Question 1

Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €512,100. The U.S. importer will contact his U.S. bank (where of course he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes as €1.0242/$1.00. The importer accepts this price, so his bank will ____________ the importer's account in the amount of ____________.

A)Debit; $500,000
B)Credit; €512,100
C)Credit; $500,000
D)Debit; €512,100

Accepted Answer

The bank will debit the importer's account in the amount of $500,000, as the exchange rate is €1.0242 per $1.00, making the cost in dollars $500,000 (€512,100 / 1.0242).

Question 2

The current exchange rate is &#8364;1.00 = $1.50. Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys &#8364;100,000 from a currency trader at Bank B for $150,000 using its correspondent relationship with Bank&#10;A)Bank A's dollar-denominated account at B will fall by $150,000.&#10;B)&#10;B) Bank B's dollar-denominated account at A will fall by $150,000.&#10;C) Bank A's pound-denominated account at B will fall by &#8364;100,000.&#10;D) Bank B's pound-denominated account at A will rise by &#8364;100,000.

Accepted Answer

Bank A's dollar-denominated account at B will fall by $150,000 because Bank A is buying €100,000 from Bank B for $150,000. This means that Bank A will need to transfer $150,000 to Bank B's dollar-denominated account in order to complete the transaction.

Question 3

The current exchange rate is &#163;1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys &#163;45,000 from a currency trader at Bank B for $90,000 using its correspondent relationship with Bank&#10;A)Bank A's dollar-denominated account at B will rise by $90,000.&#10;B)&#10;B) Bank B's dollar-denominated account at A will fall by $90,000.&#10;C) Bank A's pound-denominated account at B will rise by &#163;45,000.&#10;D) Bank B's pound-denominated account at A will rise by &#163;45,000.

Accepted Answer

Bank A's pound-denominated account at Bank B will rise by £45,000 because Bank A is buying £45,000 from Bank B.

Question 4

It is common practice among currency traders worldwide to both price and trade currencies against the U.S. dollar. Consider a currency dealer who makes a market in 5 currencies against the dollar. If he were to supply quotes for each currency in terms of all of the others, how many quotes would he have to provide?

A)36
B)30
C)60
D)120
E)None of the above

Accepted Answer

According to the information given, about 86 percent of currency trading in the world involves the U.S. dollar on one side of the transaction.

Question 5

Suppose that the current exchange rate is &#8364;0.80 = $1.00. The direct quote, from the U.S. perspective is&#10;A)&#8364;1.00 = $1.25.&#10;B)&#8364;0.80 = $1.00.&#10;C)&#163;1.00 = $1.80.&#10;D)None of the above

Accepted Answer

The direct quote from the U.S. perspective is the amount of domestic currency (USD) needed to buy one unit of foreign currency (EUR). Since €0.80 = $1.00, the direct quote is €1.00 = $1.25.

Question 6

The standard size foreign exchange transactions are for&#10;A)$10 million U.S.&#10;B)$1 million U.S.&#10;C)&#8364;1 million.

Accepted Answer

The standard size for foreign exchange transactions, particularly in the interbank market, is typically around $10 million U.S.

Question 7

The foreign exchange market closes&#10;A)Never.&#10;B)4:00 p.m. EST (New York time).&#10;C)4:00 p.m. GMT (London time).&#10;D)4:00 p.m. (Tokyo time).

Accepted Answer

The foreign exchange market operates 24 hours a day, five days a week, across different time zones, and does not have a centralized closing time.

Question 8

The world's largest foreign exchange trading center is&#10;A)New York.&#10;B)Tokyo.&#10;C)London.&#10;D)Hong Kong.

Accepted Answer

London is widely recognized as the largest foreign exchange trading center in the world, with an average daily trading volume of over $2.6 trillion. It is followed closely by New York and Tokyo.

Question 9

Spot foreign exchange trading&#10;A)accounts for about 5 percent of all foreign exchange trading.&#10;B)accounts for about 20 percent of all foreign exchange trading.&#10;C)accounts for about 33 percent of all foreign exchange trading.&#10;D)accounts for about 70 percent of all foreign exchange trading.

