Question 1 � Which of the following is most likely to provide currency forward contracts to their customers? Question 2 � ____ forecasting is usually based on either the spot rate or the forward rate. Question 3 � If the spot rate of the British pound is $2, and the 180-day forward rate is $2.05, what is the annualized premium or discount? Question 4 � The speculative risk of purchasing a ____ is that the foreign currency value ____ over time. Question 5 � In the Wall Street Journal, you observe that the British pound (£) is quoted for $1.65. The Australian dollar (A$) is quoted for $0.60. What is the value of the Australian dollar in British pounds? Question 6 � Assume that a British pound put option has a premium of $.03 per unit, and an exercise price of $1.60. The present spot rate is $1.61. The expected future spot rate on the expiration date is $1.52. The option will be exercised on this date if at all. What is the expected per unit net gain (or loss) resulting from purchasing the put option? Question 7 � When a government influences factors, such as inflation, interest rates, or income, in order to affect currency’s value, this is an example of Question 8 � If the U.S. government imposed trade restrictions on U.S. imports, this would ____ the U.S. demand for foreign currencies, and would place ____ pressure on the values of foreign currencies (with respect to the dollar). Question 9 � The act of capitalizing on the discrepancy between the forward rate premium and the interest rate differential is called Question 10 � Currency futures contracts differ from forward contracts in that they Question 11 � If a firm planning to hedge receivables is certain of the future direction a spot rate will move, and requires a tailor-made hedge in terms of amount and maturity date, it should use a Question 12 � If U.S. interest rates suddenly become much higher than European interest rates (and if it does not cause concern about higher inflation there), the U.S. demand for euros would ____, and the supply of euros to be exchanged for dollars would ____, other factors held constant. Question 13 � A system whereby exchange rates are market determined without boundaries but subject to government intervention is called Question 14 � Assume interest rate parity exists. If the spot rate on the British pound is $2 and the 1-year British interest rate is 7 percent, and the 1-year U.S. interest rate is 11 percent, what is the pound’s forward discount or premium? Question 15 � Assume an equilibrium state in which European inflation and U.S. inflation are both 4 percent. If U.S. inflation suddenly decreased to 2 percent, the euro will ____ against the dollar by approximately ____ percent, according to purchasing power parity. Question 16 � When banks obtain funds in the federal funds market, the providers of the funds are Question 17 � ____ loans are extended primarily to finance the purchase of fixed assets such as machinery. Question 18 � A ____ is a time deposit offered by some large banks to corporations, with a specific maturity date, minimum deposit of $100,000 or more, and a secondary market. Question 19 � When a bank obtains funds through ____, households are not a common provider of the funds. Question 20 � When a bank obtains funds through a ____, the provider of the funds receives collateral. Question 21 � When banks need funding for just a few days, they would most likely Question 22 � Which of the following is not an off-balance sheet activity? Question 23 � ____ are the largest bank source of funds (as a percentage of total liabilities). Question 24 � ____ is (are) not a major source of funds for commercial banks. Question 25 � A ____ is a type of loan commitment. Question 26 � Which type of savings account transfers funds to a checking account when checks are written? Question 27 � Commercial banks are not allowed to invest in Question 28 � Subordinated notes and debentures are examples of Question 29 � ____ loans are primarily used to finance the purchase of fixed assets. Question 30 � When a bank in need of funds for a few days sells some of its government securities to a corporation with a temporary excess of funds, then buys them back shortly thereafter, this is a
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