fin 535

fin 535.

Question 6

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  2.  

    Assume that Japan places a strict quota on

    goods imported from the U.S. and the U.S. places a strict quota on goods

    imported from Japan. This event should immediately cause the U.S. demand for

    Japanese yen to ____, and the supply of Japanese yen to be exchanged for U.S.

    dollars to ____.

    Answer

    increase;
    increase

    increase;
    decline

    decline;
    decline

    decline;
    increase

1 points  

Question 7


  2.  

    Any event that increases the supply of British

    pounds to be exchanged for U.S. dollars should result in a(n) ____ in the value

    of the British pound with respect to ____, other things being

    equal.

    Answer

    increase; U.S.
    dollar

    increase; nondollar
    currencies

    decrease; nondollar
    currencies

    decrease; U.S.
    dollar

1 points  

Question 8


  2.  

    Any event that increases the U.S. demand for

    euros should result in a(n) ____ in the value of the euro with respect to ____,

    other things being equal.

    Answer

    increase; U.S.
    dollar

    increase; nondollar
    currencies

    decrease; nondollar
    currencies

    decrease; U.S.
    dollar

1 points  

Question 9


  2.  

    Any event that reduces the supply of Swiss

    francs to be exchanged for U.S. dollars should result in a(n) ____ in the value

    of the Swiss franc with respect to ____, other things being

    equal.

    Answer

    increase; U.S.
    dollar

    increase; nondollar
    currencies

    decrease; nondollar
    currencies

    decrease; U.S.
    dollar

1 points  

Question 10


  2.  

    Which of the following events would most

    likely result in an appreciation of the U.S. dollar?

    Answer

    U.S. inflation is very
    high.

    The Fed indicates that it will
    raise U.S. interest rates.

    Future U.S. interest rates are
    expected to decline.

    Japan is expected to increase
    interest rates in the near
    future.

1 points  

Question 11


  2.  

    If the U.S. and Japan engage in substantial

    financial flows but little trade, ____ directly influences their exchange rate

    the most. If the U.S. and Switzerland engage in much trade but little financial

    flows, ____ directly influences their exchange rate the

    most.

    Answer

    interest rate differentials;
    interest rate differentials

    inflation and interest rate
    differentials; interest rate differentials

    income and interest rate
    differentials; inflation differentials

    interest rate differentials;
    inflation and income differentials

    inflation and income differentials;
    interest rate differentials

1 points  

Question 12


  2.  

    Assume that British corporations begin to

    purchase more supplies from the U.S. as a result of several labor strikes by

    British suppliers. This action reflects:

    Answer

    an increased demand for British
    pounds.

    a decrease in the demand for
    British pounds.

    an increase in the supply of
    British pounds for sale.

    a decrease in the supply of British
    pounds for sale.

1 points  

Question 13


  2.  

    Any event that reduces the U.S. demand for

    Japanese yen should result in a(n) ____ in the value of the Japanese yen with

    respect to ____, other things being equal.

    Answer

    increase; U.S.
    dollar

    increase; nondollar
    currencies

    decrease; nondollar
    currencies

    decrease; U.S.
    dollar

1 points  

Question 14


  2.  

    Assume that the U.S. experiences a significant

    decline in income, while Japan’s income remains steady. This event should place

    ____ pressure on the value of the Japanese yen, other things being equal.

    (Assume that interest rates and other factors are not

    affected.)

    Answer

    upward

    downward

    no

    upward and downward
    (offsetting)

1 points  

Question 15


  2.  

    If the Fed announces that it will decrease the

    U.S. interest rates, and European Central Bank takes no action, then the value

    of euro will ____ against the value of U.S. dollar. The Fed’s action is called

    ____ intervention.

    Answer

    appreciate;
    direct

    depreciate;
    direct

    appreciate;
    indirect

    depreciate;
    indirect

1 points  

Question 16


  2.  

    Currency options sold through an options

    exchange:

    Answer

    contain a commitment to the owner,
    and are standardized.

    contain a commitment to the owner,
    and can be tailored to the desire of the owner.

    contain a right but not a
    commitment to the owner, and can be tailored to the desire of the
    owner.

    contain a right but not a
    commitment to the owner, and are
    standardized.

1 points  

Question 17


  2.  