Accepted Answer

Spot foreign exchange trading accounts for about 33 percent of all foreign exchange trading, as it involves the immediate exchange of currencies at current market rates.

Question 10

At the wholesale level&#10;A)most trading takes place OTC between individuals on the floor of the exchange.&#10;B)most trading takes place over the phone.&#10;C)most trading flows over Reuters and EBS platforms.&#10;D)most trading flows through specialized &#34;broking&#34; firms.

Accepted Answer

At the wholesale level, most trading flows over Reuters and EBS platforms. These are electronic trading platforms commonly used for foreign exchange interbank trading. Trading over the phone is also common, but the use of electronic platforms has increased in recent years. OTC trading between individuals on the floor of the exchange is more common at the retail level. Specialized "broking" firms may be involved in facilitating trades, but they do not necessarily handle the majority of the trading volume.

Question 11

Most interbank trades are&#10;A)speculative or arbitrage transactions.&#10;B)simple order processing for the retail client.&#10;C)overnight loans from one bank to another.&#10;D)brokered by dealers.

Accepted Answer

The answer of Most interbank trades are&#10;A)speculative or arbitrage transactions.&#10;B)simple...

Question 12

On average, worldwide daily trading of foreign exchange is closest to&#10;A)impossible to estimate.&#10;B)$15 billion.&#10;C)$504 billion.&#10;D)$3.21 trillion.

Accepted Answer

The answer of On average, worldwide daily trading of foreign...

Question 13

The difference between a broker and a dealer is&#10;A)dealers sell drugs; brokers sell houses.&#10;B)brokers bring together buyers and sellers, but carry no inventory; dealers stand ready to buy and sell from their inventory.&#10;C)brokers transact in stocks and bonds; currency is bought and sold through dealers.&#10;D)none of the above

Accepted Answer

The answer of The difference between a broker and a...

Question 14

Suppose that the current exchange rate is &#163;1.00 = $2.00. The indirect quote, from the U.S. perspective is&#10;A)&#163;1.00 = $2.00.&#10;B)&#163;1.00 = $0.50.&#10;C)&#163;0.50 = $1.00.&#10;D)None of the above

Accepted Answer

The answer of Suppose that the current exchange rate is...

Question 15

Intervention in the foreign exchange market is the process of&#10;A)a central bank requiring the commercial banks of that country to trade at a set price level.&#10;B)commercial banks in different countries coordinating efforts in order to stabilize one or more currencies.&#10;C)a central bank buying or selling its currency in order to influence its value.&#10;D)the government of a country prohibiting transactions in one or more currencies.

Accepted Answer

The answer of Intervention in the foreign exchange market is...

Question 16

The current exchange rate is &#163;1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys &#163;45,000 from a currency trader at Bank B for $90,000 using its correspondent relationship with Bank B.&#10;A) Bank A's dollar-denominated account at B will fall by $90,000.&#10;B) Bank B's dollar-denominated account at A will rise by $90,000.&#10;C) Bank A's pound-denominated account at B will rise by &#163;45,000.&#10;D) Bank B's pound-denominated account at A will fall by &#163;45,000.&#10;E) All of the above are correct

Accepted Answer

The answer of The current exchange rate is &#163;1.00 =...

Question 17

Most foreign exchange transactions are for&#10;A)intervention by central banks.&#10;B)interbank trades between international banks or nonbank dealers.&#10;C)retail trade.&#10;D)purchase of hard currencies.

Accepted Answer

The answer of Most foreign exchange transactions are for&#10;A)intervention by...

Question 18

The spot market&#10;A)involves the almost-immediate purchase or sale of foreign exchange.&#10;B)involves the sale of futures, forwards, and options on foreign exchange.&#10;C)takes place only on the floor of a physical exchange.&#10;D)all of the above.

Accepted Answer

The answer of The spot market&#10;A)involves the almost-immediate purchase or...

