates a complex design and is difficult

to counterfeit.

9. Lowering the value of a nations currency.10. To move up and down.11. The participation of a government or bank to cause change.12. To put into circulation.13. A written promise to pay an amount of money to another party.14. A forward contract traded on an exchange.15. A purchase order placed with a dealer to be executed when a currency or

commodity becomes available.

16. A currency which is appreciating on the market.17. The number of points between a banks bid rate and its offered rate in currency

dealing.

18. The limit set by bank management on the size of each dealer or counterpartysposition.

19.The acceptable form of currency in a country.20. Money with dependable value, backed by gold reserves.

21. British agent producing coins by stamping metal.

22. An agreement by two parties to exchange a series of cash-flows in the future.

23. Speculative money moving in and out of a particular market, changing in value.

24. The front end fee paid for an option.


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UNIT 2 ANSWER KEY

Lead-in

Ex. 2

1. barter; 2. coinage; 3. mint; 4. gold reserves; 5. sound money; 6. fiduciary issue;

7. promissory notes; 8. issue; 9. banknotes; 10. forgery; 11. watermark; 12. monetary

policy.

Vocabulary

Ex. 1.

1 f ; 2 d ; 3 i ; 4 b ; 5 h ; 6 g ; 7 j ; 8 c ; 9 a ; 10 e.

Ex. 2.

1. spot; 2. value date; 3. cable; 4. big figure; 5. base currency; 6. cross rates;

7. spread; 8. deal slip.


1 p; 2 k; 3 h; 4 o; 5 a ; 6 x; 7 d; 8 y; 9 s; 10 f; 11 n; 12 g; 13 j; 14 v; 15 b; 16 i; 17 r;

18 n; 19 m; 20 t; 21 l; 22 w; 23 c; 24 e.


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UNIT 3

STOCKS AND SHARES

OBJECTIVES


understand the role of the major financial instruments traded on the Stockexchanges;

be able to identify the risks involved in stock exchange activities; connect the current economic/financial environment with the toxic assets

market.

LEAD-IN:

Fill in the gaps in the text below with the words that follow:

a) stock prices; b) investment banking; c) basic ownership; d) going public;

e) underwriting; f) common stock; g) initial offer; h) underwriters; i) market value;

j) initial public offering (IPO); k) preferred stock; l) tombstone.

Issuing New Stock

The first time a companys stock is issued, the company is said to be (1) .. . This

means that the owners of the company are selling part of it to the general public. The

formal name for this process is (2) .. . Usually, a company offering stock for sale

places a special kind of advertisement in the financial press, called a (3) .. . This

provides potential investors with specific information about the company. It includes

price per share, which is the (4) .. of the stock. The price of shares when offered for

the first time is the (5) .. .


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The offering of shares is dealt with by the (6) .. , who actually buy up all the shares

for sale and sell them on the market. This is referred to as (7) .. and is handled by

the (8) .. division of asecurities firm.

Companies can issue two kinds of stock-the first offers owners a share in the direct

success or failure of the business and represents the (9) .. of a corporation . This

type of stock is called (10) .. . Common stock owners benefit directly through

increases in (11) .. . The other type of stock offers holders dividends which are

distributed to them before common stock holders and is called (12) .. .

(fromPratten, J.,Banking English, OUP, 2001, p. 68)

READING

The paragraphs in the text below have been scrambled. Reconstruct the logical

sequence, using as prompts the items in italics.

Bonds

(A) Companies finance most of their activities by way of internally generated cash

flows. If they need more money they can either sell shares or borrow, usually by

issuing bonds. More and more companies now issue their own bonds rather than

borrow from banks, because this is often cheaper: the market may be a better judge

of thefirms credit worthiness than a bank, i.e. it may lend money at a lower interest

rate. This is evidently not a good thing for the banks, which now have to lend large

amounts of money to borrowers that are much less secure than blue chipcompanies.

