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
Regression tests of the unbiasedness hypothesis indicate that it is ________ with real life events. A) an unbiased indicator of expected future exchange rates B) very consistent C) not consistent D) has a strong correlation to the current account ANSWER Answer: C
With the ACH (automated clearing house) credits, disbursement float is sacrificed because ACH transactions immediately draw down a company’s payroll account on pay day. Indicate whether the statement is true or false ANSWER TRUE
It is often said that interest rate parity is satisfied when the differential between the interest rates denominated in two currencies equals the forward premium or discount between the two currencies. Explain why this is an imprecise statement when the interest rates are not continuously compounded. ANSWER Answer: Interest rate parity requires the […]
If there is no systematic difference between the forward rate and the expected future spot rate, then the expected forward market return should be ________. A) zero B) greater than one C) equal to the stockholders’ required rate of return D) less than one but greater than zero ANSWER Answer: A
Describe the sequence of transactions required to do a covered interest arbitrage out of British pound and into U.S. dollars. What will be an ideal response? ANSWER Answer: To do a covered interest arbitrage out of ₤ and into U.S. dollars, one would borrow ₤ from the bank at the bank’s ask interest […]
When the forward rate is equal to the expected future spot rate, the forward rate is said to be ________ the future spot rate. A) an information signal for B) an unbiased predictor of C) a hedge for D) in parity with the expected future spot rate ANSWER Answer: B
Collection float is experienced by a payer and is a delay in the receipt of funds. Indicate whether the statement is true or false ANSWER FALSE