Question 19

Suppose that the current exchange rate is &#8364;1.00 = $1.60. The indirect quote, from the U.S. perspective is&#10;A)&#8364;1.00 = $1.60.&#10;B)&#8364;0.6250 = $1.00.&#10;C)&#8364;1.60 = $1.00.&#10;D)None of the above

Accepted Answer

The answer of Suppose that the current exchange rate is...

Question 20

Indirect exchange rate quotations from the U.S. perspective are&#10;A)the price of one unit of the foreign currency in terms of the U.S. dollar.&#10;B)the price of one U.S. dollar in the foreign currency.

Accepted Answer

The answer of Indirect exchange rate quotations from the U.S....

Question 21

In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/£ bid-ask quote of $1.9072-$1.9077. The currency dealer would likely quote that as _____.

A)72-77
B)77-72
C)5 points
D)None of the above

Accepted Answer

The answer of In conversation, interbank foreign exchange traders use...

Question 22

Suppose you observe the following exchange rates: &#8364;1 = $1.60; &#163;1 = $2.00. Calculate the euro-pound exchange rate.&#10;A)&#8364;1.3333 = &#163;1.00&#10;B)&#163;1.3333 = &#8364;1.00&#10;C)&#8364;3.00 = &#163;1&#10;D)&#8364;1.25 = &#163;1.00

Accepted Answer

The answer of Suppose you observe the following exchange rates:...

Question 23

The Bid price&#10;A)is the price that the dealer has just paid for something, his historical cost of the most recent trade.&#10;B)is the price that a dealer stands ready to pay.&#10;C)refers only to auctions like eBay, not over the counter transactions with dealers.&#10;D)is the price that a dealer stands ready to sell at.

Accepted Answer

The answer of The Bid price&#10;A)is the price that the...

Question 24

The AUD/$ spot exchange rate is AUD1.60/$ and the SF/$ is SF1.25/$. The AUD/SF cross exchange rate is _____.&#10;A)0.7813&#10;B)2.0000&#10;C)1.2800&#10;D)0.3500

Accepted Answer

The answer of The AUD/$ spot exchange rate is AUD1.60/$...

Question 25

A dealer in British pounds who thinks that the pound is about to appreciate&#10;A)may want to widen his bid-ask spread by raising his ask price.&#10;B)may want to lower his bid price.&#10;C)may want to lower his ask price.&#10;D)none of the above

Accepted Answer

The answer of A dealer in British pounds who thinks...

Question 26

In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/£ bid-ask quote of $1.9072-$1.9077. The currency dealer would likely quote that as _____.

A)72-77
B)77-72
C)5 points
D)None of the above

Accepted Answer

The answer of In conversation, interbank foreign exchange traders use...

Question 27

Suppose you observe the following exchange rates: &#8364;1 = $1.45; &#163;1 = $1.90. Calculate the euro-pound exchange rate.&#10;A)&#8364;1.3103 = &#163;1.00&#10;B)&#163;1.3333 = &#8364;1.00&#10;C)&#8364;2.00 = &#163;1&#10;D)&#8364;3 = &#163;1

Accepted Answer

The answer of Suppose you observe the following exchange rates:...

Question 28

In the Interbank market, the standard size of a trade among large banks in the major currencies is&#10;A)for the U.S.-dollar equivalent of $10,000,000,000.&#10;B)for the U.S.-dollar equivalent of $10,000,000.&#10;C)for the U.S.-dollar equivalent of $100,000.&#10;D)for the U.S.-dollar equivalent of $1,000.

Accepted Answer

The answer of In the Interbank market, the standard size...

Question 29

A dealer in British pounds who thinks that the pound is about to depreciate&#10;A)may want to widen his bid-ask spread by raising his ask price.&#10;B)may want to lower his bid price and his ask price.&#10;C)may want to lower his ask price.&#10;D)none of the above.

Accepted Answer

The answer of A dealer in British pounds who thinks...

Question 30

It is common practice among currency traders worldwide to both price and trade currencies against the U.S. dollar. Consider a currency dealer who makes a market in 5 currencies against the dollar. If he were to supply quotes for each currency in terms of all of the others, how many quotes would he have to provide?

