The term covered means the investment is ________ transaction foreign exchange risk. A) hedged against B) exposed to C) completely free from D) structured to activate forward contracts that free it from ANSWER Answer: A
Date: September 19th, 2020
The difference between the interest rate that a bank charges on its loans and the interest rate that the banks pay their depositors is known as the A) percent spread. B) arbitrage opportunity. C) bid-ask spread. D) covered interest arbitrage opportunity. ANSWER Answer: C
Date: September 19th, 2020
When parity conditions are not in effect in currency and money markets, traders could make extraordinary profits from a practice known as ________. A) covered interest rate parity B) covered interest rate arbitrage C) triangular arbitrage D) forward market arbitrage ANSWER Answer: B
Date: September 19th, 2020
Which one of the following is NOT a reason for using hedges such as a synthetic forward? A) In some currency markets, forward contracts may not be available, but they can be manufactured using a money market hedge. B) Individual companies are not able to borrow and lend at the interest rates available in the […]
Date: September 19th, 2020
What is the name of the interbank interest rate used in external currency markets that is the most important and used in various cities globally in contractual loan agreements? A) the fed funds rate B) twelfth district interest rate C) LIBOR D) the U.S. prime rate ANSWER Answer: C
Date: September 19th, 2020
When there are no intervening cash flows between the time a deposit is made and the maturity of the deposit, the interest rates are said to be ________. A) discount rate B) compound interest rate C) covered interest rate D) spot interest rates ANSWER Answer: D
Date: September 19th, 2020
When one of the counterparties to an agreement globally may possibly fail to honor its contract, it is known as ________ risk. A) interest rate B) business C) transaction D) default ANSWER Answer: D
Date: September 19th, 2020
When the possibility exists that the government of a nation may impose some form of exchange controls or tax on foreign investment, the risk is known as ________ risk. A) political B) exchange controls C) business risk D) government ANSWER Answer: A
Date: September 19th, 2020
The entire process resulting from a check issue and mail by a payer company to a payee company (i.e., mail float, processing float, and clearing float) is disbursement float to the payer company and is collection float to the payee company. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
If interest rate parity is in effect, there are ________. A) no profitable opportunities for covered interest arbitrage B) many opportunities for covered interest arbitrage C) currency dealers will arbitrage interest rate differentials in different countries D) currency dealers will be motivated to arbitrage forward market contracts ANSWER Answer: A
Date: September 19th, 2020
