FRL 301 Chapter 21 Concept

14. Mr. Black has agreed to a currency exchange with Mr. White. The parties have agreed to exchange C$12,500 for $10,000 with the exchange occurring 4 months from now. This agreed-upon exchange rate is called the:

c

19. Which one of the following supports the idea that real interest rates are equal across countries? A. unbiased forward rates condition B. uncovered interest rate parity C. international Fisher effect D. purchasing power parity E. interest rate parity

c

15. Assume that an item costs $100 in the U.S. and the exchange rate between the U.S. and Canada is: $1 = C$1.27. Which one of the following concepts supports the idea that the item that sells for $100 in the U.S. is currently selling in Canada for $127? A. unbiased forward rates condition B. uncovered interest rate parity C. international Fisher effect D. purchasing power parity E. interest rate parity

d

20. Which one of the following is the risk that a firm faces when it opens a facility in a foreign country, given that the exchange rate between the firm's home country and this foreign country fluctuates over time? A. international risk B. diversifiable risk C. purchasing power risk D. exchange rate risk E. political risk

d

11. Trader A has agreed to give 100,000 U.S. dollars to Trader B in exchange for British pounds based on today's exchange rate of $1 = £0.62. The traders agree to settle this trade within two business day. What is this exchange called? A. swap B. option trade C. futures trade D. forward trade E. spot trade

e

6. You would like to purchase a security that is issued by the British government. Which one of the following should you purchase? A. Samurai bond B. kronor C. Euro D. LIBOR E. gilt

gilt

2. Assume that $1 is equal to ¥98 and also equal to C$1.21. Based on this, you could say that C$1 is equal to: C$1(¥98/C$1.21) = ¥80.99. The exchange rate of C$1 = ¥80.99 is referred to as the: A. open exchange rate. B. cross-rate. C. backward rate. D. forward rate. E. interest rate.

Cross Rate

10. The price of one Euro expressed in U.S. dollars is referred to as a(n): A. ADR rate. B. cross inflation rate. C. depository rate. D. exchange rate. E. foreign interest rate.

Exchnge rate

9. A large U.S. company has £500,000 in excess cash from its foreign operations. The company would like to exchange these funds for U.S. dollars. In one of the following markets can this exchange be arranged? A. ADR B. national registry C. national discount window D. foreign exchange market E. Eurobond market

Foreign Exchange mart

8. Party A has agreed to exchange $1 million U.S. dollars for $1.21 million Canadian dollars. What is this agreement called? A. gilt B. LIBOR C. SWIFT D. Yankee agreements E. swap

Swap

12. George and Pat just made an agreement to exchange currencies based on today's exchange rate. Settlement will occur tomorrow. Which one of the following is the exchange rate that applies to this agreement? A. spot exchange rate B. forward exchange rate C. triangle rate D. cross rate E. current rate

a

13. A trader has just agreed to exchange $2 million U.S. dollars for $1.55 million Euros six months from today. This exchange is an example of a: A. spot trade. B. forward trade. C. currency swap. D. floating swap. E. triangle arbitrage. `

b

16. The condition stating that the interest rate differential between two countries is equal to the percentage difference between the forward exchange rate and the spot exchange rate is called: A. the unbiased forward rates condition. B. uncovered interest rate parity. C. the international Fisher effect. D. purchasing power parity. E. interest rate parity.

e

17. Which one of the following states that the current forward rate is an unbiased predictor of the future spot exchange rate? A. unbiased forward rates B. uncovered interest rate parity C. international Fisher effect D. purchasing power parity E. interest rate parity

a

18. Which one of the following states that the expected percentage change in the exchange rate between two countries is equal to the difference in the countries' interest rates? A. unbiased forward rates condition B. uncovered interest parity C. international Fisher effect D. purchasing power parity E. interest rate parity

b

1. Which one of the following securities is used as a means of investing in a foreign stock that otherwise could not be traded in the United States? A. American Depository Receipt B. Yankee bond C. Yankee stock D. LIBOR E. gilt

American Depository Receipt

3. International bonds issued in multiple countries but denominated solely in the issuer's currency are called: A. Treasury bonds. B. Bulldog bonds. C. Eurobonds. D. Yankee bonds. E. Samurai bonds.

Eurobonds

4. U.S. dollars deposited in a bank in Switzerland are called: A. foreign depository receipts. B. international exchange certificates. C. francs. D. Eurocurrency. E. Eurodollars.

Eurocurrency

5. International bonds issued in a single country and denominated in that country's currency are called: A. Treasury bonds. B. Eurobonds. C. gilts. D. Brady bonds. E. foreign bonds.

Foreign Bonds

7. On Friday evening, Bank A loans Bank B Eurodollars that must be repaid the following Monday morning. Which one of the following is most likely the interest rate that will be charged on this loan? A. Eurodollar yield to maturity B. London Interbank Offer Rate C. Paris Opening Interest Rate D. United States Treasury bill rate E. international prime rate

London Interbank offer rate