Fin 582 chapter 5 - Study guides, Class notes & Summaries

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...

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...

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 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 zer...

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 desire. c. ...

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 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. ...

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 exhibit a p...