A)36
B)30
C)60
D)120
E)None of the above

Accepted Answer

The answer of It is common practice among currency traders...

Question 31

A dealer in pounds who thinks that the exchange rate is about to increase in volatility&#10;A)may want to widen his bid-ask spread.&#10;B)may want to decrease his bid-ask spread.&#10;C)may want to lower his ask price.&#10;D)none of the above.

Accepted Answer

The answer of A dealer in pounds who thinks that...

Question 32

Suppose you observe the following exchange rates: &#8364;1 = $1.50; &#165;120 = $1.00. Calculate the euro-pound exchange rate.&#10;A)&#165;133.33 = &#8364;1.00&#10;B)&#8364;1.00 = &#165;180&#10;C)&#165;80 = &#8364;1.00&#10;D)&#8364;1 = &#163;2.50

Accepted Answer

The answer of Suppose you observe the following exchange rates:...

Question 33

What is the ASK cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Swiss francs.&#10;A)&#8364;0.5386/CHF&#10;B)&#8364;0.5389/CHF&#10;C)&#8364;0.5463/CHF&#10;D)&#8364;0.5466/CHF

Accepted Answer

The answer of What is the ASK cross-exchange rate for...

Question 34

Suppose you observe the following exchange rates: &#8364;1 = $1.50; &#163;1 = $2.00. Calculate the euro-pound exchange rate.&#10;A)&#8364;1.3333 = &#163;1.00&#10;B)&#163;1.3333 = &#8364;1.00&#10;C)&#8364;3.00 = &#163;1&#10;D)&#8364;1.25 = &#163;1.00

Accepted Answer

The answer of Suppose you observe the following exchange rates:...

Question 35

Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = &#8364;1.00 and the dollar-pound exchange rate is quoted at $2.00 = &#163;1.00.&#10;A)&#8364;1.25/&#163;1.00&#10;B)$1.25/&#163;1.00&#10;C)&#163;1.25/&#8364;1.00&#10;D)&#8364;0.80/&#163;1.00

Accepted Answer

The answer of Find the no-arbitrage cross exchange rate. The...

Question 36

The dollar-euro exchange rate is $1.25 = &#8364;1.00 and the dollar-yen exchange rate is &#165;100 = $1.00. What is the euro-yen cross rate?&#10;A)&#165;125 = &#8364;1.00&#10;B)&#165;1.00 = &#8364;125&#10;C)&#165;1.00 = &#8364;0.80&#10;D)None of the above

Accepted Answer

The answer of The dollar-euro exchange rate is $1.25 =...

Question 37

Suppose the spot ask exchange rate, S^a($|£), is $1.90 = £1.00 and the spot bid exchange rate, S^b($|£), is $1.89 = £1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be "eaten" by the bid-ask spread?

A)$1,000,000
B)$52,910.05
C)$100,000
D)$52,631.58

Accepted Answer

The answer of Suppose the spot ask exchange rate, S^a($|£),...

Question 38

What is the BID cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Swiss francs.&#10;A)&#8364;0.5386/CHF&#10;B)&#8364;0.5389/CHF&#10;C)&#8364;0.5463/CHF&#10;D)&#8364;0.5466/CHF

Accepted Answer

The answer of What is the BID cross-exchange rate for...

Question 39

If the $/&#8364; bid and ask prices are $1.50/&#8364; and $1.51/&#8364;, respectively, the corresponding &#8364;/$ bid and ask prices are&#10;A)&#8364;0.6667 and &#8364;0.6623.&#10;B)$1.51 and $1.50.&#10;C)&#8364;0.6623 and &#8364;0.6667.&#10;D)cannot be determined with the information given.

Accepted Answer

The answer of If the $/&#8364; bid and ask prices...

Question 40

Suppose you observe the following exchange rates: &#8364;1 = $1.25; &#163;1 = $2.00. Calculate the euro-pound exchange rate.&#10;A)&#8364;1 = &#163;1.60&#10;B)&#8364;1 = &#163;0.625&#10;C)&#8364;2.50 = &#163;1&#10;D)&#8364;1 = &#163;2.50

Accepted Answer

The answer of Suppose you observe the following exchange rates:...

