Exam 6: International Parity Relationships and Forecasting Foreign Exchange Rates

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As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

(Multiple Choice)

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Question 21

With regard to fundamental forecasting versus technical forecasting of exchange rates

(Multiple Choice)

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Question 22

If you borrowed $1,000,000 for one year, how much money would you owe at maturity?

(Essay)

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Question 23

If you had borrowed $1,000,000 and traded for euro at the spot rate, how many € do you receive?

(Essay)

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Question 24

How high does the lending rate in the euro zone have to be before an arbitrageur would NOT consider borrowing dollars, trading for euro at the spot, investing in the euro zone and hedging with a short position in the forward contract?

(Multiple Choice)

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Question 25

There is (at least) one profitable arbitrage at these prices. What is it?

(Essay)

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Question 26

If you had borrowed $1,000,000 and traded for euro at the spot rate, how many € do you receive?

(Essay)

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Question 27

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward exchange rate in $ per € that satisfies IRP from the perspective of a customer that borrowed $1m traded for € at the spot and invested at i_€ = 4%.

(Essay)

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Question 28

A higher U.S. interest rate (i_$ ↑) will result in

(Multiple Choice)

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Question 29

The moving average crossover rule

(Multiple Choice)

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Question 30

Which of the following is a true statement?

(Multiple Choice)

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Question 31

The benefit to forecasting exchange rates

(Multiple Choice)

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Question 32

The International Fisher Effect suggests that

(Multiple Choice)

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Question 33

If you borrowed €1,000,000 for one year, how much money would you owe at maturity?

(Essay)

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Question 34

If you had €1,000,000 and traded it for USD at the spot rate, how many USD will you get?

(Essay)

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Question 35

According to the research in the accuracy of paid exchange rate forecasters,

(Multiple Choice)

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Question 36

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward ASK exchange rate in $ per € that that satisfies IRP from the perspective of a customer.

(Essay)

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Question 37

An Italian currency dealer has good credit and can borrow €800,000 for one year. The one-year interest rate in the U.S. is i_$ = 2% and in the euro zone the one-year interest rate is i_€ = 6%. The spot exchange rate is $1.25 = €1.00 and the one-year forward exchange rate is $1.20 = €1.00. Show how to realize a certain euro-denominated profit via covered interest arbitrage.

(Multiple Choice)

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Question 38

There is (at least) one profitable arbitrage at these prices. What is it?

(Essay)

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Question 39

Some commodities never enter into international trade. Examples include

(Multiple Choice)

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Question 40

Showing 21 - 40 of 100

As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

With regard to fundamental forecasting versus technical forecasting of exchange rates

If you borrowed $1,000,000 for one year, how much money would you owe at maturity?

If you had borrowed $1,000,000 and traded for euro at the spot rate, how many € do you receive?

How high does the lending rate in the euro zone have to be before an arbitrageur would NOT consider borrowing dollars, trading for euro at the spot, investing in the euro zone and hedging with a short position in the forward contract?

There is (at least) one profitable arbitrage at these prices. What is it?

If you had borrowed $1,000,000 and traded for euro at the spot rate, how many € do you receive?

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward exchange rate in $ per € that satisfies IRP from the perspective of a customer that borrowed $1m traded for € at the spot and invested at i_€ = 4%.

A higher U.S. interest rate (i_$ ↑) will result in

The moving average crossover rule

Which of the following is a true statement?

The benefit to forecasting exchange rates

The International Fisher Effect suggests that

If you borrowed €1,000,000 for one year, how much money would you owe at maturity?

If you had €1,000,000 and traded it for USD at the spot rate, how many USD will you get?

According to the research in the accuracy of paid exchange rate forecasters,

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward ASK exchange rate in $ per € that that satisfies IRP from the perspective of a customer.

There is (at least) one profitable arbitrage at these prices. What is it?

Some commodities never enter into international trade. Examples include

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 6: International Parity Relationships and Forecasting Foreign Exchange Rates

As of today, the spot exchange rate is €1.00 = $1.25 and the rates of inflation expected to prevail for the next year in the U.S. is 2% and 3% in the euro zone. What is the one-year forward rate that should prevail?

With regard to fundamental forecasting versus technical forecasting of exchange rates

If you borrowed $1,000,000 for one year, how much money would you owe at maturity?

If you had borrowed $1,000,000 and traded for euro at the spot rate, how many € do you receive?

How high does the lending rate in the euro zone have to be before an arbitrageur would NOT consider borrowing dollars, trading for euro at the spot, investing in the euro zone and hedging with a short position in the forward contract?

There is (at least) one profitable arbitrage at these prices. What is it?

If you had borrowed $1,000,000 and traded for euro at the spot rate, how many € do you receive?

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward exchange rate in $ per € that satisfies IRP from the perspective of a customer that borrowed $1m traded for € at the spot and invested at i€ = 4%.

A higher U.S. interest rate (i$ ↑) will result in

The moving average crossover rule

Which of the following is a true statement?

The benefit to forecasting exchange rates

The International Fisher Effect suggests that

If you borrowed €1,000,000 for one year, how much money would you owe at maturity?

If you had €1,000,000 and traded it for USD at the spot rate, how many USD will you get?

According to the research in the accuracy of paid exchange rate forecasters,

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward ASK exchange rate in $ per € that that satisfies IRP from the perspective of a customer.

There is (at least) one profitable arbitrage at these prices. What is it?

Some commodities never enter into international trade. Examples include

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

USING YOUR PREVIOUS ANSWERS and a bit more work, find the 1-year forward exchange rate in $ per € that satisfies IRP from the perspective of a customer that borrowed $1m traded for € at the spot and invested at i_€ = 4%.

A higher U.S. interest rate (i_$ ↑) will result in