1.Using exchange rates, it is possible to price-compare in different nations. If an iPod costs $90 in the United States and 45 in France, in which nation would you get the better deal when the dollareuro exchange rate is $2/?

Question 11 options:

A.The iPod would be cheaper in France.

B.The iPod would be cheaper in the United States.

C.The iPod would cost the same in both countries.

D.From the information provided, it is impossible to answer this question.

2.When exchange rates are very volatile, with a wide range of variation, the currency is said to be:

Question 12 options:

A.in limbo.

B.in free float.

C.perfectly flexible.

D.in sluggish float.

3.A spot contract is a(n):

Question 13 options:

A.promise to purchase a foreign currency in 30 days.

B.promise to purchase a foreign currency in 90 days.

C.contract for the immediate exchange of currencies.

D.agreement to sell currencies at a fixed price indefinitely.

4..The difference between the spot contract and a forward contract is that:

Question 14 options:

A.the former is a flexible price on the currency, and the latter is a fixed price.

B.the former is a contract to be settled immediately, and the latter is a contract to be settled at a future agreed-upon date

C.the former is a derivative, and the latter is not a derivative.

D.the former has a fixed price but the contract can be settled at a later date, and the latter is a contract to be settled immediately.

5.In which of the following categories would the sale of foreign currency with a forward repurchase agreement be included?

Question 15 options:

A.an option

B.a futures contract

C.a forward contract

D.a swap

6.Suppose $1 = 1.5 euros in London and $1 = 1.2 euros in New York. Which of the following would be the right trade for you to make money?

Question 16 options:

A.You sell 1,000 euros in London and buy euros in New York.

B.You sell dollars in New York and buy dollars in London.

C.You sell dollars in London and buy dollars in New York.

D.You sell euros in London and buy dollars in New York.

7.If the U.S. interest rate is 4% per year and the U.K. interest rate is 9% per year, then:

Question 17 options:

A.an investor will see no reason to invest in the United Kingdom.

B.an investor will borrow money in the United Kingdom and invest it in the United States.

C.an investor can borrow money in the United States and invest it in the United Kingdom and profit.

D.an investor will find that the returns are the same in both countries.

8.The forward exchange rate:

Question 18 options:

A.allows investors to be sure of the price at which they can trade forex in the future.

B.is the rate at which a trader can purchase currency for immediate delivery.

C.is the rate of discount that international banks get when they purchase.

D.is the rate that speculators consider if they are looking for bargain prices.

9.Covered interest parity refers to the situation in which:

Question 19 options:

A.interest rates are the same in both currencies.

B.spot and forward rates are the same in both currencies.

C.the forward rate between the two currencies is equal to C. the ratio of their returns times the spot rate between the two currencies.

D.there is an opportunity for arbitrage whenever prices are sluggish and sticky.

10.In equilibrium, the expected future spot rate is equal to the:

Question 20 options:

A.current spot rate.

B.current interest rate.

C. Interest rate spread.

D.current forward rate.