(B) Governments, of course, unlike companies, do not have the option of issuing

equities. Consequently, they issue bonds when public spending exceeds receipts

from income tax, VAT, and so on. Long-term government bonds are known as gilt-

edged securities, or simply gilts, in Britain, and Treasury Bonds in the US. The

British and American central banks also sell and buy short-term (three month)


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Treasury Bills as a way of regulating the money supply. To reduce the money

supply, they sell these bills to commercial banks, and withdraw the cash received

from circulation; to increase the money supply they buy them back, paying with

newly created money which is put into circulation in this way.

(C)Most bonds are bearer certificates, so after being issued (on the primary market),

they can be traded on the secondary bond market until they mature. Bonds are

therefore liquid, although of course their price on the secondary market fluctuates

according to changes in interest rates. Consequently, the majority of bonds on the

secondary market are traded either above or below par. A bonds yield at any

particular time is thus its coupon (the amount of interest it pays) expressed as a

percentage of its price on the secondary market.

(D)For companies, the advantage of debt financing over equity financing is that

bond interest is tax deductible. In other words, a company deducts its interest

payments from its profits before paying tax, whereas dividends are paid out of

already-taxed profits. Apart from this tax-shield, it is generally considered to be a

sign of good health and anticipated higher future profits if a company borrows. On

the other hand, increasing debt increases financial risk: bond interest has to be paid,

even in a year without any profits from which to deduct it, and the principal has to

be repaid when the debt matures, whereas companies are not obliged to pay

dividends or repay share capital. Thus companies have a debt-equity ratio that is

determined by balancing tax savings against the risk of being declared bankrupt by

creditors.

(E) Bond-issuing companies are rated by private ratings companies such as

Moodys or Standard & Poors, and given an investment grade according to their

financial situation and performance, Aaa being the best, and C being the worst, i.e.

nearly bankrupt. Obviously, the higher the rating, the lower the interest rate at which

a company can borrow.

(fromMcKenzie, I.,English for Business Studies, pp. 81-82)


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VOCABULARY

1. Match the expressions on the left with the definitions on the right:

1. equity financing A. a security whose owner is not registered with the issuer2. debt financing B. easily sold (turned into cash)3. bearer certificate C. the rate of interest paid by a fixed interest security4. liquid D. the rate of income an investor receives, taking into5. par account a securitys current price6. coupon E. issuing bonds7. yield F. issuing shares

G. nominal or face value (100%)

2. Replace the words in bolded italics in the text that follows with the items listed

below:

a) bring about g) backerb) bilateral h) promisesc) amount i) vitald) receiver j) related toe) demand k) safeguardf) entities l) regard

Bonds

A bond is issued by aguarantor(1) usually a bank or an insurance company, on

behalf of an exporter. It is a guarantee to the buyer that the exporter will fulfill his

contractual (2) obligations. If these obligations are not fulfilled, the guarantor

undertakes (3) to pay a sum of money to the buyer in compensation.

Bonds are usually required in connection with (4) overseas contracts, or with the

supply of capital goods and services. When there is a buyers market, the provision

of a bond can be made an essential(5)condition for the granting of the contract.


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Bonds have, for some time, been required by Middle Eastern countries, but

nowadays many other countries require them. For instance, most international aid

agencies, such as the World Bank or the European Development Fund, and most

government purchasing organizations (6) in the developing world, plus major

purchases of goods and services in the oil sector now require bonds from sellers.

Banks are usually prepared to assist their customers by giving or becoming a party

to bonds, guarantees and indemnities. Once issued a bank will incur(7) a liability to

honor(8) that guarantee and must consider its customer undoubted for the sum (9)

involved. However, banks will always take a counter-indemnity from their

customers in order to protect (10) themselves against a possible claim from the

beneficiary.

In some cases, guarantees can be issued direct to the beneficiary (11) in which case

the issuing bank will specify that its own laws apply. In other cases, the beneficiary

may insist, or a local law may stipulate (12), that the guarantee be issued by a local

bank against the issuing banks counter-indemnity.

