国际金融学练习题：Lecture 6

Lecture6(Chapter6)

InternationalParityRelationshipsandForecastingForeignExchangeRates

MultipleChoiceQuestions

1.Anarbitrageisbestdefinedas

A.AlegalconditionimposedbytheCFTC.

B.Theactofsimultaneouslybuyingandsellingthesameorequivalentassetsorcommodities

forthepurposeofmakingreasonableprofits.

C.Theactofsimultaneouslybuyingandsellingthesameorequivalentassetsorcommodities

forthepurposeofmakingguaranteedprofits.

D.Noneoftheabove

2.InterestRateParity(IRP)isbestdefinedas

A.Whenagovernmentbringsitsdomesticinterestrateinlinewithothermajorfinancial

markets.

B.Whenthecentralbankofacountrybringsitsdomesticinterestrateinlinewithitsmajor

tradingpartners.

C.Anarbitrageconditionthatmustholdwheninternationalfinancialmarketsarein

equilibrium.

D.Noneoftheabove

3.WhenInterestRateParity(IRP)doesnothold

A.thereisusuallyahighdegreeofinflationinatleastonecountry.

B.thefinancialmarketsareinequilibrium.

C.thereareopportunitiesforcoveredinterestarbitrage.

D.bothb)andc)

4.Supposeyouobserveaspotexchangerateof$1.50/€.Ifinterestratesare5%APRintheU.S.

and3%APRintheeurozone,whatistheno-arbitrage1-yearforwardrate?

A.€1.5291/$

B.$1.5291/€

C.€1.4714/$

D.$1.4714/€

5.Supposeyouobserveaspotexchangerateof$1.50/€.Ifinterestratesare3%APRintheU.S.

and5%APRintheeurozone,whatistheno-arbitrage1-yearforwardrate?

A.€1.5291/$

B.$1.5291/€

C.€1.4714/$

D.$1.4714/€

6.Supposeyouobserveaspotexchangerateof$2.00/£.Ifinterestratesare5%APRintheU.S.

and2%APRintheU.K.,whatistheno-arbitrage1-yearforwardrate?

A.£2.0588/$

B.$2.0588/£

C.£1.9429/$

D.$1.9429/£

7.AformalstatementofIRPis

?($/€)_1+4

AS^/€)~TTZ

F($/€)_l+7€

-

B5($/€)1+^

F($/€)-S($/€)_1+7$

-

cS($/€)l+z€

F($/€)-5($/€)=7$-7€

8.Supposethattheone-yearinterestrateis5.()percentintheUnitedStates;thespotexchange

rateis$1.20/€;andtheone-yearforwardexchangerateis$1.16/€,Whatmustone-yearinterest

ratebeintheeurozonetoavoidarbitrage?

A.5.0%

B.6.09%

C.8.62%

D.Noneoftheabove

9.Supposethattheone-yearinterestrateis3.0percentintheItaly,thespotexchangerateis

$1.20/€,andtheone-yearforwardexchangerateis$1.18/€.Whatmustone-yearinterestratebe

intheUnitedStates?

A.1.2833%

B.1.0128%

C.4.75%

D.Noneoftheabove

10.Supposethattheone-yearinterestrateis4.0percentintheItaly,thespotexchangerateis

$1.60/€,andtheone-yearforwardexchangerateis$1.58/€.Whatmustone-yearinterestratebe

intheUnitedStates?

A.2%

B.2.7%

C.5.32%

D.Noneoftheabove

11.CoveredInterestArbitrage(CIA)activitieswillresultin

A.anunstableinternationalfinancialmarkets.

B.restoringequilibriumquitequickly.

C.adisintermediation.

D.noeffectonthemarket.

12.Supposethattheone-yearinterestrateis5.0percentintheUnitedStatesand3.5percentin

Germany,andthatthespotexchangerateis$1.12/€andtheone-yearforwardexchangerate,is

$1.16/€.Assumethatanarbitrageurcanborrowupto$1,000,000.

A.Thisisanexamplewhereinterestrateparityholds.

B.Thisisanexampleofanarbitrageopportunity;interestrateparitydoesNOThold.

C.ThisisanexampleofaPurchasingPowerParityviolationandanarbitrageopportunity.