Question 41

What is the ASK cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Canadian dollars.&#10;A)&#8364;0.6094/CAD&#10;B)&#8364;0.6104/CAD&#10;C)&#8364;0.6181/CAD&#10;D)&#8364;0.6191/CAD

Accepted Answer

The answer of What is the ASK cross-exchange rate for...

Question 42

What is the BID cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Canadian dollars.&#10;A)&#8364;0.6094/CAD&#10;B)&#8364;0.6104/CAD&#10;C)&#8364;0.6181/CAD&#10;D)&#8364;0.6191/CAD

Accepted Answer

The answer of What is the BID cross-exchange rate for...

Question 43

The Singapore dollar-U.S. dollar (S$/$) spot exchange rate is S$1.60/$, the Canadian dollar-U.S. dollar (CD/$) spot rate is CD1.33/$ and the S$/CD1.15. Determine the triangular arbitrage profit that is possible if you have $1,000,000.

A)$44,063 profit
B)$46,093 loss
C)No profit is possible
D)$46,093 profit

Accepted Answer

The answer of The Singapore dollar-U.S. dollar (S$/$) spot exchange...

Question 44

A recent survey of U.S. foreign exchange traders measured traders perceptions about how fast news events that cause movements in exchange rates actually change the exchange rate. The survey respondents claim that the bulk of the adjustment to economic announcements regarding unemployment, trade deficits, inflation, GDP, and the Federal funds rate takes place within

A)ten seconds.
B)one minute.
C)five minutes.
D)one hour.

Accepted Answer

The answer of A recent survey of U.S. foreign exchange...

Question 45

Suppose a bank customer wishes to trade out of British pounds and into Swiss francs.&#10;A)In dealer jargon, this is a currency against currency trade.&#10;B)The bank will frequently handle such a trade by selling British pounds for U.S. dollars and then buying Swiss francs with U.S. dollars.&#10;C)The bank would typically sell the British pounds directly for Swiss francs.&#10;D)Both a and b

Accepted Answer

The answer of Suppose a bank customer wishes to trade...

Question 46

Suppose you observe the following exchange rates: &#8364;1 = $.85; &#163;1 = $1.60; and &#8364;2.00 = &#163;1.00. Starting with $1,000,000, how can you make money?&#10;A)Exchange $1m for &#163;625,000 at &#163;1 = $1.60. Buy &#8364;1,250,000 at &#8364;2 = &#163;1.00; trade for $1,062,500 at &#8364;1 = $.85.&#10;B)Start with dollars, exchange for euros at &#8364;1 = $.85; exchange for pounds at &#8364;2.00 = &#163;1.00; exchange for dollars at &#163;1 = $1.60.&#10;C)Start with euros; exchange for pounds; exchange for dollars; exchange for euros.&#10;D)No arbitrage profit is possible.

Accepted Answer

The answer of Suppose you observe the following exchange rates:...

Question 47

The euro-pound cross exchange rate can be computed as:&#10;A)S(&#8364;/&#163;) = S($/&#163;) &#215; S(&#8364;/$)&#10;B)  &#10;C)  &#10;D)all of the above

Accepted Answer

The answer of The euro-pound cross exchange rate can be...

Question 48

You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.25 how can you make money?

A)No arbitrage is possible.
B)Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£.
C)Buy £ $2/£, buy € at €1.25/£, sell € at $1.50/€.

Accepted Answer

The answer of You are a U.S.-based treasurer with $1,000,000...

Question 49

Using the table above, what is the bid price of pounds in terms of euro?&#10;A)&#8364;1.3371/&#163;&#10;B)&#8364;1.3378/&#163;&#10;C)&#163;0.7475/&#8364;&#10;D)&#163;0.7479/&#8364;

Accepted Answer

The answer of Using the table above, what is the...

