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# Assume that a bank's bid rate on Swiss francs is \$.45 and its ask rate is \$.47.

## percentage 4.44%. 4.26%. 4.03%. 4.17%.

The forward rate of the Swiss franc is \$.50. The spot rate of the Swiss franc is \$.48. The following interest rates exist: U.S. Switzerland 360-day borrowing rate 7% 5% 360-day deposit rate 6% 4% You need to purchase SF200,000 in 360 days. If you use a money market hedge, the amount of dollars you need in 360 days is: \$101,904 \$101,923 \$ 98,770 \$ 96,914 \$ 92,307
You are a speculator who sells a put option on Canadian dollars for a Premium of \$.03 per unit, with an exercise price of \$.86. The option will not be exercised until the expiration date, if at all. If the spot rate of the Canadian dollar is \$.78 on the expiration date, your net profit per unit is: -\$.08 -\$.03 \$.05 \$.08 none of the above

Assume the Canadian dollar is equal to \$.88 and the Peruvian Sol is equal to \$.35. The value of the Peruvian Sol in Canadian dollars is: 0.3621 Canadian dollars. 0.3977 Canadian dollars. 2.36 Canadian dollars. 2.51 Canadian dollars Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% discount. Todays spot rate of the Canadian dollar is \$.80. The spot rate forecasted for one year ahead is: \$.860 \$.848 \$.740 \$.752 none of the above Carl is an option writer. In anticipation of a depreciation of the British pound from its current level of \$1.50 to \$1.45, he has written a call option with an exercise price of \$1.51 and a premium of \$.02. If the spot rate at the options maturity turns out to be \$1.54, what is Carls profit or loss per unit (assuming the buyer of the option acts rationally)? -\$0.01 \$0.01 -\$0.04 \$0.04 -\$0.0

Assume U.S. and Swiss investors require a real rate of return of 3%. Assume the nominal U.S. interest rate is 6% and the nominal Swiss rate is 4%. According to the international Fisher effect, the franc will _______ by about _______. appreciate; 3% appreciate; 1% depreciate; 3% appreciate; 2%

## Assume the following information:

U.S. investors have \$1,000,000 to invest 1-year deposit rate offered on U.S. dollars = 12% 1-year deposit rate offered on Singapore dollars = 10% 1-year forward rate of Singapore dollars = \$.412 Spot rate of Singapore dollar = \$.400

Given this information: interest rate parity exists and covered interest arbitrage by U.S investors results in the same yield as investing domestically. interest rate parity doesnt exist and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically. interest rate parity exists and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically. interest rate parity doesnt exist and covered interest arbitrage by U.S. investors results in a yield below what is possible domestically.

According to the international Fisher effect, if U.S. investors expect a 5% rate of domestic inflation over one year, and a 2% rate of inflation in European countries that use the euro, and require a 3% real return on investments over one year, the nominal interest rate on one-year U.S. Treasury securities would be: 9%. 3%. -2%. 5%. 8%.

Assume the British pound is worth \$1.60, and the Canadian dollar is worth \$.80. What is the value of the Canadian dollar in pounds?
2.00 2.40 .80 .50 none of the above

Silicon Co. has forecasted the Canadian dollar for the most recent period to be \$0.73. The realized value of the Canadian dollar in the most recent period was \$0.80. Thus, the absolute forecast error as a percentage of the realized value was ______%. 9.6 -9.6 8.8 -8.8

The ADR of a British firm is convertible into 3 shares of stock. The share price of the firm as 30 pounds when the British market closed. When the U.S. market opens, the pound isworth \$1.63. The
price of this ADR should be \$_______.

## 48.90 146.70 55.21 none of the above

The value of the Australian dollar (A\$) today is \$0.73. Yesterday, the value of the Australian dollar was \$0.69. The Australian dollar ________ by _______%. depreciated; 5.80 depreciated; 4.00 appreciated; 5.80 appreciated; 4.00

Assume the spot rate of the Swiss franc is \$.62 and the one-year forward rate is \$.66. The forward rate exhibits a _______ of _______.

The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 1.3%. The current exchange rate for the Japanese yen () is \$0.0075. After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:
\$0.0076 \$0.0075 \$0.0074 \$0.0131 none of the above

If nominal British interest rates are 3% and nominal U.S. interest rates are 6%, then the British pound () is expected to ____________ by about _________%, according to the international Fisher effect (IFE). depreciate; 2.9 appreciate; 2.9 depreciate; 1.0 appreciate; 1.0

Assume the bid rate of a New Zealand dollar is \$.33 while the ask rate is \$.335 at Bank X. Assume the bid rate of the New Zealand dollar is \$.32 while the ask rate is \$.325 at Bank Y. Given this information, what would be your gain if you use \$1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the \$1,000,000 you started with? \$15,385. \$15,625. \$22,136. \$31,250.

Assume the bid rate of a Singapore dollar is \$.40 while the ask rate is \$.41 at Bank X. Assume the bid rate of a Singapore dollar is \$.42 while the ask rate is \$.425 at Bank Z. Given this information, what would be your gain if you use \$1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the \$1,000,000 you started with?
\$11,764. -\$11,964. \$36,585. \$24,390. \$18,219.

The 90-day forward rate for the euro is \$1.07, while the current spot rate of the euro is \$1.05. What is the annualized forward premium or discount of the euro? 1.9 percent discount. 1.9 percent premium. 7.6 percent premium. 7.6 percent discount.

You have an opportunity to invest in Australia at an interest rate of 8%. Moreover, you expect the Australian dollar (A\$) to appreciate by 2%. Your effective return from this investment is: 8.00%. 6.00%. 10.16%. 5.88%.