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
When it is said that there exists covered interest arbitrage opportunities, the term covered means the arbitrage is not exposed to A) exchange rate risk. B) manipulation by speculators. C) central bank interventions. D) government actions against the arbitrageurs. ANSWER Answer: A
Date: September 19th, 2020
What is the name for the bank market for deposits and loans that is denominated in a currency different to the currency of the country in which a bank is operating? A) internal currency market B) foreign exchange market C) external currency market D) interbank market ANSWER Answer: C
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
How would a target zone system or a pegged exchange rate system that has been in place mask the true currency risk? What will be an ideal response? ANSWER Answer: If the peg or target zone holds for a long time, historical volatility appears to be zero or very limited, but this may […]
Date: September 19th, 2020
What is the negative side effect on the money supply of a non-sterilized foreign exchange intervention? A) A higher money supply eventually leads to lower inflation, and the foreign exchange objective of the central bank’s policy may conflict with its abroad goal of price stability. B) A higher money supply eventually leads to higher inflation, […]
Date: September 19th, 2020
What is the relationship of currency risk in a floating exchange rate system to the future exchange rate changes? What will be an ideal response? ANSWER Answer: To characterize the risk of a currency position, you must try to characterize the conditional distribution of the future exchange rate changes. With floating exchange rates, […]
Date: September 19th, 2020
What are the three major components of the official reserves account? A) foreign exchange reserves, gold, and IMF-related reserve assets B) foreign exchange reserves, foreign government bonds, gold C) IMF-related reserve assets, gold, and U.S. Dollars D) gold, IMF-related reserves assets, and government-owned land ANSWER Answer: A
Date: September 19th, 2020
