To be truly marketable, a security must ________. A) be highly rated by a credit rating agency B) have the characteristics of a callable bond C) be readily convertible into cash D) have a maturity of 10 years or more ANSWER C
________ are obligations of the U.S. Treasury with common maturities of 91 to 182 days and that have a strong secondary market. A) Treasury notes B) Treasury bills C) Federal agency issues D) Banker’s acceptances ANSWER B
In its absolute version, purchasing power parity states that price levels worldwide should be ________ when expressed in a common currency. A) equal B) roughly equal C) different D) opportunities for arbitrage ANSWER Answer: A
When is a currency said to be overvalued? A) when its internal purchasing power is greater than its external purchasing power B) when its external purchasing power is greater than its internal purchasing power C) when its external purchasing power is less than its internal purchasing power D) when its internal purchasing power is equal […]
All of the following options are some of the factors that cause deviations from absolute PPP EXCEPT: A) transaction costs. B) non-traded goods. C) balance of payments. D) changes in relative prices. ANSWER Answer: A
A ________ is an unsigned check drawn on one of a firm’s bank accounts and deposited into its account at another bank. A) direct send B) wire transfer C) depository transfer check D) preauthorized check ANSWER C
When the price of one commodity is the same wherever in the world the good is being sold when denominated in a particular currency, it is said the Law of ________ prevails. A) currency supply B) currency demand C) purchasing power parity D) one price ANSWER Answer: D
Which one of the following reasons for violations of the Law of One Price is the most obvious? A) tariffs on imports B) banking rules C) industrial policies D) exchange rate controls ANSWER Answer: A
A ________ is a telegraphic communication that, via bookkeeping entries, removes funds from the payer’s bank and deposits them in an account of the payee’s bank. A) direct send B) wire transfer C) depository transfer check D) preauthorized check ANSWER B
In the absence of pure competition, firms who segment markets may be able to charge different prices in different countries for the same good. This practice is known as ________. A) mark to market B) interest rate arbitrage C) pricing to market D) speculation ANSWER Answer: C