( fromPratten, J., Banking English, pp. 24-25)


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Read the newspaper article below, and try to identify the correct meaning of the

following items that appear in the article.

1. regulator (2)A. a provisionB. an entity which has the right to controlC. something you can draw a straight line with

2. prospectus (2)A.perspectiveB. someone who prospectsC. an advertisement in the financial press announcing a future sale of stock

3. reflotation (3)A. re-launching a boat in the waterB. rebukingC. re-launching shares

4. administrator (5)A. caretaker of the buildingB. a foreclosure officialC. a person who is in charge of re-organizing a failing business

5. audited numbers (6)A. correct figuresB. official results of an auditC. numbers everyone has heard about

6. the groups legal claimsA. the legal provisions that allow Parmalat to fight backB. the sum of money that Parmalats stakeholders claim as compensationC. the problems encountered by the Group of 20 after the Group of 8 have

resigned

7. junior team (12)A. a brand new teamB. a team that is made up of undergraduates on an internship programme


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C. a team comprised of inexperienced professionals8. first-half accounts (20)

A. financial statements for the first semesterB. Mr Bondis better halfC. the footings on the bottom-line

9. Parmalats suppliers (24)A. the internet providers for the groupB. the cattleC. the dairies that supply Parmalat with raw material in this trade

10. signs of fading impetus (26)A. signs of newly gained momentumB. signs of a weak impactC. the impression that the initial quick pace of the inquiry has slackened

11.dilatory pace ( 27)A. lively stepB. slowing down motionC.peace and quiet

12.claims for damages (29)A. Parmalats request for receiving compensation for the losses incurred during

the inquiry

B. the regulators claims for justiceC. the money you are entitled to receive from your insurer in case your car is

damaged

13.300-odd page (2)A.page 300, which seems a strange oneB. only the odd-numbered pages from the 300 pp. documentC. approximately 300 pages

14.last-gasp questions (9)A. latest queriesB. the last thing Mr Bondi asked before passing awayC.puzzling poser

15.By flexing its muscles (16)A.by asking pointless questions with the purpose of showing offB.by putting difficult questions


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C.by doing bodybuilding at the gym16.he is likely to try (18)

A. he enjoys tryingB. he will definitely tryC. he will probably try

17.This it is endeavouring to do (20)A. this is what Consob tries to doB. this is what Parmalat strive to do because they have to do itC. this is a great enterprise for Consob

18.Why would Consob hold up Mr Bondi ? (10)A. Why would Consob try to delay the proceedings ?B. Why would Consobs thugs break into Parmalats premises?C. Why would the armed attack influence the inquiry?

Parmalat

A curious delay

A deadline came and went on March 31st. That was the date by which Consob,

Italys stockmarket regulator, might have approved a 300-odd page prospectus that

would have paved the way for the reflotation of Parmalat, a dairy-products group

that imploded after a huge fraud was uncovered late in 2003. Instead, at the last

minute, Consob faxed a long list of questions to Enrico Bondi, (5)Parmalats special

administrator, who has been pushing hard to get the firm back on its feet. The effect

has been to derail Parmalats timetable for recovery- audited numbers on which it

was relying are now considered out of date. Consobs approval is needed not just for

the flotation of new shares, but also for creditors to vote on the next stages of Mr

Bondis strategic plan.

Many of Consobs last-gasp questions had been answered long ago, and concerns

related to the (10)status of the groups legal claims were simply perplexing to

Parmalat. But why would Consob hold up Mr Bondi? Officially it is saying nothing,

but two theories, neither flattering, have emerged.


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One points to the relatively junior team appointed by Consob to handle the Parmalat

case and asks whether it has been able to keep pace with the ambitious timetable set

by Mr Bondi and the groups creditors at a meeting in March 2004. The second

remembers Mr Bondis criticisms of Consob, (15)among others, when he first

announced how the huge fraud was done and expressed his amazement that no one

had spotted what was going on. By flexing its muscles, is the regulator trying to

teach Mr Bondi a lesson?

