Quiz4

1.Whichofthefollowingstatementsisfalse?
A.Excessivefinancialregulationisthoughtbythemajorityofobserverstobeoneofthe
factorscausingtheglobalfinancialcrisistomaterialiseandbecomepronounced
B.Excessivefinancialderegulationisthoughtbythemajorityofobserverstobeoneofthe
factorscausingtheglobalfinancialcrisistomaterialiseandbecomepronounced
C.Majorcountriesshiftedtoasystemofflexibleoffloatingexchangeratesin1973
D.Bythe1980sexchangerateshadbecomevolatileandmisaligned
2.Interestandexchangeratesarelinkedvia:
A.purchasingpowerparity
B.uncoveredinterestparity
C.coveredinterestparity
D.theFishereffect
3.Grosscapitalflowsreflect:
A.currentaccountimbalances
B.internationalindebtedness
C.crossborderbankingandflowsofsecurities
D.capitalaccountimbalances
4.Acrosscurrencyinterestrateswapinvolves:
A.twofixedinterestratesontwocurrencies
B.twofloatinginterestratesontwocurrencies
C.afixedinterestrateononecurrencyandafloatinginterestrateonanothercurrency
D.twofixedorfloatinginterestratesontwocurrencies,neitherofwhichistheU.S.dollar
5.Thedifferencebetweengrossprofitandnetprofitinoptiontransactionsis:
A.brokeragefees
B.theoptionpremium
C.taxes
D.fixedcosts
Iftheinterestratedifferentialandtheforwardspreadarepositiveandtheinterest.6
differentialislowerthanthespre
A.theforeigncurrencyshouldofferahigherinterestrateandsellataforwarddiscount
B.theforeigncurrencyshouldofferalowerinterestrateandsellataforwardpremium
C.thedomesticcurrencyshouldofferalowerinterestrateandsellataforwardpremium
D.thedomesticcurrencyshouldofferahigherinterestrateandsellataforwarddiscount

:Inthepresenceofbidofferspreads,inwardarbitragecomestoanendwhen.7
A.thedifferencebetweenthedomesticofferinterestrateandtheforeignbidinterestrateis
equaltothesumoftheforwardspreadandthebidofferspread
B.thedifferencebetweenthedomesticbidinterestrateandtheforeignbidinterestrateis
equaltothesumoftheforwardspreadandthebidofferspread
C.thedifferencebetweenthedomesticbidinterestrateandtheforeignofferinterestrateis
equaltothesumoftheforwardspreadandthebidofferspread
D.thedifferencebetweenthedomesticofferinterestrateandtheforeignofferinterestrateis
equaltothedifferencebetweentheforwardspreadandthebidofferspread
8.OntheexpirydateofaEuropeancallcurrencyoption,thewriter:
A.mustbuythespecifiedamountoftheunderlyingcurrency,ifput
B.mayormaynotbuythespecifiedamountoftheunderlyingcurrency
C.mustsellthespecifiedamountoftheunderlyingcurrency,ifcalled
D.mayormaynotsellthespecifiedamountoftheunderlyingcurrency
:Thedifferentialratesofreturnhypothesisassumes.9
.A.riskaversion
.B.riskneutrality
.C.UIP
.D.ExantePPP
:Yankeebondsare.10
.A.U.S.dollarbondsissuedbynonU.S.borrowers
.B.U.S.dollarbondsissuedbyU.S.borrowers
.C.nonU.S.dollarbondsissuedbyU.S.borrowers
.D.nonU.S.dollarbondsissuedbynonU.S.borrowersandplacedintheU.S
:Theadvantagesofparallelloansinclude.11
.A.thefactthattheycircumventforeignexchangecontrols
B.thefactthattheyavoidthecostofthebidofferspreadsinbothinterestandexchange
.rates
.C.thefactthattheyareeasytoarrange
D.boththefactthattheycircumventforeignexchangecontrolsandthefactthattheyavoid
.thecostofthebidofferspreadsinbothinterestandexchangerates
12.Thedefinitionofriskincludes:
A.theextentofdispersionaroundthemean
B.thepossibilityofagain
C.thevolatilityofunexpectedoutcomes
D.allofthegivenanswers

~DNE~