QUESTION 6

1. A direct quote of 0.1256/Dkr is equivalent to an indirect quote of

a.

Dkr 7.8654/

b.

Dkr 0.8654/

c.

Dkr 7.962/

d.

Dkr 1.1345/

QUESTION 7

1. Purchasing Power Parity (PPP) theory states that

Which of the answers is incorrect?

a.

the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels.

b.

as the purchasing power of a currency sharply declines (due to hyperinflation) that currency will depreciate against stable currencies.

c.

the prices of standard commodity baskets in two countries are not related.

QUESTION 8

1. For an American trader, an interbank quotation of $1.4631/ is in

a.

non-conventional terms

b.

direct terms

c.

European terms

d.

indirect terms