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
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
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
