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FIN 350 Quiz 7

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FIN 350 Quiz 7 Course Financial Mkts And Insti. Test Quiz 7 Question 1 2 out of 2 points Correct Which of the following is most likely to provide currency forward contracts to their customers? Question 2 2 out of 2 points Correct ____ forecasting is usually based on either the spot rate or the forward rate. Question 3 2 out of 2 points Correct If the spot rate of the British pound is $2, and the 180-day forward rate is $2.05, what is the annualized premium or discount? Question 4 2 out of 2 points Correct The speculative risk of purchasing a ____ is that the foreign currency value ____ over time. Question 5 2 out of 2 points Correct In the Wall Street Journal, you observe that the British pound (£) is quoted for $1.65. The Australian dollar (A$) is quoted for $0.60. What is the value of the Australian dollar in British pounds? Question 6 2 out of 2 points Correct Assume that a British pound put option has a premium of $.03 per unit, and an exercise price of $1.60. The present spot rate is $1.61. The expected future spot rate on the expiration date is $1.52. The option will be exercised on this date if at all. What is the expected per unit net gain (or loss) resulting from purchasing the put option? Question 7 2 out of 2 points Correct When a government influences factors, such as inflation, interest rates, or income, in order to affect currency’s value, this is an example of Question 8 2 out of 2 points Correct If the U.S. government imposed trade restrictions on U.S. imports, this would ____ the U.S. demand for foreign currencies, and would place ____ pressure on the values of foreign currencies (with respect to the dollar). Question 9 2 out of 2 points Correct The act of capitalizing on the discrepancy between the forward rate premium and the interest rate differential is called Question 10 2 out of 2 points Correct Currency futures contracts differ from forward contracts in that they Question 11 2 out of 2 points Correct If a firm planning to hedge receivables is certain of the future direction a spot rate will move, and requires a tailor-made hedge in terms of amount and maturity date, it should use a Question 12 2 out of 2 points Correct If U.S. interest rates suddenly become much higher than European interest rates (and if it does not cause concern about higher inflation there), the U.S. demand for euros would ____, and the supply of euros to be exchanged for dollars would ____, other factors held constant. Question 13 2 out of 2 points Correct A system whereby exchange rates are market determined without boundaries but subject to government intervention is called Question 14 2 out of 2 points Correct Assume interest rate parity exists. If the spot rate on the British pound is $2 and the 1-year British interest rate is 7 percent, and the 1-year U.S. interest rate is 11 percent, what is the pound’s forward discount or premium? Question 15 2 out of 2 points Correct Assume an equilibrium state in which European inflation and U.S. inflation are both 4 percent. If U.S. inflation suddenly decreased to 2 percent, the euro will ____ against the dollar by approximately ____ percent, according to purchasing power parity. Question 16 2 out of 2 points Correct When banks obtain funds in the federal funds market, the providers of the funds are Question 17 2 out of 2 points Correct ____ loans are extended primarily to finance the purchase of fixed assets such as machinery. Question 18 2 out of 2 points Correct A ____ is a time deposit offered by some large banks to corporations, with a specific maturity date, minimum deposit of $100,000 or more, and a secondary market. Question 19 2 out of 2 points Correct When a bank obtai

FIN 350 Quiz 7

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