Yet Mr Bondi has not given up. He is likely to try to persuade Consob to make a

new effort that might allow a flotation in June or early July. This would depend on

Parmalat quickly producing (20)audited numbers for all of 2004 instead of just first-

half accounts. This it is endeavouring to do. But Consob would also have to show

itself willing to move much faster towards approving the prospectus. Realistically,

approval will have to be given within a month if the flotation is to happen before the

summer.

That would certainly please creditors, including Parmalats suppliers, some of whom

have lost (25)patience and begun to sell their rights to shares in the refloated group.

But it would also send an important signal to foreign observers of the Parmalat mess.

Italys initial responses to the fraud were decisive and effective, but lately there have

been worrying signs of fading impetus. Consobs dilatory pace is one. Another is the

lack of real progress by the investigating magistrates in Parma, one of whom

recently announced his departure. Their slowness is holding up claims for damages,

which (30)cannot be launched before investigators have finished their work. Consob

still has the chance to reinvigorate one important part of Parmalats administration.

If it cannot, or will not, do that, Italys business culture may suffer another painful

blow.

The EconomistApril 9th 2005, p. 50 Business


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UNIT 3 ANSWER KEY

Lead-in

1 d; 2 j; 3 l; 4 i; 5 g; 6 h; 7 e; 8 b; 9 c; 10 f; 11 a; 12 k.

Reading

The order in which the paragraphs should be arranged is the following one: A, E, C,

D, B.

Vocabulary

Ex. 1.

1 F; 2 E; 3 A; 4 B; 5 G; 6 C; 7 D.

Ex. 2.

1 g; 2 b; 3 h; 4 j; 5 i; 6 f; 7 a; 8 l; 9 c; 10 k; 11 d; 12 e.

Self-assessment test1 B; 2 C; 3 C; 4 C; 5 B; 6 A; 7 C; 8 A; 9 C; 10 C; 11 B; 12 A; 13 C; 14 A; 15 A;

16 C; 17 B;18 A.


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UNIT 4

DERIVATIVES

OBJECTIVES


become familiar with the basic characteristics ofderivatives, comparativelyrecent banking products that have generated the latest banking and financial

crisis;

define the basics offutures, options and swaps; understand the importance ofhedging as a protection strategy against sharp

fluctuations in the price;

grasp the difficulty of the attempts to regulate the derivatives market.

LEAD-IN

The text below is aimed at introducing the topic of derivatives. Read it to find out

basic information related to these banking products:

Futures, Options and Swaps

Futures

Every weekday, enormous amounts of commodities, currencies and financial

securities are traded for immediate delivery at their current price on spot markets.

Yet there are also futures markets on which contracts can be made to buy and sell

commodities, currencies and various financial assets, at a future date (e.g. three, six

or nine months ahead) but with the price fixed at the time of the deal. Standardized

deals for fixed quantities and time periods (e.g. 25 tons of copper to be delivered

next June 30) are called futures; individual, non-standard, over-the-counter deals


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between two parties (e.g. 1.7 billion yen to be exchanged for dollars on September

15, at a rate set today) are called forward contracts.

Hedging and speculating

Futures, options and other derivatives exist in order that companies and individuals

may attempt to diminish the effects of, or profit from, future changes in commodity

and asset prices, exchange rates, interest rates, and so on. For example, the prices of

foodstuffs such as wheat, maize, cocoa, coffee, tea and orange juice are frequently

affected by floods, and other extreme weather conditions. Consequently many

producers and buyers of raw materials want to hedge, in order to guarantee next

seasons prices. When commodity prices are expected to rise, future prices are

obviously higher than (at a premium on) spot prices; when they are expected to fall

they are at a discount on spot prices.

In recent years, especially since financial deregulation, exchange rates and interest

rates have also fluctuated wildly. Many businesses, therefore, want to buy or sell

currencies at a guaranteed future price. Speculators, anticipating currency

appreciations or depreciations, or interest rate movements, are also active in

currency futures markets, such as the London International Financial Futures

Exchange (LIFFE, pronounced life).

