A. forward contracts occur in a specific locations-for example, the Chicago Mercantile Exchange
B. futures contracts have negotiable delivery dates
C. forward contracts can be tailored in amount and delivery date to the need of importers of exporters
D. futures contracts involve no brokerage fees or other transactions costs
Foreign Exchange
The reduction or covering of foreign exchange risk is called ?
A. hedging
B. speculation
C. intervention
D. arbitrage
Investor engage in _____ when they move funds into foreign currencies in order to take advantage to interest rates abroad that are higher than domestic interest rates ?
A. currency arbitrage
B. interest arbitrage
C. short positions
D. long positions
If the bank is selling francs for $0.45, then what is the implied franc price of the dollar ?
A. 2.0
B. 1.999
C. 2.323
D. 2.222
In the early eighties, the Federal Reserve pursed a tight monetary policy. All else being equal. the impact of that policy was to interest rates in the United States relative to those in Europe and cause the dollar to _______ against European currencies?
A. decrease; depreciate
B. decrease; appreciate
C. increase; depreciate
D. increase; appreciate
Which of the following is not a reason why Joe Smith (an American) might participate as a demander in the foreign exchange market ?
A. his desire to open a bank account in Japan
B. his desire to purchase an automobile produced domestically
C. his desire to travel to Europe
D. his desire to purchase Treasury bills issued by the British government
If a nation’s interest rates are relatively low compared to those of other countries then the exchange value of its currency will tend to ?
A. depreciate under a system of fixed exchange rates
B. depreciate under a system of floating exchange rates
C. appreciate under a system of floating exchange rates
D. appreciate under a system of floating fixed rates
All currencies other than the domestic currency of a given country are referred to as ?
A. hard currency
B. foreign exchange
C. reserve currencies
D. near monies
The theory of international exchange that holds that exchange rates adjust to offset differences in countries inflation rates in the ?
A. price feedback theory
B. trade feedback theory
C. J-curve theory
D. purchasing power parity theory
Given the foreign currency market for the Swiss franc, the supply of franc slopes upward, because as the dollar price of the franc rises ?
A. America’s demand for Swiss merchandise rises
B. America’s demand for Swiss merchandise falls
C. Switzerland’s demand for American merchandise rises
D. Switzerland’s demand for American merchandise falls
