Suppose that the Hong Kong Dollar (HKD) is pegged to the U.S. dollar ($) at a rate of 7.75 HKD/$. Over the past month, the U.S. dollar has fluctuated against the Euro from an exchange rate of $0.838/ to $0.816/. What is the most likely new HKD/$ exchange rate?

Group of answer choices

7.75 HKD/$

7.85 HKD/$

7.55 HKD/$

7.96 HKD/$

After the Brexit referendum results were realized, the British Pound declined significantly against other currencies. Which best explains this outcome?

Group of answer choices

British goods are competitors with other goods in the euro area, which became more attractive

Politicaly instability and uncertainty make it more difficult to maintain successful business relationships

Desire for British products declined

The referendum established higher tariffs and less favorable terms of trade

Which best explains why covered interest rate parity is empirically stronger than uncovered interest rate parity?

Group of answer choices

Covered interest rate parity is enforced by arbitrage, whereas taking advantage of uncovered interest rate parity violations is risky

Covered interest rate parity relies on futures which are generally unbiased predictors of the spot rate

Covered interest rate parity violations generate profits today whereas profits from violations of uncovered interest rate parity accrue in the future

Futures contracts impose additional transactions costs

If the U.S. intervenes in foreign exchange markets by selling Euros, which best describes the outcome and mechanism of this intervention?

Group of answer choices

They wish to decrease the value fo the dollar by increasing the supply of dollars

They wish to decrease the value of the dollar by decreasing the supply of dollars

They wish to increase the value of the dollar by increasing the demand for dollars

They wish to increase the value of the dollar by increasing the supply of dollars

Suppose you see the following bid/ask quotes for various currencies:

Asset	Bid	Ask
	$1.180	$1.185
	$1.345	$1.350
	1.140	1.145T

What is the triangular arbitrage opportunity?

Group of answer choices

Either (b) or (c) result in an arbitrage opportunity

Convert Dollars to Pounds, Pounds to Euros, Euros to Dollars.

Three is no triangular arbitrage opportunity

Convert Dollars to Euros, Euros to Pounds, Pounds to Dollars.