Options

As well as currencies and commodities, there is now a huge futures market in stocks

and shares. One can buy options giving the right-but not the obligation- to buy and

sell securities at a fixed price in the future. A call option gives the right to buy

securities (or a currency, or a commodity) at a certain price during a certain period

of time. A put option gives the right to sell an asset at a certain price during a certain

period of time. These options allow organizations to hedge their equity investments.

For example, if you think a share worth 100 will rise, you can buy a call option

giving the right to buy at 100, hoping to sell this option, or to buy and resell the

share at a profit. Alternatively, you could write a call option giving someone else the

right to buy the shares at 100: if the market price remains above 100, no one will

exercise the option, so you earn the premium.


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On the contrary, if you expect the value of a share that you own to fall below its

current price of 100, you can buy a put option at 100 (or higher); if the price falls,

you can still sell your shares at this price. Alternatively you could write a call option

giving someone else the right to buy the share at 100: if the market price of the

underlying security remains below the options exercise price or strike price, no one

will take up the option, and you earn the premium.

Swaps

Options are merely one type of derivative instrument, based on another underlying

price. Many companies nowadays also arrange currency swaps and interest rate

swaps with other companies or financial institutions. For example, a French

company that can borrow francs at a preferential rate, but which also needs yen, can

arrange a swap with a Japanese company in the opposite position. Such currency

swaps, designed to achieve interest rate savings, are of course open to the risk of

exchange rate fluctuations. A company with a lot of fixed interest debt might choose

to exchange some of it for another companys floating rate loans. Whether they save

or lose money will depend on the movement of interest rates.

( fromMackenzie, I.,English for Business Studies, CUP 1997, pp. 85-86)

After reading the text above, decide whether the following statements are true (T)

or false (F).

1. Futures and options are traded on the commodities exchanges all over the world.

2. The difference between futures and forward contracts is that the former are

standardized deals while the latter are individual over-the-counter agreements

between two parties.

3. Derivatives exist so that companies and individuals should ban any further

fluctuations in the price of commodities or exchange rates.

4. When commodity prices are expected to plummet, future prices are always lower

than spot prices.

5. Speculators can make money on currency futures if there is no change in the

exchange or interest rates.6. Stocks and shares are never quoted on the futures markets.


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7. If you anticipate that a stock price will firm up, possible option strategies include

buying a call, which you will be able to sell at a profit, and writing(i.e. selling) aput,

which will never be exercised, so you earn the premium.

8. On the contrary, if you reckon that a share price will fall, you can buy a put, so you

would be able to buy those shares at below the market price, and write a call, which

will be exercised to earn the premium.

9. Underlying price means the price of that stock on the black market.

10. The risk with currency and interest rate swaps is that the exchange and interest

rates fluctuations may run counter your predictions.

READING

The text below is meant to explain the concept of banking deregulation (a

collocation that most students wrongly translate into Romanian as neregulile din

bnci instead of providing the correct version dereglementarea sistemului

bancar).

What is Banking Deregulation?

Banking deregulation is the removal of regulations governing the banking system. It

reversed laws that were set up un the 1930s, taking away much of the federal control

that was put into place as part of theNew Deal.

Banking Regulation

In 1993, the Glass-Steagall Act was passed, establishing the Federal Deposit

Insurance Corporation (FDIC) and creating banking reforms and regulations that

governed financial institutions in the United States, covering issues from interest

rates to speculation.

First Act of Deregulation

In 1980, the Depository Institutions Deregulation and Monetary Control Act was

passed, eliminating the regulation of interest rates in savings accounts, among other

things.


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Eliminating Separation

In 1999, the Financial Services Modernization Act was passed eliminating

regulations that created a separation among different branches of finance, like banks,

mortgage companies, insurance companies, and commercial banking institutions.

Results of Deregulation

Deregulation led to finance companies taking over other companies. Big banks

bought up one, two, three and more smaller banks. Financial institutions also

became mega institutions which covered private banking, investing, mortgages and

insurance.

