an increase in u.s inflation relative to canadian inflation places upward pressure on the value of the canadian currency.

• true
• false

the value of the australian dollar today is 0.93usd/aud. yesterday, the value of the australian dollar was 0.95usd/aud. the australian dollar _____ by _____ percent.

• appreciated, 1.064%
• depreciated, 1.064%
• depreciated, 2.105%
• appreciated, 2.105%

if the law of one price is accurate, arbitrage in the market for international goods is a likely possibility.

• true
• false

increasing income levels in canada along with no change in the u.s income levels would result in (assuming no change in interest rates or other factors) a(n) _____ in canadian demand for u.s goods, and the cad should _____.

• increase, depreciate
• increase, appreciate
• decrease, appreciate
• decrease, depreciate

an increase in french interest rates relative to u.s interest rates would likely _____ the u.s demand for euros and _____ the supply of euros for sale.

• reduce, reduce
• increase, reduce
• increase, increase
• reduce, increase

if the chinese government wants to weaken its currency with respect to the u.s dollar, it would consider intervening in the foreign exchange market by selling its reserve of u.s dollars to buy chinese yuan.

• true
• false

if inflation in mexico is expected to decrease in the near future the value of the peso will most likely _____ against the u.s dollar in the near-term.

• strengthen
• cannot be determined
• weaken
• flat (no change)

which factors potentially impact the value of currencies in the foreign exchange market?

• all are potentially relevant
• political or economic turmoil
• government controls
• excessive debt levels

if spain places a large quota (limit) on goods imported from the u.s, the supply of euros to be exchanged for the u.s dollars will _____ and the value of the usd to _____.

• increase, decline
• decline, increase
• increase, increase
• decline, decline

carl is an option buyer. in anticipation of an appreciation of the british pound from its current level of $1.25 to $1.30, he brought a call option with an exercise price of $1.26 and a premium of $.02. if the spot rate at the options maturity turns out to be $1.30, what is carls profit or loss per unit?

• $.00
• -$.03
• -$.01
• $.02
• do not exercise, lose premium