D.Noneoftheabove

13.SupposethatyouarethetreasurerofIBMwithanextraUS$1,000,000toinvestforsix

months.YouareconsideringthepurchaseofU.S.T-billsthatyield1.810%(that'sasixmonth

rate,notanannualratebytheway)andhaveamaturityof26weeks.Thespotexchangerateis

$1.00=¥100,andthesixmonthforwardrateis$1.00=¥110.TheinterestrateinJapan(onan

investmentofcomparablerisk)is13percent.Whatisyourstrategy?

A.Take$lm,investinU.S.T-bills.

B.Take$lm,translateintoyenatthespot,investinJapan,andrepatriateyouryenearnings

backintodollarsatthespotrateprevailinginsixmonths.

C.Take$lm,translateintoyenatthespot,investinJapan,hedgewithashortpositioninthe

forwardcontract.

D.Take$lm,translateintoyenattheforwardrate,investinJapan,hedgewithashortposition

inthespotcontract.

14.Supposethattheannualinterestrateis2.0percentintheUnitedStatesand4percentin

Germany,andthatthespotexchangerateis$1.60/€andtheforwardexchangerate,with

one-yearmaturity,is$1.58/€.Assumethatanarbitragercanborrowupto$1,000,000or

€625,000.Ifanastutetraderfindsanarbitrage,whatisthenetcashflowinoneyear?

A.$238.65

B.$14,000

C.$46,207

D.$7,000

15.Acurrencydealerhasgoodcreditandcanborroweither$1,000,000or€800,000forone

year.Theone-yearinterestrateintheU.S.isis=2%andintheeurozonetheone-yearinterest

rateisie=6%.Thespotexchangerateis$1.25=€1.00andtheone-yearforwardexchangerate

is$1.20=€1.00.Showhowtorealizeacertainprofitviacoveredinterestarbitrage.

A.Borrow$1,000,000at2%.Trade$1,000,()0()for€800,000;investatze=6%;translate

proceedsbackatforwardrateof$1.20=€1.00,grossproceeds=$1,017,600.

B.Borrow€800,000atie=6%;translatetodollarsatthespot,investintheU.S.ati$=2%for

oneyear;translate€848,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit

$2,400.

C.Borrow€800,000at卜=6%;translatetodollarsatthespot,investintheU.S.ati$=2%for

oneyear;translate€850,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit

€2,000.

D.Bothc)andb)

16.Supposethattheannualinterestrateis5.0percentintheUnitedStatesand3.5percentin

Germany,andthatthespotexchangerateis$1.12/€andtheforwardexchangerate,with

one-yearmaturity,is$1.16/€.Assumethatanarbitragercanborrowupto$1,000,000.Ifan

astutetraderfindsanarbitrage,whatisthenetcashflowinoneyear?

A.$10,690

B.$15,000

C.$46,207

D.$21,964.29

17.AU.S.-basedcurrencydealerhasgoodcreditandcanbon*ow$1,000,000foroneyear.The

one-yearinterestrateintheU.S.isi$=2%andintheeurozonetheone-yearinterestrateisk=

6%.Thespotexchangerateis$1.25=€1.00andtheone-yearforwardexchangerateis$1.20=

€1.00.Showhowtorealizeacertaindollarprofitviacoveredinterestarbitrage.

A.Borrow$1,000,000at2%.Trade$1,000,000for€800,000;investatie=6%;translate

proceedsbackatforwardrateof$1.20=€1.00,grossproceeds=$1,017,600.

B.Borrow€800,000atie=6%;translatetodollarsatthespot,investintheU.S.atz$=2%for

oneyear;translate€848,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit

$2,400.

C.Borrow€800,000atie=6%;translatetodollarsatthespot,investintheU.S.ati$=2%for

oneyear;translate€850,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit

€2,000.

D.Bothc)andb)

18.AnItaliancurrencydealerhasgoodcreditandcanborrow€800,000foroneyear.The

one-yearinterestrateintheU.S.isis=2%andintheeurozonetheone-yearinterestrateisie=

6%.Thespotexchangerateis$1.25=€1.00andtheone-yearforwardexchangerateis$1.20=

€1.00.Showhowtorealizeacertaineuro-denominatedprofitviacoveredinterestarbitrage.

