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Foreign Market Quiz

The document contains 5 multiple choice questions about foreign exchange markets. Question 1 asks about the appreciation and depreciation of the euro and dollar. Question 2 asks which factors would lead to appreciation of the US dollar. Question 3 identifies a forward foreign exchange transaction. Question 4 asks about the relationship between interest rates and inflation in Germany vs the US based on interest rate parity. Question 5 asks about calculating the Japanese interest rate based on a forward exchange rate and US interest rate under interest rate parity.

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Sohad Elnagar
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31 views

Foreign Market Quiz

The document contains 5 multiple choice questions about foreign exchange markets. Question 1 asks about the appreciation and depreciation of the euro and dollar. Question 2 asks which factors would lead to appreciation of the US dollar. Question 3 identifies a forward foreign exchange transaction. Question 4 asks about the relationship between interest rates and inflation in Germany vs the US based on interest rate parity. Question 5 asks about calculating the Japanese interest rate based on a forward exchange rate and US interest rate under interest rate parity.

Uploaded by

Sohad Elnagar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Quiz of foreign Exchange Market

1) The value of the euro changed from $1.20 to $1.14. We can say that the dollar has ________
and the euro has ________.
A) depreciated; appreciated.
B) appreciated; appreciated.
C) appreciated; depreciated.
D) depreciated; depreciated.
E) None of these choices are correct.

2) Which of the following are likely to lead to an appreciation of the U.S. dollar (all else held
constant)?
1. I. Higher real U.S. interest rates
2. II. Lower U.S. inflation
3. III. Higher nominal U.S. interest rates
A) II and III only
B) I and III only
C) I and II only
D) II only
E) I, II, and III

3) A negotiated OTC agreement to exchange currencies at a fixed date in the future but at an
exchange rate specified today is a:
A) currency swap agreement.
B) forward foreign exchange transactions.
C) currency futures contract.
D) currency options contract.
E) spot foreign exchange transactions.
4) If interest rate parity holds and the annual German nominal interest rate is 3 percent and the
U.S. annual nominal rate is 5 percent, and real interest rates are 2 percent in both countries,
then inflation in Germany is about _______________ than in the United States.
A) 1 percent higher
B) 2 percent higher
C) 1 percent lower
D) 4 percent lower
E) 2 percent lower

5) You can buy or sell the yen spot at ¥102 to the dollar. You can buy or sell the yen one-year
forward at ¥104 to the dollar. If U.S. annual interest rates are 4 percent, what must be the
approximate one-year Japanese interest rate if interest rate parity holds?

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