Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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A
direct rate of exchange is: a. | The price of one unit of the counter currency in terms of the
base | c. | The rate of
exchange for immediate transfer | b. | The price of one unit of the base currency in terms of the
counter currency | d. | The rate of
exchange between two closely alligned currencies | | | | |
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2.
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With
an indirect £/$ rate two figures are quoted as 1.7590 and 1.7600. At which rate will the
foreign currency dealer sell dollars? a. | 1.75960 | c. | 1.75980 | b. | 1.76000 | d. | 0.56818 | | | | |
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3.
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The
dollar is trading at 1.7600 against sterling (spot) and 1.7655 (forward). Is it trading at a
forward premium or discount and at what rate? a. | 0.3115 per cent forward
discount | c. | 0.3125 per cent
forward discount | b. | 0.3115 per cent forward premium | d. | 0.3125 per cent forward premium | | | | |
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4.
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The
sterling euro rate is 1.3420 and the sterling dollar rate is 1.7600. What is the euro/$ cross
rate (indirect) a. | 1.3115 | c. | 1.3445 | b. | 0.7625 | d. | 1.4580 | | | | |
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5.
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The
sterling euro rate is 1.3420 and the sterling dollar rate is 1.7600. The current Euro/$ rate
1.3250. Is there an arbitrage gain and by how much (assume an initial investment of
£500000)? a. | Buy Euros at
1.3420, convert to dollars at 1.3250, buy sterling at 1.7600 gain
£5103 | c. | Buy Euros at
1.3420, convert to dollars at 1.3250, buy sterling at 1.7600 gain
£5156 | b. | Buy dollars at 1.7600, convert to euros at 1.3250, buy sterling
at 1.3420 gain £5103 | d. | uy dollars at
1.7600, convert to euros at 1.3250, buy sterling at 1.3420 gain £5156 | | | | |
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