1.The bid rate is the rate at which the bank buys the foreign currency from the customer by paying in home currency.(true/false)

2.Forward rate contracts are used in international transactions to: (Select the best choice below.)

A. reduce the risk for the buyer.

B. reduce the risk for the seller.

C. Both A and B

D. Neither A nor B

3.The Euro increased dramatically in value against the U.S. dollar between 2000 and 2009. The result has been that

A.U.S. exports are more competitive in Europe.

B.U.S. travelers are finding it less expensive to travel in Europe.

C.U.S. goods cost more in Europe.

D.European exports to the United States are more competitive.

4.If you are an importer of goods and you will make payment for the purchase of inventory on 90minus

day terms, which of the below is the correct term for the exchange rate that you willuse?

A.spot rate

B.indirect rate

C.direct rate

D.forward rate

5.If the exchange rate quotes in two different countries were out of line with eachother, an enterprising trader could make a profit by buying in the market where the currency was cheaper and simultaneously selling it in the market where the currency was more expensive. Such a person would be known asa(n)

A.spot trader.

B.arbitrageur.

C.capitalist.

D.cross trader.

6.A forward exchange contract

A. gives the owner the right to purchase a foreign currency at some point in the future and any gains or losses arecredited/debited to the account at the close of business each day.

B. requiresdelivery, within two workingdays, of one currency for a specified amount of another currency.

C. requiresdelivery, at a specified futuredate, of one currency for a specified amount of another currency.

D. gives the owner theright, but not theobligation, to buy a foreign currency at a fixed exchange rate for a fixed period of time.

7.An American manufacturer with its corporate headquarters in New York City is purchasing goods from a French supplier. Which of the following statements is true regarding the exchange rate risk for thiscontract?

A.The American company will bear all of the exchange rate risk if the contract is denominated in dollars.

B.The French company will bear all of the exchange rate risk if the contract is denominated in dollars.

C.Both companies could bear exchange rate risk if the contract is denominated in British pounds.

D.Both B and C are correct.

8.(Purchasing-power parity) AMcDonald's Big Mac costs 2.46 yuan in China but costs $ 4.29 in the United States. Assuming thatpurchasing-power parity(PPP) holds, how many Chinese yuan are required to purchase 1 U.S.dollar?

Assuming thatpurchasing-power parity(PPP) holds, how many Chinese yuan are required to purchase 1 U.S.dollar?

( )yuan/$ (Round to four decimalplaces.)