A.Borrow$1,00(),000at2%.Trade$1,000,000for€800,000;investat记=6%;translate

proceedsbackatforwardrateof$1.20=€1.00,grossproceeds=$1,017,600.

B.Borrow€800,000atie=6%;translatetodollarsatthespot,investintheU.S.ati$=2%for

oneyear;translate€848,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit

$2,400.

C.Borrow€800,000atze=6%;translatetodollarsatthespot,investintheU.S.at/$=2%for

oneyear;translate€850,000backintoeuroattheforwardrateof$1.20=€1.00.Netprofit

€2,000.

D.Bothc)andb)

19.SupposethatyouarethetreasurerofIBMwithanextraUS$1,000,000toinvestforsix

months.YouareconsideringthepurchaseofU.S.T-billsthatyield1.810%(that'sasixmonth

rate,notanannualratebytheway)andhaveamaturityof26weeks.Thespotexchangerateis

$1.00=¥100,andthesixmonthforwardrateis$1.00=¥110.Whatmusttheinterestratein

Japan(onaninvestmentofcomparablerisk)bebeforeyouarewillingtoconsiderinvesting

thereforsixmonths?

A.11.991%

B.1.12%

C.7.45%

D.-7.45%

20.Howhighdoesthelendingrateintheeurozonehavetobebeforeanarbitrageurwould

NOTconsiderborrowingdollars,tradingforeuroatthespot,investingintheeurozoneand

hedgingwithashortpositionintheforwardcontract?

BidAskBorrowingLending

5o($/€)$1.40=€1.00$1.43=€1.00/$4.20%.APR4.10。。APR

尸360($/€)

$1.44=€1.00$1.49=€1.00i€

A.Thebid-askspreadsaretoowidefbranyprofitablearbitragewhenie>0

B.3.48%

C.-2.09%

D.Noneoftheabove

21.Supposethattheone-yearinterestrateis5.()percentintheUnitedStatesand3.5percentin

Germany,andtheone-yearforwardexchangerateis$1.16/€.Whatmustthespotexchangerate

be?

A.$1.1768/€

B.$1.1434/€

C.$1.12/€

D.Noneoftheabove

22.AhigherU.S.interestrate(z$T)willresultin

A.astrongerdollar.

B.alowerspotexchangerate(expressedasforeigncurrencyperU.S.dollar).

C.botha)andb)

D.noneoftheabove

23.IftheinterestrateintheU.S.isis=5percentfbrthenextyearandinterestrateintheU.K.

isZi=8percentfbrthenextyear,uncoveredIRPsuggeststhat

A.thepoundisexpectedtodepreciateagainstthedollarbyabout3percent.

B.thepoundisexpectedtoappreciateagainstthedollarbyabout3percent.

C.thedollarisexpectedtoappreciateagainstthepoundbyabout3percent.

D.botha)andc)

24.Acurrencydealerhasgoodcreditandcanborroweither$1,000,000or€800,000fbrone

year.Theone-yearinterestrateintheU.S.isz$=2%andintheeurozonetheone-yearinterest

rateisze=6%.Theone-yearforwardexchangerateis$1.20=€1.00;whatmustthespotratebe

toeliminatearbitrageopportunities?

A.$1.2471=€1.00

B.$1.20=€1.00

C.$1.1547=€1.00

D.noneoftheabove

25.Willanarbitrageurfacingthefollowingpricesbeabletomakemoney?

bonowiiigleixliiigBidAsk

$5°o4.5%Spot$1.00=€1.00$1.01=€1.00

€6%5.5%Fonvard$0.99=€1.00$1.00=€1.00

A.Yes,borrow$1,000at5%;Tradefbr€attheaskspotrate$1.01=€1.00;Invest€990.10at

5.5%;Hedgethiswithaforwardcontracton€1,044.55at$0.99=€1.00;Receive$1.034.11.

B.Yes,borrow€1,000at6%;Tradefor$atthebidspotrate$1.00=€1.00;Invest$1,000at

4.5%;Hedgethiswithaforwardcontracton€1,045at$1.00=€1.00.

C.No;thetransactionscostsaretoohigh.

