Fin 582 - Study guides, Class notes & Summaries

FIN 582 Chapter 5 Exam Questions with Correct Answers An option writer is the seller of a call or a put option. - Answer-True An MNC frequently uses either forward or futures contracts to hedge its exposure to foreign receivables. To do so, the MNC can either sell the foreign currency forward or sell futures. - Answer-False Hedgers should buy puts if they are hedging an expected inflow of foreign currency. - Answer-True The lower bound of the call option premium is the greater of zero...

FIN 582 Chapter 8 Quiz

Fin 582 Chapter 8 Exam Questions and Answers All Correct There is much evidence to suggest that Japanese investors invest in U.S. Treasury securities when U.S. interest rates are higher than Japanese interest rates. These investors most likely believe in the international Fisher effect. - Answer-False The relative form of purchasing power parity (PPP) accounts for the possibility of market imperfections such as transportation costs, tariffs, and quotas in establishing a relationship betwee...

Fin 582 Chapter 6 Exam Questions with Correct Answers A weak dollar is normally expected to cause a. high unemployment and high inflation in the U.S. b. low unemployment and high inflation in the U.S. c. low unemployment and low inflation in the U.S. d. high unemployment and low inflation in the U.S. - Answer-b. low unemployment and high inflation in the U.S. Under a freely floating exchange rate system a. exchange rates remain very stable because of offsetting economic conditions. ...

FIN 582 Final Exam Questions and Answers All Correct T/F: The volume of core deposits at U.S. banks has been growing in recent years relative to other categories of deposits. - Answer-False T/F: The Truth in Savings Act requires a bank to disclose to its deposit customers, the frequency with which interest is compounded on all interest-bearing accounts. - AnswerTrue T/F: Research indicates that at least half of all households and small businesses hold their primary checking account at ...

FIN 582 Ch 3 Review Questions with Correct Answers The forward rate is the exchange rate used for an immediate exchange of currencies. - Answer-False The ask quote is the price for which a bank offers to sell a currency. - Answer-True The existence of imperfect markets has prevented the internationalization of financial markets. - Answer-False Under the gold standard, each currency was convertible into gold at a specified rate, and the exchange rate between two currencies was determ...

FIN 582 Chapter 7 Quiz Questions with Correct Answers Due to ____, market forces should realign the spot rate of a currency among banks. a. covered interest arbitrage b. locational arbitrage c. quadratic arbitrage d. triangular arbitrage - Answer-b. locational arbitrage Assume that the interest rate in the home country of Currency X is much lower than the U.S. interest rate. According to interest rate parity, the forward rate of Currency X a. should exhibit a discount. b. should exh...

Fin 582 Chapter 5 Quiz Questions with Correct Answers The one-year forward rate of the British pound is quoted at $1.50, and the spot rate of the British pound is quoted at $1.515. The forward ____ is ____ percent. a. discount; 1.0 b. discount; 1.5 c. premium; 1.5 d. premium; 1.0 - Answer-a. discount; 1.0 Forward contracts contain a. a right but not a commitment to the owner, and can be tailored to the owner's desire. b. a commitment to the owner, and can be tailored to the owner's ...

FIN 582 Chapter 8 Quiz Questions with Correct Answers According to the IFE, if British interest rates are lower than U.S. interest rates a. the British inflation rate will decrease. b. the British pound will appreciate against the dollar. c. the British pound will depreciate against the dollar. d. today's forward rate of the British pound will equal today's spot rate. e. the British pound's value will remain constant. - Answer-b. the British pound will appreciate against the dollar. ...