Exam 17: International Business Finance

Translation exposure can be reduced by the use of a money-market hedge or a forward-market hedge.

Buying and selling in more than one market to make a riskless profit is called

The forward exchange rate quoted today should be equal to the spot rate in the future.

The difference between the asked price and the bid price is known as the spread.

In an international trade contract involving one buyer and one seller,both parties may be exposed to exchange rate risk if the contract is denominated in a third currency.

The forward-spot differential is the difference between the forward rate and the expected future spot rate.

A foreign currency option differs from a forward exchange contract is all of the following ways except:

Due to the dominance of Chinese companies in international trade,the Chinese yuan is the most frequently traded currency.

The efficiency of foreign currency markets is assured,in large measure,by the process of arbitrageurs.

A cross rate is the computation of an exchange rate for a currency from the exchange rates of two other currencies.

Triangular arbitrage eliminates exchange rate differentials across three markets for three currencies.

You purchased 500,000 Swiss Francs in London at an exchange rate of 0.6705 to the dollar and simultaneously sold the francs in New York at an exchange rate of 0.6692 to the dollar.What is the name for such a transaction?

The bid rate is the rate at which the bank buys the foreign currency from the customer by paying in home currency.

In order to profit from an expected near-term increase in the relative value of the British pound versus the U.S.dollar,an investor would be wise to maintain a short position in pounds,then sell when the pound rises in relative value.

Forward contracts benefit only the customer due to a reduction in uncertainty.

Prior to 1973 the exchange rates between the major currencies of the world were

Which of the following is true?

Interest rate parity theory states that the forward premium or discount should be equal and opposite in sign to the difference in the national interest rates for securities of the same maturity.

The direct quote in New York is .015 dollar per Pakistani Rupee.The direct quote in Pakistan is 60 rupees per dollar.This imbalance in rates can be correct by arbitrage.A trader will ________ rupees in New York and ________ rupees in Pakistan,causing the direct quote in New York to ________.

Why do currency exchange rates throughout the world trade within a very narrow range on any given day?