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19 Cards in this Set
- Front
- Back
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A __________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date. |
Forward |
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From the viewpoint of a British investor, which of the following would be a direct quote in the foreign exchange market? |
0.55 pounds / euro |
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The U.S dollar suddenly changes in value against the euro moving from an exchange rate of $0.8909/euro to $0.8709/euro. Thus the dollar has _________ by __________. |
A) appreciated; 2.30% B) depreciated; 2.30% C) appreciated; 2.24% D) depreciated; 2.24% |
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Assume the implied PPP rate of exchange of Mexican Pesos per U.S dollar is 8.50 according to the Big Mac Index. Further, assume the current exchange rate is is Peso 10.80/$1. Thus, according to PPP and the Law of One Price, at the current exchange rate the peso is: |
A) overvalued B) undervalued C) correctly valued D) There is not enough information to answer this question |
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The relationship between the percentage change in the spot exchange rate over time and the differential between comparable interest rates in different national capital markets is known as: |
A) absolute PPP B) the law of one price C) relative PPP D) the international Fisher Effect |
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Jaguar has full manufacturing costs of their S-type sedan of 22,803 pounds. They sell the S-type in the UK with a 20% margin for a price of 27,363 pounds. Today these cars are available in the U.S for $55,000 which is the UK price multiplied by the current exchange rate of $2.01/pound. Jaguar has committed to keeping the U.S price at $55,000 for the next 6 months. If the UK pound appreciates against the USD to an exchange rate of $2.15/pound, and the Jaguar has not hedged against the currency changes, what is the amount the company will receive in pounds at the new exchange rate? |
25,581 pounds |
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With covered interest arbitrage: |
A) the market must be out of equilibrium. B) a "riskless" arbitrage opportunity exists. C) the arbitrage trades in both the spot and future currency exchange markets. D) All the above |
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A foreign currency __________ contract calls for the future delivery of a standard amount of foreign exchange at a fixed time, place, and price. |
A) futures B) forward C) option D) swap |
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Jack Hemmings bought a 3-month British pound futures contract for $1.4400/pound only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of 62,500 pounds, how much money did Jack gain or lose from his speculation with pound futures? |
A) $937.50 loss B) $937.50 gain C) 937.50 pounds loss D) 937.50 pounds gain |
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An __________ option can be exercised only on its expiration date, whereas a/an __________ option can be exercised anytime between the date of writing up to and including the exercise date. |
European; American |
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The __________ provides a means to account for international cash flows in a standardized and systematic manner. |
A) parity conditions B) asset approach C) balance of payments D) International Fisher Effect |
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The asset market approach to forecasting assumes whether foreigners are willing to hold claims in monetary form depends on an extensive set of investment considerations. These include all but which of the following choices? |
A) relative real interest rates B) capital market liquidity C) political safety D) all of the above are considered by investors in their decision process. |
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The Asian Currency crisis appeared to begin in: |
A) South Korea B) Taiwan C) Thailand D) Japan |
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Dealers in foreign exchange departments' at large international banks act as market makers and maintain inventories of the securities in which they specialize. |
True |
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Since the global financial crisis of 2008-2009, the Chinese renminbi (yuan) has become the most widely traded currency with the U.S dollar surpassing the euro, yen, and pound as dollar trading pairs. |
False |
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If the current U.S dollar-yen spot rate is 125 yen/$, and the 90-day forward exchange rate is 127 yen/$, then the yen is at a forward premium. |
False |
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The major difference between currency futures and forward contracts is that futures contracts are standardized for ease of trading on an exchange market whereas forward contracts are specialized and tailored to meet the needs of clients. |
True |
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Most option profits and losses are realized through taking actual delivery of the currency rather than offsetting contracts. |
False |
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The asset market approach to forecasting is not applicable to emerging markets. |
False |