D.Noneoftheabove

26.IfIRPfailstohold

A.pressurefromarbitrageursshouldbringexchangeratesandinterestratesbackintoline.

B.itmayfailtoholdduetotransactionscosts.

C.itmaybeduetogovernment-imposedcapitalcontrols.

D.alloftheabove

27.AlthoughIRPtendstohold,itmaynotholdpreciselyallthetime

A.duetotransactionscosts,likethebidaskspread.

B.duetoasymmetricinformation.

C.duetocapitalcontrolsimposedbygovernments.

D.botha)andc)

28.Considerabankdealerwhofacesthefollowingspotratesandinterestrates.Whatshouldhe

sethis1-yearforwardaskpriceat?

BidAskBorrowingLending

5($/€)

0$1.42=€1.00$1.45=€1.00/$4.25%APR4%.APR

B60($/€)%3.10%APR3%APR

A.$1.4324/€

B.$1.4358/€

C.$1.4662/€

D.$1.4676/€

29.Considerabankdealerwhofacesthefollowingspotratesandinterestrates.Whatshouldhe

sethis1-yearforwardbidpriceat?

BidAskBorrowingLending

it

50($/€)$1.42=€1.00$1.45=€1.0()4.25%APR4°。APR

F360($/€)if3.10%APRNoAPR

A.$1.4324/€

B.$1.4358/€

C.$1.4662/€

D.$1.4676/€

30.Willanarbitrageurfacingthefollowingpricesbeabletomakemoney?

BidAskBorrowingLending

50($/€)$1.40=€1.00$1.43=€1.00/$4.20%APR4.10。。APR

F36O($/€)$1.44=€1.00$1.49=61.003.65%.APR3.50°oAPR

A.Yes,borrow€1,000,000at3.65%;Tradefor$atthebidspotrate$1.40=€1.00;Investat

4.1%;Hedgethiswithalongpositioninaforwardcontract.

B.Yes,borrow$1,000,000at4.2%;Tradefor€atthespotaskexchangerate$1.43=€1.00;

Invest€699,300.70at3.5%;HedgethisbygoingSHORTinforward(agreetosell€@BID

priceof$1.44/€inoneyear).Cashflowin1year$237.76.

C.No;thetransactionscostsaretoohigh.

D.Noneoftheabove

31.Ifaforeigncountyexperiencesahyperinflation,

A.itscurrencywilldepreciateagainststablecurrencies.

B.itscurrencymayappreciateagainststablecurrencies.

C.itscurrencymaybeunaffected—it'sdifficulttosay.

D.noneoftheabove

32.Asoftoday,thespotexchangerateis€1.00=$1.25andtheratesofinflationexpectedto

prevailforthenextyearintheU.S.is2%and3%intheeurozone.Whatistheone-year

forwardratethatshouldprevail?

A.€1.00=$1.2379

B.€1.00=$1.2623

C.€1.00=$0.9903

D.$1.00=€1.2623

33.PurchasingPowerParity(PPP)theorystatesthat

A.theexchangeratebetweencurrenciesoftwocountriesshouldbeequaltotheratioofthe

countries1pricelevels.

B.asthepurchasingpowerofacurrencysharplydeclines(duetohyperinflation)thatcurrency

willdepreciateagainststablecurrencies.

C.thepricesofstandardcommoditybasketsintwocountriesarenotrelated.

D.botha)andb)

34.Asoftoday,thespotexchangerateis€1.00=$1.60andtheratesofinflationexpectedto

prevailforthenextyearintheU.S.is2%and3%intheeurozone.Whatistheone-year

forwardratethatshouldprevail?

A.€1.00=$1.6157

B.€1.6157=$1.00

C.€1.00=$1.5845

D.$1.00x1.03=€1.60x1.02

35.Iftheannualinflationrateis5.5percentintheUnitedStatesand4percentintheU.K.,and

thedollardepreciatedagainstthepoundby3percent,thentherealexchangerate,assumingthat

PPPinitiallyheld,is

A.0.07

B.0.9849

C.-0.0198

D.4.5

36.Iftheannualinflationrateis2.5percentintheUnitedStatesand4percentintheU.K.,and

thedollarappreciatedagainstthepoundby1.5percent,thentherealexchangerate,assuming

thatPPPinitiallyheld,is.

