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Quiz 6 As Qiz 7

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24 views7 pages

Quiz 6 As Qiz 7

Hjvc

Uploaded by

فتح قريبغعهفعخغعح
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1. The one-year forward rate of the British pound is quoted at $1.

50, and
the spot rate of the British pound is quoted at $1.515. The forward ____
is ____ percent.

a. premium;
1.0

b. discount;
1.0

c. discount;
1.5

d. premium;
1.5

2. Forward contracts contain

a. a right but not a commitment to the owner, and can be tailored to the
owner's desire.

b. a commitment to the owner, and are


standardized.

c. a commitment to the owner, and can be tailored to the


owner's desire.

d. a right but not a commitment to the owner, and are


standardized.

Which of the following is the least likely strategy for a U.S. firm that will be
purchasing Swiss francs in the future and desires to avoid exchange rate risk
(assume the firm has no offsetting position in francs)?

a. Purchase a call option on


francs.

b. Sell a futures contract on


francs.

c. Obtain a forward contract to purchase francs


forward.

d. All of the above are appropriate strategies for the scenario


described.
If your firm expects the euro to substantially appreciate, it could speculate by
____ euro call options or ____ euros forward in the forward exchange market.

a. purchasing;
selling

b. selling;
purchasing

c. purchasing;
purchasing

d. selling;
selling

When you own ____, there is an obligation on your part; however, when you
own ____, there is no obligation on your part.

a. forward contracts; futures


contracts

b. futures contracts; call


options

c. call options; forward


contracts

d. call options; put


options

The lower the variability of a currency, the ____ will be the premium of a call
option on this currency, and the ____ will be the premium of a put option on
this currency, other things being equal.

a. lower;
greater

b. greater;
greater

c. greater;
lower

d. lower;
lowe
The longer the time to the expiration date for a currency, the ____ will be the
premium of a call option, and the ____ will be the premium of a put option,
other things being equal.

a. lower;
lower

b. greater;
greater

c. greater;
lower

d. lower;
greater

A firm sells a currency futures contract, and then decides before the
settlement date that it no longer wants to maintain such a position. It can
close out its position by

a. selling a futures contract for a different amount of


currency.

b. buying a futures contract with a different


settlement date.

c. buying an identical futures


contract.

d. selling an identical futures


contract.

The premium on a pound put option is $.04 per unit. The exercise price is
$1.60. The break-even point is ____ for the buyer of the put, and ____ for the
seller of the put. (Assume zero transactions costs and that the buyer and
seller of the put option are speculators.)

a. $1.56;
$1.56

b. $1.64;
$1.64
c. $1.64;
$1.56

d. $1.56;
$1.60

When a currency call option is classified as "in the money," this indicates
that

a. the buyer of the option would generate a profit; that is, the exercise
price would exceed the sum of the spot rate and the premium paid.

b. the spot rate of the currency is greater than the exercise price
of the option.

c. the buyer of the option would generate a profit; that is, the spot rate
would exceed the sum of the exercise price and the premium paid.

d. the spot rate of the currency is less than the exercise price of
the option.

QUIZ 6

Under a freely floating exchange rate system

a. a foreign exchange market does


not exist.

b. central bank intervention in the foreign exchange market is


often necessary.

c. central bank intervention in the foreign exchange market is


not necessary.

d. exchange rates remain very stable because of offsetting


economic conditions.

A weak dollar is normally expected to cause

a. high unemployment and low inflation in


the U.S.

b. low unemployment and high inflation in


the U.S.

c. high unemployment and high inflation in


the U.S.

d. low unemployment and low inflation in


the U.S.

Which of the following is an appropriate form of indirect intervention?

a. To strengthen the dollar, the Fed increases the money supply to lower
interest rates.

b. To weaken the dollar, the Fed reduces the money supply to increase
interest rates.

c. To weaken the dollar in the long run, the Fed attempts to reduce
U.S. inflation.

d. To strengthen the dollar in the long run, the Fed attempts to reduce
U.S. inflation.

The value of the Canadian dollar, Japanese yen, and Australian dollar with
respect to the U.S. dollar are part of a

a. pegged
system.

b. fixed
system.

c. crawling peg
system.

d. managed float
system

Assume Countries A, B, and C produce goods that are substitutes of each


other and that these countries engage in trade with each other. Assume that
Country A's currency floats against Country B's currency, and that Country
C's currency is pegged to B's. If A's currency appreciates against B, then A's
exports to C should ____, and A's imports from C should ____.

a. decrease;
decrease

b. increase;
decrease

c. decrease;
increase

d. increase;
increase

If the Fed uses a stimulative monetary policy, it may be very concerned


about causing inflation if the dollar's value is expected to

a. remain
stable.

b.
strengthen.

c.
weaken.

d. none of the above will have an impact on


inflation.

Which of the following countries has not adopted the euro?

a.
France

b.
Germany

c. United
Kingdom

d.
Spain

Assume that the Fed intervenes by exchanging euros for dollars in the
foreign exchange market. This will cause an ____ in the supply of euros in the
foreign exchange market, and will place _______ pressure on the value of the
euro.
a. outward shift;
downward

b. outward shift;
upward

c. inward shift;
upward

d. inward shift;
downward

A weak dollar places ____ pressure on U.S. inflation, which in turn places ____
pressure on U.S. interest rates.

a. upward;
downward

b. downward;
downward

c. downward;
upward

d. upward;
upward

The currency of Country X is pegged to the currency of Country Y and will


remain pegged. Assume that Country Y's currency appreciated against the
dollar during the last week. In this case, the currency of Country X _______
against the dollar during the last week.

a.
appreciated

b.
depreciated

c. remained
stable

d. may have changed value[but the direction cannot be determined from


the information provided]

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