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Question
A U.S. importer has to pay SKr1 million to a Swedish firm in 60 days. The current spot rate is $0.5 per Swedish krona, and the 60-day forward rate is $0.65. Bob forecasts that the spot rate in 60 days will be $0.45. Jane forecasts that the spot rate will be $0.85 in 60 days. The actual spot rate in 60 days turns out to be $0.68. Whose advice, between Bob and Jane, will save the companys money?
a. Bob
b. Jane
c. Both Bob and Jane
d. Neither Ben nor Jane
Answer
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Related questions
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Risk premium equals to:a. expected premium minus forward premium.b. expected premium plus forward premium.c. forward premium minus expected premium.d. exchange rate premium plus forward premium.
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Q:
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a. Correctly valued according to PPP.
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d. Not enough information to find answer.
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If prices in the U.K. are rising slower than prices in the U.S. then
a. The pound depreciates.
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c. The dollar depreciates.
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Q:
The equivalence of the exchange rate to the ratio of price levels between two countries is referred to as the:
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Q:
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Q:
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a. depreciation; deficit
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Q:
Under the flexible exchange rate regime, which of the following variables in the monetary approach becomes zero and is dropped out of the equation?
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According to the monetary approach to the balance of payments, which of the following economic events would help a country to resolve its balance of trade deficit?
a. An increase in money supply
b. A decrease in money supply
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True or false: The BP curve could be vertical, if capital is perfectly mobile.
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Considering the internal balance in an economy, which of the following could lead to lower interest rate and higher income?
a. An increase in government spending
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a. The minimization of taxes remitted from foreign subsidiaries.
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c. The maximization of shareholder wealth.
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In foreign exchange forecasting, what is a good forecast?
a. When the forecast encourages the firm to buy.
b. When the forecast is close.
c. When the forecast is high.
d. When the forecast predicts the right hedging strategy.
Q:
Suppose for two currencies the forward premium is 8.5% and the expected premium is 5%. Then the risk premium is:
a. -13.5%
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Q:
Suppose that the 1-year forward rate of dollar per pound is $1.32, the current spot rate ($/pound) is $1.20, and the expected future spot rate ($/pound) is $1.40. The expected premium on the pound is:
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The ________ in the forward exchange market is equal to the effective return differential.
a. Strike price
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Q:
Information exposure is a type of foreign exchange risk.
Q:
Suppose for two currencies the forward premium is 4% and the expected premium is 8%. Then the risk premium is:
a. -4%
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A U.S. firm has a 1 million payment due to a Dutch firm in 90 days. The current spot rate is $1.00 per euro, and the 90-day forward rate is $1.11. Ben forecasts that the spot rate in 90 days will be $0.99. Jerry forecasts that the spot rate will be $1.12 in 90 days. The actual spot rate in 90 days turns out to be $1.10. Whose advice, between Ben and Jerry, will save the companys money?
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b. Jerry
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Suppose that the 1-year forward rate of dollar per Swiss franc is $0.42, the current spot rate ($/SFr) is $0.40, and the expected future spot rate ($/SFr) is $0.45. The forward premium equals to:
a. 7.5%
b. 5%
c. 6.67%
d. 12.5%