What is the main objective of the international credit market? : medium-term lending.

If a currency's spot rate market is..illiquid, its exchange rate is likely to be..highly sensitive

What is the main objective of the international money market? : short-term lending (one year or
less)

Which of the following events would lead to appreciation of the VND? : State Bank of Vietnam is
going to increase interest rates.

The value of the Australian dollar (A$) today is $0.69. Yesterday, the value of the Australian dollar
was $0.73. The Australian dollar : depre, 5.8%

The value of euro was $1.30 last week. During last week the euro depreciated by 5%. What is the
value of euro today? : 1.235

A large increase in the income level in Vietnam along with no growth in the China income level is
normally expected to cause (assuming no change in interest rates or other factors) a : incr, depre

Assume that Swiss investors have franes available to invest in securities, and they initially view and
British interest rates as equally altractive. New assume that U.S. interest rates decrease while British
interest rates stay the same. This weuld likely cause? : the Swiss demand for dollars to increase and
the dollar will appreciate against the Swiss franc.

Which of the following is an incorrect characteristic of banks who provides foreign exchange
services? Order costs

An MNC's medium debt financing decisions are satisfied in the : ..international money market, while
its short- term financing decisions are satisfied in the ...international credit

If inflation reduces substantially in Vietnam while U.S. inflation remains unchanged, this is expected
to place : upward

Assume that the inflation rate becomes much higher in the Vietnam relative to the China. This will
place ..downward pressure on the value of the VND. Also, assume that interest rates in the Vietnam
begin to rise relative to interest rates in the China. The change in interest rates will place ..upward

Assume that the bank's bid quote of Thai Baht is $.126 and ask price is $.129. If you have Thai Baht,
what is the Thai Baht that you need to purchase $100000? 100000/0.126 = 793650.79

Assume that $1 is equal to .85 British Pound and 98 yen. What is the value of yen in British
Pound? 0.85/98 = 0.0087

Assume the Canadian dollar is equal to $.95 and the Peruvian Sol is equal to $.45. The value of the
Canadian dollars in Peruvian Sol is: 0.95/0.45 = 2.11

A Japanese yen is worth $.0060, and a Fijian dollar (F$) is worth $.4500. What is the value of the yen
in Fijian dollars (i.e., how many Fijian dollars do you need to buy a yen)? 0.006/0.45 = 0.013

Assume the Canadian dollar is equal to $.95 and the Peruvian Sol is equal to $.35. The value of the
Peruvian Sol in Canadian dollars is : 0.35/0.95 = 0.37
National Bank quotes a bid rate of $0.026 and an ask rate of $0.028 for the Indian rupee (INR);
American Bank quotes a bid rate of $0.024 and an ask rate for $0.025. Locational arbitrage would
involve? : buying rupees from American Bank at the ask rate and selling to National Bank at the bid
rate.

Suppose that the annual interest rate is 4.0 percent in the United States and 3 percent in Norway,
and that the spot exchange rate is $1.61/€ and the forward exchange rate, with one-year maturity, is
$1.63/€. Assume that an arbitrager can borrow up to $50,000 or €31,056. : 139.75

Assume that British interest rates are LOWER than U.S. rates, and that the spot rate equals the
forward rate. Covered interest arbitrage puts : downward; upward

In which case will locational arbitrage most likely be feasible? One bank's bid price for a currency is
greater than another bank's ask price for the currency.

Market forces should realign the spot rate of a currency among banks. This is the impact of which of
the following arbitrage? locational arbitrage

Market forces should realign the cross- exchange rate between two foreign currencies based on the
spot exchange rates of the two currencies against the U.S. dollar. This is the impact of which of the
following arbitrage? triangular arbitrage

Assume that the euro's interest rates are higher than U.S. interest rates, and that interest rate parity
exists. Which of the following is true? None of above is correct

Assume the following exchange rates: $1= NZ$3, NZ$1 = MXP2, and $1 = MXP5. Given this
information, as you and others perform triangular arbitrage, the exchange rate of the New Zealand
dollar (NZ) with respect to the U.S. dollar should : none of above is correct

Which of the following is not true regarding interest rate parity (IRP)?When covered interest
arbitrage is not feasible, interest rate parity must hold.

Which of the following is not true regarding covered interest arbitrage?Covered interest arbitrage
opportunities only exist when the foreign interest rate is higher than the interest rate in the home
country.

Suppose you observe an exchange rate of S($/SFr) = 0.85 (i.e., SFr1 = $.85). The one- year forward
rate is F1($/SFr) = 0.935 (SFr 1 = $0.935). The risk-free interest rate is 5% in the U.S and 2% in
Switzerland. How can a dollar-based investor make money?Borrow dollars in the U.S., exchange for
Swiss francs, invest in Switzerland, and enter into a one-year forward contract to sell francs for
dollars. In one year, translate the Swi ss Francs back into dollars at the forward rate.

Suppose you observe the following exchange rates: S($/€) = 1.50 (€1 = $1.50). The one- year forward
rate is F1($/€) = 1.55 (€1 = $1.55). The risk-free interest rate is 5% in the U.S. and 2.5% in the euro
zone. How can a euro-based investor (with good credit at home and abroad) make money : Borrow
$1,000 in the U.S. at 5%, exchange for Euros at the spot rate, and invest in the euro zone at 2.5%.

What will happen if Interest Rate Parity (IRP) does not hold? there are opportunities for covered
interest arbitrage.
Suppose that the annual interest rate is 4.0. percent in the United States and 3 percent in Norway,
and that the spot exchange rate is $1.61/€ and the forward exchange rate, with one-year maturity, is
$1.63/€. Assume that an arbitrager can borrow up to $50,000 or €31,056. If an astute trader finds an
arbitrage, what is the profit in one year? 139.75

ACB offers the bid and ask value of a British pound (£) in $ are $1.61 and $1.62. TPbank offers the bid
and ask value of a British pound (£) in NZ$ are NZ$2.95 and NZ$2.96. VCB offers the bid and ask
value of a NZ$ in $ are $0.56 and $0.57. Assume you have $10,000 to conduct triangular arbitrage.
What is your profit in USD from implementing this strategy? 197.53

ACB offers the bid and ask value of a Euro in USD are $1.61 and $1.62. TPbank offers the bid and ask
value of a Euro in A$ are A$2.91 and A$2.92. VCB offers the bid and ask value
of a A$ in USD are $0.56 and $0.57. Assume you have $100,000 to conduct triangular
arbitrage. What is your profit in USD from implementing this strategy? 15.43

Suppose that the annual interest rate is 5.0 percent in the United States and 4 percent in
France, and that the spot exchange rate is $1.58/€ and the forward exchange rate, with one-year
maturity, is $1.61/€. Assume that an arbitrager can borrow up to $100,000 or €63,291. If an astute
trader finds an arbitrage, what is the profit in one year? 974.68