Controversy

Banking Deregulation is a complex issue that many blame for todays suffering

economy, demonstrating the fine line between government involvement and

government interference.

(from www.ehow.com)

VOCABULARY

Find the appropriate synonyms from the list below for the highlighted words in the

text that follows.

a) assess b) danger c) changed

d) turnaround e) extended f) profits

g) identified h) demise i) allocate

j) pushed k) wipe out l) clear view

m) movements n) exposures o) allowances

p) reveal


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Trading Risks in International Banks

(Back-up information: In the mid-1990-s, various companies, local governments and

financial institutions made spectacular losses with derivatives. The most famous was

Barings Bank, which was bankrupted when a single trader in Singapore lost over $ 1

billion by speculating disastrously on futures and options on the Nikkei 225 stock

index, which is traded in Osaka and Singapore.)

The failure (1) of Barings Bank brought the risks (2) faced by banks trading in

international markets into sharp focus (3). Worries about trading risks were already

growing as banks diversified (4) their business from lending and deposit taking, to

dealing in securities, foreign exchange, bonds and derivatives.

New proposals by the Basle Committee on Banking Supervision will unveil (5)

details of important changes to the way banks monitor (6) risk and set aside (7)

capital to meet shifts (8) in the market value of their trading positions.

Deregulation of financial markets since the early 1980s and increased competition

have squeezed(9) margins (10) on traditional bank business. At the same time, the

growth of the derivatives markets has made it cheaper and easier for banks to move

into trading, an area which in the past was the preserve of securities houses. This

switch (11) in focus has transformed(12) the character of the risks faced by banks.

To old problems, such as liquidity risk and credit risk, has been added a third

threat(13): market risk, the possibility that sharp downward movements in market

prices will destroy (14) a banks capital base.

The Basle Committee, whose members include senior bank regulators from the

worlds most powerful countries, recognized (15) the need for action in this area in

1993, when it added newprovisions (16) to existing rules governing credit rules.

(fromPratten, J.,Banking English,p. 82)


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Read the following newspaper article that follows and list the highlighted word(s)

under one of the headings below:

A. WORDS that have to do with INVESTMENT/BUSINESS and have already been

in the previous tasks in this unit.

B. WORDS that have to do with INVESTMENT/BUSINESS but have not occurred

in previous tasks because they only appear injournalese. Which of these words can

be grouped under the subheading food/drink-related. Why would one use so many

items of this latter subgroup in this article?C. WORDS that initially appeared in journalese but are now widely used in any

business-related context.

D. WORDS that have to do with INVESTMENT/BUSINESS that are not typical of

journalese and did not appear in any of the Tasks 1-4 above either.

World Trends

When Markets Lose Their Moorings

This time is different.

Thats what people argue every time a bubble inflates (1), and what they think every

time they are chastened by its popping (2), But century after century, decade after

decade and year after year, human beings let irrational hopes get the better of them.

Not long ago, the housing bubble burst (3), bringing the global economy to a

standstill. Now economists are on the lookout for the next market to fizzle (4).They

say governments, central banks and international bodies should scrutinize markets

(5) that look likely to froth over (6) in the next few years, like capital markets (7) in

China, commodities (8) like gold and oil, and government bonds (9) in heavily

indebted countries (10) like the United States.

Globally, a lot of money is now seeking higher returns (11) once again, said


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Rachel Ziemba, senior analyst at RGE Monitor. The steadying of the economy (12),

liquidity injections (13) by governments and big returns reaped (14) early this year

by investment banks (15) are encouraging more traders (16) to return to the market.

As long as compensation (17) and bonuses (18) are based on short-term

performance (19) in the market, Ms. Ziemba said, thats going to encourage risk-

seeking behavior.(20)

Bubbles are episodes of collective human madness euphoria over investments

whoseskyrocketingvalues (21) are unsustainable (22).

