TCQUOCTE

The primary component of the current account is the

• unilateral transfers

• balance of money market flows

• balance of capital market flows

• balance of trade

Assume that U.S interest rate are 6%, while British interest rate are 7%. If the international Fisher effect holds and is used to determine the future spot rate, the forecast would reflect an expectation of

• not enough information to answer this question

• no change in pound's value over the next year

• depreciation of pound's value over the next year

• apprreciation of pound's value over the next year

The bid-ask spread on an exchange rate can be used to directly determine:

• the transaction cost of foreign exchange

• the forward premium

• how an exchange rate will change

• the currency option premium

the currency of Country X is pegged to the currency of Country Y's currency depreciates against the currency of Country Z. It is likely that Country X will export ........... to Country Z and import.............from Country Z.

• MORE, MORE

• MORE, LESS

• LESS, MORE

• LESS, LESS

The value of Euro was $1.30 last week. During last week the euro depreciated by 5%. What is the value of euro today?

• $1.30

• $1.365

• $1.330

• $1.235

Assume the bid rate of a Singapore dollar is $.40 while the ask rate is $.41 at Bank X. Assume the bid rate of Singapore dollar is $.42 while the ask rate is $.425 at Bank Z. Given the information, what would be your gain if you use $ 1,000.000 and execute location arbitrage? That is, how much will u end up with over and above the $1,000.000 u started with?

• $36,585

• $24,390

• $11,764

• -$11,964

if interest rate parity exists, then ............. is not feasible

• forward realignment arbitrage

• covered interest arbitrage

• locational arbitrage

• triangular arbitrage

Given a home country and foreign country, purchasing power parity (PPP) suggest that:

• a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate

• a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate

• a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate

• a home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate

"Dumping" is used in the text to represent the:

• exporting of goods at priced below cost

• sales of junk bonds to foreign countries

• exporting of goods that do not meet quality standards

• removal of foreign subsidiaries by the host government

The strengthen the USD using sterilized intervention, the Federal Reserve (US central bank) would ........... USD and simultaneously............ Treasury securities

• sell, sell

• buy, buy

• buy, sell

• sell, buy