1) suppose that bank of america quotes you a buy rate of $1.50 per pound and a sell rate
of $1.60 per pound. how much dollars would you receive, if you sell 1,000 british
pounds to bank of america?
a.$100
b.$1,000
c.$1,500
d.$1,600
2)
referring to figure 2.1, the pound per dollar exchange rate starts at 2.00. assume that an
increase in the taste for u.s. imports by u.k. residents leads to a shift in the supply of
pounds. if the bank of england wishes to intervene by buying pounds to restore the peg
of $2.0/pound, what distance represents that intervention?
a.a to b
b.b to a
c.a to d
d.d to b
3) the ________ interest rate is equal to the ________ interest rate minus the expected
rate of inflation.
a.real, nominal
b.predicted, nominal
c.standard, nominal
d.nominal, standard
4) table 6-1: spot and forward exchange rates on may 5, 2012
refer to table 6-1. comparing the yens forward rates against the yens spot rate, over the
period of a forward contract, we would expect the yens spot rate to:
a.remain constant against the dollar
b.appreciate against the dollar
c.depreciate against the dollar
d.depreciate against the dollar in the first 30 days and then appreciate afterward.
5) which of the following reasons explain why interest rate parity may not hold
perfectly?
i.transaction costs
ii.business loan risks
iii.offshore risk accounting rules
iv.political risk
a.i only
b.ii and iii
c.i and iv
d.i, iii, and iv
6) eurodollars cannot be created in _____.
a.the united states of america
b.china
c.middle eastern countries
d.africa
7) fewer regulations allow _______ to offer narrower spreads than ________.
a.domestic banks, state owned banks
b.eurobanks, domestic banks
c.domestic banks, offshore banks
d.offshore banks, eurobanks
8) rising income in the united states triggers an increased demand for imports. this
causes:
a.an increase in the demand for foreign currency
b.decrease in the demand for foreign currency
c.an increase in the supply of foreign currency
d.a decrease in the supply of foreign currency
9) which of the following statements regarding portfolio risk and number of stocks is
generally true?
a.adding more stocks increases risk
b.adding more stocks decreases risk but does not eliminate it
c.adding more stocks has no effect on risk
d.adding more stocks increases only systematic risk
10) figure 13-3:
using figure 13.3, if a country experiences less than perfect capital mobility, the bp
curve has a shape like:
a.bpa
b.bpb
c.bpc
d.bpd
11) in a portfolio investment,
a.investors are directly involved in managing the operations
b.as in direct investment, investors export goods and services abroad
c.investors transfer the technology to local investors
d.investors have little control over operations
12) refer to table 6-1. on may 5, 2012, the 1-year forward yen was selling at a:
a.3.56% premium per annum against the dollar
b.3.69% premium per annum against the dollar
c.3.56% discount per annum against the dollar
d.3.69% discount per annum against the dollar
13) the preferred habit theory of term structure of interest rates suggests that long-term
bonds should________ short-term bonds due to investor risk aversion.
a.hold a premium over
b.have a discount over
c.offer the same return as
d.be entirely separate of
14) the elasticities approach to the balance of trade is concerned with how:
a.currency pegs alter the market for imports and exports
b.government deficits influence the balance of trade
c.the balance of trade is altered by changing relative prices of domestic and foreign
goods
d.the ratio of domestic spending to domestic production influences the balance of trade
15) a forward flat occurs when:
a.the forward rate is greater than the spot rate
b.the spot rate is greater than the forward rate
c.the forward and spot rates are equal
d.none of the above
16) assume there is a reduction in u.s. output. then under maer there will be a(n):
a.increase in domestic money supply
b.decrease in domestic money supply
c.increase in the exchange rate (dollar/foreign currency)
d.decrease in the exchange rate (dollar/foreign currency)