They tend to arise from perceptions ofpending shortages (23) (as happened last

year, with the oil bubble) (24); from glamorized (25) new technologies or

investment frontiers (like the dot-com bubble (26) of the 1990s); or from faddish

cultural obsessions (27) (like theDutch tulip bubble (28) of the 17th century).

Often they are based on legitimate expectations of high growth that are

extrapolated into thestratosphere, (29) as the economist Daniel Yergin, chairman

of HIS-Cambridge Energy Research Associates, put it. Such is the fear over

investment in emerging markets (29) like China. Im a long-term bull(30) on Asia,

but right now its premature to be celebrating the Asian Century, like some

investors seem to be doing, said Stephen Roach, chairman ofMorgan Stanley (31)

Asia.

The Shanghai Stock Exchange Composite Index, for example, nearly doubled from

November to July before pulling back last month. People seem to believe the baton

of global economic leadership is being seamlessly passed from the West to the

East, Mr. Roach said. Thats going to happen, but not for another 5 to 10 years at

least.

Similar premature excitement inflated the South Sea bubble (32), an 18th century

mania over British trade with emerging Latin American markets. Economists also

worry that commodity bubbles maystrike (33) again. Oil and gold prices are rising,

and though both of those commodities have boomed and busted(34) many times in


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the last century, investors may bet on unrealistically high growth once more. Gold

prices have risen more than 30 per cent from a year ago.

In each of these markets, the inflation and deflation of prices would be painful to

investors but may not have as far-reaching consequences as the recent housing and

credit collapses.(35) But a sovereign debt bubble (36) could prove far more

dangerous. So many countries, like the United States, are running up such large

national debts that they could risk eventual default (37) Even without outright

default on their obligations, the value of government bonds sold to finance these

deficits couldplunge (38) costing investors a lot.

The pain of the housing bust has led political leaders and central bankers reconsider

their duties to pre-empt, rather than just respond to, bubbles.

China has started to tighten monetary policy (39) to lower high expectations about

its stocks. Other measures under discussion around the world include additional

regulation (40), guidelines for financial compensation and possibly requirements for

more market transparency (41).

But however stringent new rules may be, economists say, they cannot defeat human

nature. Ultimately, bubbles are a human phenomenon, said Robert Shiller, a Yale

university economics professor who warned of the current crisis. People just get a

little crazy.

The New York Times, Friday, September 18, 2009


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Unit 4 Answer Key

Lead-in

1 F; 2 T; 3 F; 4 T; 5 F; 6 F; 7 T; 8 F; 9 F; 10 T.

Vocabulary

1 h; 2 n; 3 l; 4 e; 5 p; 6 a; 7 i; 8 m; 9 j; 10 f; 11 d; 12 c; 13 b; 14 k; 15 g; 16 o.


A: 7, 8, 9, 15, 16, 33, 40.

B: 2, 4, 6, 14, 25, 27, 29.

Food/drink-related: 2, 4, 6, 14. (They are used because greed is thought to be the

underlying reason for the over-investment bubbles.)

C: 1, 3, 21, 24, 26, 28, 29, 30, 32, 34, 36, 38.

D: 5, 10, 11, 12, 13, 17, 18, 19, 20, 22, 23, 29, 31, 35, 37, 39, 41.


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BIBLIOGRAPHY

Corbett, J.,English for International Banking and Finance, Cambridge University

Press, 1990.

Hollingher, A., Test Your Business English Vocabulary, Teora, 2002.

MacKenzie, I.,English for Business Studies, Cambridge University Press, 1997.

Pratten, J.,Banking English, O.U.P, 1993.

Prelipceanu, C. (coord.), First Steps in Business, Ed. Universitar, 2005.

The Readers Digest Oxford Wordfinder, Tulloch.,S.,Ed., Clarendon Press, Oxford,

1993.

The New York Times, in Romania Libera, Friday, September 2009.

The Economist, April 9th, 2009.

The Economist, March 22nd, 2003.

Documents

Limba Engleza Si Comunicare de Special It Ate 2