Why would an MNC use a spot—forward swap? Fill in the blank with correct word. ANSWER Answer: A spot-forward swap involves either the purchase of foreign currency spot against the sale of the same amount of foreign currency forward, or the sale of foreign currency spot against the purchase of the same amount […]
Date: September 19th, 2020
It is 1998. The spot and 30-day forward rates for the Dutch guilder are $.3075 and $.3120, respectively. The guilder is said to be selling at a forward A) premium of 16.83% B) premium of 17.56% C) discount of 6.39% D) discount of 15.10% ANSWER Answer: B
Date: September 19th, 2020
What is the statistical interpretation of the expected future spot rate? Fill in the blank with correct word. ANSWER Answer: The expected future spot rate is the conditional mean of the probability distribution of future spot rates. The probability distribution describes all of the possible realizations (or ranges of realizations) of the future […]
Date: September 19th, 2020
What is a forward—forward swap? Fill in the blank with correct word. ANSWER Answer: A forward-forward swap involves either the purchase of foreign currency at a short maturity forward against the sale of the same amount of foreign currency at a longer maturity forward, or the sale of foreign currency at the short […]
Date: September 19th, 2020
What is the percentage change in price for an American importer of Indian sitar music cassettes if the Indian rupee/U.S. dollar exchange rate goes from 12 rps./$ to 14rps./$ and the price of a cassette is 50 rupees? A) −16.7% B) −14.4% C) +20.2% D) +16.5% E) +14.2% ANSWER B
Date: September 19th, 2020
Suppose the quote on pounds was $1.624-31. If you converted $10,000 to pounds and then back to dollars, how many dollars would you end up with? What will be an ideal response? ANSWER Answer: For $10,000, you would buy pounds at the asking price. Given this quote, the asking price would be $1.631/£. […]
Date: September 19th, 2020
On December 3,2001, spot Japanese yen were sold at $0.008058. Suppose the 180-day forward Japanese yen was selling at a 1.91% annualized premium, what is the 180-day forward rate of the yen? A) 0.008245 B) 0.008135 C) 0.008457 D) 0.008550 ANSWER Answer: B
Date: September 19th, 2020
Suppose the spot quote on the euro is $0.9302-18, and the spot quote on the Swiss franc is $0.6180-90. What is the direct spot quote for the Swiss franc in Frankfurt? What will be an ideal response? ANSWER Answer: In order to sell one franc for euros, first you would sell the franc […]
Date: September 19th, 2020
From the perspective of the MNC, the most important purpose of the forward markets is the process of ________. A) hedging B) arbitraging C) speculating D) preventing default ANSWER Answer: A
Date: September 19th, 2020
Suppose the U.S. imposes import restrictions on Japanese cars. What is likely to happen to the U.S. current-account deficit? What will be an ideal response? ANSWER Answer: Nothing will happen to the U.S. current account deficit, unless the import restrictions cause a change in savings or investment behavior. Absent these changes, which are […]
Date: September 19th, 2020
