EAN: 2020-11-25 13:45 1 USD equivalent Country BID ASK Canada (Dollar) 0.8653 0.8667 Euro 1.4000 1.4200 1. What is the BID cross-exchange rate for Canadian dollars priced in euro? (2.097) A. 60.6094/CAD B. 0.6104/CAD C. 0.6181/CAD D. 0.6191/CAD OD 2 USD equivalent Country BID ASK Canada (Dollar) 0.8653 0.8667 Euro 1.4000 1.4200 2. What is the ASK cross-exchange rate for Canadian dollars priced in euro? (2.00) . A. 60.6094/CAD B. B. 0.6104/CAD C. 0.6181/CAD D.D. 0.6191/CAD 3 3. Suppose you observe the following exchange rates: 1 = $.85; 1 = $1.60; and 2.00 = 1.00. Starting with $1,000,000, how can you make money? (2.05) A A. Exchange $1m for 625,000 at 1 = $1.60. Buy 1,250,000 at 2 = 1.00; trade for $1.062,500 at 1 = $.85 B. B. Start with dollars, exchange for euros at 1 = $.85; exchange for pounds at 2.00 = 1.00; exchange for dollars at 1 = $1.60. C. Start with euros; exchange for pounds: exchange for dollars; exchange for euros. D D. No arbitrage profit is possible. D A 4. 4. The forward price (2.00) A A. may be higher than the spot price. B B. may be the same as the spot price. C. C. may be less than the spot price. D. D. all of the above O B OD 5 5. The $/CD spot bid ask rates are $0.7560-$0.7625. The 3-month forward points are 12-16. Determine the $/CD 3-month forward bid-ask rates. (2.08) . A. $0.7548-50.7609 . B. $0.7572-$0.7641 C C. $0.7512-50.7616 D. cannot be determined with the information given OD B 6 6. The current spot exchange rate is $1.45/ and the three-month forward rate is $1.55/. Based upon your economic forecast, you are pretty confident that the spot exchange rate will be $1.50/ in three months. Assume that you would like to buy or sell 100,000. What actions would you take to speculate in the forward market? How much will you make if your prediction is correct? (2.0) . A. Take a short position in a forward. If you're right you will make $15,000. B B. Take a long position in a forward contract on euro. If you're right you will make $5,000. C. Take a short position in a forward contract on euro. If you're right you will make $5,000. D. Take a long position in a forward contract on euro. If you're right you will make $15,000. 1:00 AL D O B 10 25/11/21 7 7. The International Fisher Effect suggests that (2.05) A A. any forward premium or discount is equal to the expected change in the exchange rate. B. B. any forward premium or discount is equal to the actual change in the exchange rate. C. C. the nominal interest rate differential reflects the expected change in the exchange rate. D D. an increase (decrease) in the expected inflation rate in a country will cause a proportionate increase (decrease) in the interest rate in the country. OD 8 8. Yesterday, you entered into a futures contract to buy 62,500 at $1.50 per . Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted? (2.05) . A. $1.5160 per . B. B. $1.208 per . . C. $1.1920 per . D. D. $1.4840 per A B C OD 99. From the perspective of the writer of a put option written on 62,500. If the strike price is $1.55/, and the option premium is $1,875, at what exchange rate do you start to lose money? (205) A A $1.52 B. B. $1.55/ C C $1.58/ D D. None of the above 10 10. In the graph at night, X and Y represent Portfolio Risk (%) X Y 0.12 1 SO Number of Stocks (2.09) A. U.S. stocks and international stocks. B. B. international stocks and U.S. stocks. C systematic risk and unsystematic risk. D. none of the above