    If you expect the British pound to appreciate,

    you could speculate by ____ pound call options or ____ pound put

    options.

    Answer

    purchasing;
    selling

    purchasing;
    purchasing

    selling;
    selling

    selling;
    purchasing

1 points  

Question 18


  2.  

    If the spot rate of the euro increased

    substantially over a one-month period, the futures price on euros would likely

    ____ over that same period.

    Answer

    increase
    slightly

    decrease
    substantially

    increase
    substantially

    stay the
    same

1 points  

Question 19


  2.  

    When the futures price on euros is below the

    forward rate on euros for the same settlement date, astute investors may attempt

    to simultaneously ____ euros forward and ____ euro

    futures.

    Answer

    sell; sell

    buy; sell

    sell; buy

    buy;
    buy

1 points  

Question 20


  2.  

    When you own ____, there is no obligation on

    your part; however, when you own ____, there is an obligation on your

    part.

    Answer

    call options; put
    options

    futures contracts; call
    options

    forward contracts; futures
    contracts

    put options; forward
    contracts

1 points  

Question 21


  2.  

    When the existing spot rate exceeds the

    exercise price, a call option is ____, and a put option is

    ____.

    Answer

    out of the money; in the
    money

    out of the money; out of the
    money

    in the money; in the
    money

    in the money; out of the
    money

1 points  

Question 22


  2.  

    In the U.S., the typical currency futures

    contract is based on a currency value in terms of:

    Answer

    euros.

    U.S.
    dollars.

    British
    pounds.

    Canadian
    dollars.

1 points  

Question 23


  2.  

    Currency futures contracts sold on an

    exchange:

    Answer

    contain a commitment to the owner,
    and are standardized.

    contain a commitment to the owner,
    and can be tailored to the desire of the owner.

    contain a right but not a
    commitment to the owner, and can be tailored to the desire of the
    owner.

    contain a right but not a
    commitment to the owner, and are
    standardized.

1 points  

Question 24


  2.  

    A forward rate for a currency is said to

    exhibit a discount if

    Answer

    the forward rate exceeds the
    existing spot rate.

    the forward rate is less than the
    existing spot rate.

    the forward rate exceeds the
    expected future spot rate.

    the forward rate is less than the
    expected future spot rate.

1 points  

Question 25


  2.  

    When the futures price is equal to the spot

    rate of a given currency, and the foreign country exhibits a higher interest

    rate than the U.S. interest rate, astute investors may attempt to simultaneously

    ____ the foreign currency, invest it in the foreign country, and ____ futures in

    the foreign currency.

    Answer

    buy; buy

    sell; buy

    buy; sell

    buy;
    buy

1 points  

Question 26


  2.  

    Macomb Corporation is a U.S. firm that

    invoices some of its exports in Japanese yen. If it expects the yen to weaken,

    it could ____ to hedge the exchange rate risk on those

    exports.

    Answer

    sell yen put
    options

    buy yen call
    options

    buy futures contracts on
    yen

    sell futures contracts on
    yen

1 points  

Question 27


  2.  

    If you have a position where you might be

    obligated to sell pounds, you are:

    Answer

    a call
    writer.

    a call
    buyer.

    a put
    writer.

    a put
    buyer.

1 points  

Question 28


  2.  

    Forward contracts:

    Answer

    contain a commitment to the owner,
    and are standardized.

    contain a commitment to the owner,
    and can be tailored to the desire of the owner.

    contain a right but not a
    commitment to the owner, and can be tailored to the desire of the
    owner.

    contain a right but not a
    commitment to the owner, and are
    standardized.

1 points  

Question 29


  2.  

    The greater the variability of a currency,

    the ____ will be the premium of a call option on this currency, and the ____

    will be the premium of a put option on this currency, other things

    equal.

    Answer

    greater;
    lower

    greater;
    greater

    lower;
    greater

    lower;
    lower

1 points  

Question 30


  2.  

    European currency options can be exercised

    ____; American currency options can be exercised

    ____.

    Answer

    any time up to the expiration
    date; any time up to the expiration date

    any time up to the expiration
    date; only on the expiration date

    only on the expiration date; only
    on the expiration date

    only on the expiration date; any
    time up to the expiration
    date

fin 535

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