These are quick multiple choice questions

1. The exchange rate between the dollar and the euro is $1.20=1; the rate between the dollar and the yen is $0.0125/. What is the exchange rate between the euro and the yen?

a. 1=80

b. 96=1

c. 1=0.0104

d. 0.0104=1

e. All the above

2. The premium on a call Australian dollar option increases when:

a. The Australian dollar is not expected to fluctuate much (against the US$)

b. The exercise rate increases from 6.5 (Australian dollars per US dollar) to 7.5

c. The exercise price decreases from 6.5 to 5.5

d. The US President insults the Australian Prime Minister

3. The premium on a call Australian dollar option decreases when:

a. The Australian dollar is expected to fluctuate wildly (against the US$)

b. The maturity of the option decreases

c. Kangaroos invade Sydney

d. The exercise price increases from 6.5 (Australian dollars to US dollar) to 7.5

e. The price of the option increases

4. Which one of the following would be an indirect quote from the perspective of a German investor?

a. 0.80=1

b. $1.20=1

c. 0.011=1

d. $1.00=0.80

5. The shortcomings of the Interest Rate Parity Theorem (IRPT) include:

a. It does not consider Forward Rates

b. It considers interest rate of one country only

c. It does not assume risk

d. It does not assume efficient markets

e. All the above

6. Flabovias Central Bank (FCB) intervenes in the foreign exchange market in order to mitigate short-term fluctuations in its currency, the Flab. Such intervention is referred to as:

a. Illegal

b. Neutral

c. Monetary reserve method

d. Leaning against the wind

e. Unofficial pegging

7. Monetary foreign exchange market intervention:

a. Is also referred to as non-sterilized intervention

b. Generally, applies only to fixed exchange rate systems (especially during economic downturns)

c. Generally, results in less drastic exchange rate change than the change generated by non-monetary intervention

d. Generally, results in less drastic exchange rate change than that generated by sterilized intervention

8. According to most observers of the International Monetary System, the current exchange rate system associated with currencies of most of the major world economies can be characterized as:

a. Selective Peg with a touch of Gold Standard

b. Free Float

c. Fixed Exchange Rate

d. Managed Float

e. Managed Fixed Rate