A.parity

B.0.9710

C.-0.0198

D.4.5

37.InviewofthefactthatPPPisthemanifestationofthelawofonepriceappliedtoastandard

commoditybasket,

A.itwillholdonlyifthepricesoftheconstituentcommoditiesareequalizedacrosscountriesin

agivencurrency.

B.itwillholdonlyifthecompositionoftheconsumptionbasketisthesameacrosscountries.

C.botha)andb)

D.noneoftheabove

38.Somecommoditiesneverenterintointernationaltrade.Examplesinclude

A.nontradables.

B.haircuts.

C.housing.

D.alloftheabove

39.GenerallyunfavorableevidenceonPPPsuggeststhat

A.substantialbarrierstointernationalcommodityarbitrageexist.

B.tariffsandquotasimposedoninternationaltradecanexplainatleastsomeoftheevidence.

C.shippingcostscanmakeitdifficulttodirectlycomparecommodityprices.

D.alloftheabove

40.ThepriceofaMcDonald'sBigMacsandwich

A.isaboutthesameinthe120countriesthatMcDonaldsdoesbusinessin.

B.variesconsiderablyacrosstheworldindollarterms.

C.supportsPPP.

D.noneoftheabove.

41.TheFishereffectcanbewrittenfortheUnitedStatesas:

A.7$=P$+E(7T$)+P$XE(n$)

Bp$=7$+E(rt$)+i$xE(n$)

.q=1+/

「(l+e)(l+怎)

c.

尸($/€)_1+7$

D5($/

42.Forwardparitystatesthat

A.anyforwardpremiumordiscountisequaltotheexpectedchangeintheexchangerate.

B.anyforwardpremiumordiscountisequaltotheactualchangeintheexchangerate.

C.thenominalinterestratedifferentialreflectstheexpectedchangeintheexchangerate.

D.anincrease(decrease)intheexpectedinflationrateinacountrywillcauseaproportionate

increase(decrease)intheinterestrateinthecountry.

43.TheInternationalFisherEffectsuggeststhat

A.anyforwardpremiumordiscountisequaltotheexpectedchangeintheexchangerate.

B.anyforwardpremiumordiscountisequaltotheactualchangeintheexchangerate

C.thenominalinterestratedifferentialreflectstheexpectedchangeintheexchangerate.

D.anincrease(decrease)intheexpectedinflationrateinacountrywillcauseaproportionate

increase(decrease)intheinterestrateinthecountry.

44.TheFishereffectstatesthat

A.anyforwardpremiumordiscountisequaltotheexpectedchangeintheexchangerate.

B.anyforwardpremiumordiscountisequaltotheactualchangeintheexchangerate.

C.thenominalinterestratedifferentialreflectstheexpectedchangeintheexchangerate.

D.anincrease(decrease)intheexpectedinflationrateinacountrywillcauseaproportionate

increase(decrease)intheinterestrateinthecountry.

45.Ifyoucouldaccuratelyandconsistentlyforecastexchangerates

A.thiswouldbeaveryhandythingasgirlspreferguyswithskills.

B.youcouldimpressyourdates.

C.youcouldmakeagreatdealofmoney.

D.alloftheabove

46.Themainapproachestoforecastingexchangeratesare

A.Efficientmarket,Fundamental,andTechnicalapproaches.

B.EfficientmarketandTechnicalapproaches.

C.EfficientmarketandFundamentalapproaches.

D.FundamentalandTechnicalapproaches.

47.Thebenefittoforecastingexchangerates

A.aregreatestduringperiodsoffixedexchangerates.

B.arenonexistentnowthattheeuroanddollararethebiggestgameintown.

C.accrueto,andareavitalconcernfor,MNCsformulatinginternationalsourcing,production,

financingandmarketingstrategies.

D.alloftheabove

48.TheEfficientMarketsHypothesisstates

A.marketstendtoevolvetolowtransactionscostsandspeedyexecutionoforders.

B.currentassetprices(e.g.exchangerates)fullyreflectalltheavailableandrelevant

information.

