Exam 16: Foreign Exchange Derivative Markets

The Swiss franc is presently pegged to the euro.

The potential benefits from using foreign exchange derivatives are independent of the expected exchange rate movements.

The following information refers to Fresno Bank and Champaign Bank.

If the quoted cross-exchange rate between two foreign currencies is not aligned with the two corresponding exchange rates, investors can profit from triangular arbitrage.

On a financial website, you observe that the euro (€)is quoted for $1.67. The Canadian dollar (C$)is quoted for $0.62. What is the value of the Canadian dollar in euros?

In a(n)____ exchange rate system, the foreign exchange market is totally free from government intervention.

A country that pegs its exchange rate to another exchange rate does not have complete control over its interest rates.

If U.S. interest rates suddenly become much higher than European interest rates (and if this does not cause concern about higher inflation in the United States), the U.S. demand for euros would ____, and the supply of euros to be exchanged for dollars would ____, other factors held constant. ​

The Bretton Woods era was the era

A(n)____ in the supply of euros for sale will cause the euro to ____.

When the Federal Reserve attempts to lower interest rates by increasing the U.S. money supply and has no impact on inflationary expectations, it puts upward pressure on the value of the dollar.

When a government influences factors, such as inflation, interest rates, or income, in order to affect currency's value, this is an example of ​

Which of the following is typically used as the basis of a market-based forecast?

The European Central Bank is responsible for setting fiscal policy for all countries in the eurozone.

The indirect exchange rate specifies the value of the currency in U.S. dollars.

Generally, a ____ home currency can ____ domestic economic growth.

The exchange rate between two foreign (nondollar)currencies is known as a(n)

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? ​

If a country in the eurozone suffers from a weak economy, it may devalue its currency to increase demand for its exports and thereby stimulate its economy.

The primary advantage of currency options over forward and futures contracts is that they provide a right rather than an obligation to purchase or sell a particular currency at a specified price within a given period.