If you were attempting to forecast the forward exchange rate for a particular horizon such as 90 days, how would the forward exchange rate be an unbiased predictor of the future spot exchange rate? What will be an ideal response? ANSWER Answer: If the forward exchange rate for 90 days is an unbiased […]
Date: September 19th, 2020
If interest rate parity prevails, what is the return from a hedged foreign currency investment? What will be an ideal response? ANSWER Answer: A hedged foreign currency investment sells the known foreign currency return in the forward market at the time of the investment. This eliminates exposure to foreign exchange risk, but it […]
Date: September 19th, 2020
Zero-balance accounts are checking accounts in which a zero balance is maintained and the bank automatically covers all checks presented against the accounts. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Federal agency issues are low-risk securities issued by government agencies but not guaranteed by the U.S. Treasury. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Eurodollar deposits are deposits of currency that are not native to the country in which the bank is located. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
What does the “carry trade” term mean? A) Borrow in the domestic currency to earn only the higher yield of the dollar implied by the regression. B) Borrow in the foreign currency to earn only the expected capital appreciation of the dollar implied by the regression. C) Borrow in the domestic currency to earn both […]
Date: September 19th, 2020
Disbursement float results from the delay between the time that a payer or customer deducts a payment from its checking account ledger (disburses it) and the time that a payee or vendor actually receives these funds in a spendable form. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which one of the following is NOT a drawback when economists use survey data to examine the unbiasedness hypothesis? A) Participants may not have an incentive to respond honestly. B) Participants’ investment actions are not consistent with their answers. C) Selfish motives are generally not significant. D) They don’t know the marginal investor’s expectations. […]
Date: September 19th, 2020
A lockbox system is used to reduce collection float by shortening all three basic float components (i.e., mail, processing, and clearing). Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The peso problem got its name during the period 1955-1976 when the ________ authorities were attempting to peg the peso-dollar exchange rate. A) Argentine B) Brazilian C) Mexican D) Honduran ANSWER Answer: C
Date: September 19th, 2020
