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
When countries have pegged exchange rate systems, they often set up ________ to improve the credibility of the system in the eyes of the global traders. A) target zone systems B) futures markets for currencies C) currency board systems D) sterilized interventions ANSWER Answer: C
Date: September 19th, 2020
Which one of the following systems would most often be used by a developing economy? A) target zone B) currency board C) floating exchange rate D) crawling peg ANSWER Answer: D
Date: September 19th, 2020
What is the most likely outcome if a central bank suddenly prints a large amount of new money? A) no change in the inflation rate B) higher inflation C) recession D) prosperity ANSWER Answer: B
Date: September 19th, 2020
Why are pegged exchange rates often overvalued and difficult to governments to maintain? What will be an ideal response? ANSWER Answer: Governments that maintain a pegged exchange rate often find the position difficult to maintain. Too often, the exchange rate overvalues the local currency on the foreign exchange markets. This situation produces a […]
Date: September 19th, 2020
For a fixed exchange rate system to work successfully, the government that oversees its operations must be able to make tight budget and monetary policies prevail from the beginning. Agree or disagree and explain why. What will be an ideal response? ANSWER Answer: Under a fixed exchange rate system, there is a strong […]
Date: September 19th, 2020