Question 50

Using the table above, what is the ask price of pounds in terms of euro?&#10;A)&#8364;1.3371/&#163;&#10;B)&#8364;1.3378/&#163;&#10;C)&#163;0.7475/&#8364;&#10;D)&#163;0.7479/&#8364;

Accepted Answer

The answer of Using the table above, what is the...

Question 51

Using the table above, what is the bid price of euro in terms of pounds?&#10;A)&#8364;1.3371/&#163;&#10;B)&#8364;1.3378/&#163;&#10;C)&#163;0.7475/&#8364;&#10;D)&#163;0.7479/&#8364;

Accepted Answer

The answer of Using the table above, what is the...

Question 52

Suppose a bank customer with &#8364;1,000,000 wishes to trade out of euro and into Japanese yen. The dollar-euro exchange rate is quoted as $1.60 = &#8364;1.00 and the dollar-yen exchange rate is quoted at $1.00 = &#165;120. How many yen will the customer get?&#10;A)&#165;192,000,000&#10;B)&#165;5,208,333&#10;C)&#165;75,000,000&#10;D)&#165;5,208.33

Accepted Answer

The answer of Suppose a bank customer with &#8364;1,000,000 wishes...

Question 53

Using the table above, what is the ask price of euro in terms of pounds?&#10;A)&#8364;1.3371/&#163;&#10;B)&#8364;1.3378/&#163;&#10;C)&#163;0.7475/&#8364;&#10;D)&#163;0.7479/&#8364;

Accepted Answer

The answer of Using the table above, what is the...

Question 54

You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.25 how can you make money?

A)No arbitrage is possible.
B)Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£.
C)Buy £ $2/£, buy € at €1.25/£, sell € at $1.50/€.

Accepted Answer

The answer of You are a U.S.-based treasurer with $1,000,000...

Question 55

Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = &#8364;1.00 and the dollar-yen exchange rate is quoted at $1.00 = &#165;120.&#10;A)&#165;192/&#8364;1.00&#10;B)&#8364;1.92/&#165;100&#10;C)&#8364;1.25/&#165;1.00&#10;D)&#8364;1.00/&#165;1.92

Accepted Answer

The answer of Find the no-arbitrage cross exchange rate. The...

Question 56

You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.25 how can you make money?

A)No arbitrage is possible.
B)Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£.
C)Buy £ $2/£, buy € at €1.25/£, sell € at $1.50/€.

Accepted Answer

The answer of You are a U.S.-based treasurer with $1,000,000...

Question 57

Market microstructure refers to&#10;A)the basic mechanics of how a marketplace operates.&#10;B)the basics of how to make small (micro-sized) currency trades.&#10;C)how macroeconomic variables such as GDP and inflation are determined.&#10;D)none of the above

Accepted Answer

The answer of Market microstructure refers to&#10;A)the basic mechanics of...

Question 58

Including the transactions costs of the bid-ask spread, the euro-pound cross exchange rate for a customer who wants to sell euro and buy pounds can be computed as&#10;A)  &#10;B)  &#10;C)  &#10;D)All of the above

Accepted Answer

The answer of Including the transactions costs of the bid-ask...

Question 59

The forward price&#10;A)may be higher than the spot price.&#10;B)may be the same as the spot price.&#10;C)may be less than the spot price.&#10;D)all of the above

Accepted Answer

The answer of The forward price&#10;A)may be higher than the...

Question 60

You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 = €1.25 how can you make money?

A)No arbitrage is possible.
B)Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£.
C)Buy £ $2/£, buy € at €1.25/£, sell € at $1.50/€.

Accepted Answer

The answer of You are a U.S.-based treasurer with $1,000,000...

Question 61

Which of the following are correct?&#10;A)  &#10;B)  &#10;C)  &#10;D)All of the above are correct

Accepted Answer

The answer of Which of the following are correct?&#10;A) ...

Question 62

When a currency trades at a premium in the forward market&#10;A)the exchange rate is more than one dollar .&#10;B)the exchange rate is less than one dollar.&#10;C)the forward rate is less than the spot rate.&#10;D)the forward rate is more than the spot rate.