C.currentexchangeratescannotbeexplainedbysuchfundamentalforcesasmoneysupplies,

inflationratesandsoforth.

D.noneoftheabove

49.Good,inexpensive,andfairlyreliablepredictorsoffutureexchangeratesinclude

A.today*sexchangerate.

B.currentforwardexchangerates(e.g.thesix-monthforwardrateisaprettygoodpredictorof

thespotratethatwillprevailsixmonthsfromtoday).

C.esotericfundamentalmodelsthattakeaneconometriciantouseandnoonecanexplain.

D.botha)andb)

50.Whichofthefollowingisatruestatement?

A.Whileresearchersfounditdifficulttorejecttherandomwalkhypothesisforexchangerates

onempiricalgrounds,thereisnotheoreticalreasonwhyexchangeratesshouldfollowapure

randomwalk.

B.Whileresearchersfounditeasytorejecttherandomwalkhypothesisforexchangerateson

empiricalgrounds,therearestrongtheoreticalreasonswhyexchangeratesshouldfollowapure

randomwalk.

C.Whileresearchersfounditdifficulttorejecttherandomwalkhypothesisforexchangerates

onempiricalgrounds,therearecompellingtheoreticalreasonswhyexchangeratesshould

followapurerandomwalk.

D.Noneoftheabove

51.Iftheexchangeratefollowsarandomwalk

A.thefutureexchangerateisunpredictable.

B.thefutureexchangerateisexpectedtobethesameasthecurrentexchangerate,St=E(5t+i).

C.thebestpredictoroffutureexchangeratesistheforwardrateFt=E(St+i|A).

D.bothb)andc)

52.Oneimplicationoftherandomwalkhypothesisis

A.giventheefficiencyofforeignexchangemarkets,itisdifficulttooutperformthe

market-basedforecastsunlesstheforecasterhasaccesstoprivateinformationthatisnotyet

reflectedinthecurrentexchangerate.

B.giventheefficiencyofforeignexchangemarkets,itisdifficulttooutperformthe

market-basedforecastsunlesstheforecasterhasaccesstoprivateinformationthatisalready

reflectedinthecurrentexchangerate.

C.giventherelativeinefficiencyofforeignexchangemarkets,itisdifficulttooutperformthe

technicalforecastsunlesstheforecasterhasaccesstoprivateinformationthatisnotyet

reflectedinthecurrentfuturesexchangerate.

D.noneoftheabove

53.Therandomwalkhypothesissuggeststhat

A.thebestpredictorofthefutureexchangerateisthecurrentexchangerate.

B.thebestpredictorofthefutureexchangerateisthecurrentforwardrate.

C.botha)andb)areconsistentwiththeefficientmarkethypothesis.

D.Noneoftheabove

54.Withregardtofundamentalforecastingversustechnicalforecastingofexchangerates

A.thetechnicianstendtouse"causeandeffect1'models.

B.thefundamentaliststendtobelievethat"historywillrepeatitself*isthebestmodel.

C.botha)andb)

D.noneoftheabove

55.Generatingexchangerateforecastswiththefundamentalapproachinvolves

A.lookingatchartsoftheexchangerateandextrapolatingthepatternsintothefuture

B.estimationofastructuralmodel

C.substitutingtheestimatedvaluesoftheindependentvariablesintotheestimatedstructural

modeltogeneratetheforecast

D.bothb)andc)

56.Whichofthefollowingissuesaredifficultiesforthefundamentalapproachtoexchangerate

forecasting?

A.Onehastoforecastasetofindependentvariablestoforecasttheexchangerates.Forecasting

theformerwillcertainlybesubjecttoerrorsandmaynotbenecessarilyeasierthanforecasting

thelatter.

B.Theparametervalues,thatisthea'sand|3's,thatareestimatedusinghistoricaldatamay

changeovertimebecauseofchangesingovernmentpoliciesand/ortheunderlyingstructureof

theeconomy.Eitherdifficultycandiminishtheaccuracyofforecastsevenifthemodelis

correct.

C.Themodelitselfcanbewrong.

D.Alloftheabove

57.Researchershavefoundthatthefundamentalapproachtoexchangerateforecasting

A.outperformstheefficientmarketapproach.

