Exam 11: Foreign Exchange

A depreciation of the dollar will have its most pronounced impact on imports if the demand for imports is

Suppose you have a rule to buy euros once the 50-day average of euros crosses the 200-day average over a period of five minutes and to exit otherwise.What would happen if the euro rate crosses the 50-day average and lasts in the 200-day average for a period of three minutes?

The bid rate refers to the price at which a bank is willing to sell a unit of foreign currency; the offer rate is the price at which a bank is willing to buy a unit of foreign currency.

The pound shows a forward premium against the dollar (the forward rate is greater than the spot rate) when

You are engaging in a ______ if you initially sell a currency (that you do not own) at a high price and then buy it back later on at a low price.

The trade-weighted dollar is the weighted average of the exchange rates between the dollar and the most important industrial-country trading partners of the United States.

The major banks that trade foreign exchange generally do not deal directly with one another but instead use the services of foreign exchange brokers.

A U.S.export company scheduled to receive 1 million pounds six months from today can hedge its foreign exchange risk by

In a supply-and-demand diagram for Japanese yen, with the exchange rate in dollars per yen on the vertical axis, the demand schedule for yen is drawn sloping

If British interest rates are lower than those of the United States, then the pound shows a forward discount, which means the forward rate is less than the spot rate.

Assume that Boeing anticipates receiving 1 billion francs in three months from its exports of jetliners to Switzerland.To avoid the risk of an appreciation of the dollar against the franc, Boeing could contract to sell its expected franc receipts in the forward market at today's forward rate.

Figure 11.2. Market for Francs ​ -Refer to Figure 11.2.A shift in the demand for francs from D₀ to D₂, or a shift in the supply of francs from S₀ to S₁, would result in a(n)

If the exchange rate is $0.01 per yen in New York and $0.015 per yen in Tokyo, then an arbitrager could profit by buying yen in Tokyo and simultaneously sell them in New York.

If it takes $0.18544 to purchase 1 French franc, then it takes 5.3926 francs to purchase $1.

If the dollar's real exchange rate index increases, then American products become more affordable to foreign buyers.

Grain shortages in countries that buy large amounts of grain from the United States would increase the demand for American grain and

Figure 11.1. Supply and Demand Schedules of Francs ​ -Refer to Figure 11.1.At the equilibrium exchange rate of ____ per franc, ____ francs will be purchased at a total dollar cost of ____.