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Question
Suppose that under a gold standard, that the price of gold in the United States is $450 per ounce and the price of gold in the United Kingdom is 200 per ounce. The exchange rate is thus:
a. 2.25 per dollar
b. $0.45 per pound.
c. $2.25 per pound.
d. 1 per dollar.
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.
Q:
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.
Q:
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If a bicycle costs $200 in the U.S. and 50 Swedish kronor in Sweden and the exchange rate is 0.25 Swedish krona per dollar, then the Swedish krona is:
a. Correctly valued according to PPP.
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d. Not enough information to find answer.
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a. The pound depreciates.
b. The exchange rate stays the same.
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The equivalence of the exchange rate to the ratio of price levels between two countries is referred to as the:
a. Absolute PPP
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c. Interest rate parity
d. None of the above
Q:
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If a currency has appreciated more than the price differential between two countries as implied by PPP, then a currency is overvalued.
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In the presence of purchasing-power parity, if five pesos exchange for one dollar and a new smartphone sells for $100 in Dallas, then the identical smartphone in Mexico City should cost:
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Q:
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a. targets a domestic inflation rate within a certain range of values.
b. attempts to influence exchange rate movements with official statements on the governments preferred rate, without taking any direct action in the financial markets.
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Q:
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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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b. Percentage change in spot exchange rate
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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
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Q:
True or false: The balance of payment equilibrium implies that current account equals to zero.
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True or false: The BP curve could be vertical, if capital is perfectly mobile.
Q:
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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c. The maximization of shareholder wealth.
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In foreign exchange forecasting, what is a good forecast?
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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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Q:
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Q:
The ________ in the forward exchange market is equal to the effective return differential.
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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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Q:
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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Q:
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:
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b. 5%
c. 6.67%
d. 12.5%