B.failstomoreaccuratelyforecastexchangeratesthaneithertherandomwalkmodelorthe

forwardratemodel.

C.failstomoreaccuratelyforecastexchangeratesthantherandomwalkmodelbutisbetter

thantheforwardratemodel.

D.outperformstherandomwalkmodel,butfailstomoreaccuratelyforecastexchangerates

thantheforwardratemodel.

58.Academicstudiestendtodiscreditthevalidityoftechnicalanalysis.Whichofthefollowing

istrue?

A.Thiscanbeviewedassupporttechnicalanalysis.

B.Itcanberationalfbrindividualtraderstousetechnicalanalysis-ifenoughtradersuse

technicalanalysisthepredictionsbasedonitcanbecomeself-fulfillingtosomeextent,atleast

intheshort-run.

C.Thatcanbeexplainedbythedifficultyprofessorsmayhaveindifferentiatingbetween

technicalanalysisandfundamentalanalysis.

D.Noneoftheabove

59.Themovingaveragecrossoverrule

A.isafundamentalapproachtoforecastingexchangerates.

B.statesthatacrossoveroftheshort-termmovingaverageabovethelong-termmoving

averagesignalsthattheforeigncurrencyisappreciating.

C.statesthatacrossoveroftheshort-termmovingaverageabovethelong-termmoving

averagesignalsthattheforeigncurrencyisdepreciating.

D.noneoftheabove

60.Accordingtothetechnicalapproach,whatmattersinexchangeratedeterminationis

A.thepastbehaviorofexchangerates.

B.thevelocityofmoney.

C.thefuturebehaviorofexchangerates.

D.thebeta.

61.Studiesoftheaccuracyofpaidexchangerateforecasters

A.tendtosupporttheviewthat"yougetwhatyoupayfbr".

B.tendtosupporttheviewthatforecastingiseasy,atleastwithregardtomajorcurrencieslike

theeuroandJapaneseyen.

C.tendtosupporttheviewthatbanksdotheirbestforecastingwiththeyen.

D.noneoftheabove

62.Accordingtotheresearchintheaccuracyofpaidexchangerateforecasters,

A.asagroup,theydonotdoabetterjobofforecastingtheexchangeratethantheforwardrate

does.

B.theaverageforecasterisbetterthanaverageatforecasting.

C.theforecastersdoabetterjobofpredictingthefutureexchangeratethanthemarketdoes.

D.noneoftheabove

63.Accordingtotheresearchintheaccuracyofpaidexchangerateforecasters,

A.youcanmakemoremoneysellingforecaststhanyoucanfollowingforecasts.

B.theaverageforecasterisbetterthanaverageatforecasting.

C.theforecastersdoabetterjobofpredictingthefutureexchangeratesthanthemarketdoes.

D.noneoftheabove.

64.Accordingtothemonetaryapproach,whatmattersinexchangeratedeterminationare

A.therelativemoneysupplies.

B.therelativevelocitiesofmonies.

C.therelativenationaloutputs.

D.alloftheabove

65.Accordingtothemonetaryapproach,theexchangeratecanbeexpressedas

B.丹

D.noneoftheabove

ShortAnswerQuestions

ExchangeRateInterestRateAPR

5o($/€)$1.60=€1.007$2%

66。($€)$1.58=€1.00%4%

Pleasenotethatyouranswersareworthzeropointsiftheydonotincludecurrencysymbols($,

€)

66.Ifyouborrowed€1,000,000foroneyear,howmuchmoneywouldyouoweatmaturity?

67.Ifyouborrowed$1,000,000foroneyear,howmuchmoneywouldyouoweatmaturity?

68.Ifyouhadborrowed$1,000,000andtradedforeuroatthespotrate,howmany€doyou

receive?

69.Ifyouhad€1,000,000andtradeditforUSDatthespotrate,howmanyUSDwillyouget?

70.USINGYOURPREVIOUSANSWERSandabitmorework,findthe1-yearforward

exchangeratein$per€thatsatisfiesIRPfromtheperspectiveofacustomerthatborrowed$1m

tradedfor€atthespotandinvestedatze=4%.

71.USINGYOURPREVIOUSANSWERSandabitmorework,findthe1-yearforward

exchangeratein$p