Playing the float involves the strategic use of mailing points and bank accounts to lengthen mail float and clearing float, respectively. Indicate whether the statement is true or false ANSWER FALSE
What problem occurred as the result of a monetary stabilization plan consisting of tiding two currencies to the same exchange rate? A) Peso problem B) Argentina 2000 C) Swedish problem D) Survey data problem ANSWER Answer: B
When the forward rate equals the expected future spot rate, the forward rate is said to be a(n) ________ of the future spot rate. A) unbiased predictor B) forward market investment C) forward market return D) unsystematic risk ANSWER Answer: A
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 […]
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
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. […]
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
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
A phenomenon known as ________ arises when rational investors anticipate events that do not with the frequency that the investors expect. A) interest rate parity B) the peso problem C) rational expectations D) purchasing power parity ANSWER Answer: B
Which one of the following is the only determinant of volatility in the forward currency markets? A) interest rate parity B) economic recovery C) political turmoil D) variance of the future exchange rates ANSWER Answer: D