Question 6 Assume that Japan places a strict quota on goods imported from the U.S. and the U.S. places a strict quota on goods imported from Japan. This event should immediately cause the U.S. demand for Japanese yen to ____, and the supply of Japanese yen to be exchanged for U.S. dollars to ____.Answer increase; increaseincrease; declinedecline; declinedecline; increase1 points Question 7 Any event that increases the supply of British pounds to be exchanged for U.S. dollars should result in a(n) ____ in the value of the British pound with respect to ____, other things being equal.Answer increase; U.S. dollarincrease; nondollar currenciesdecrease; nondollar currenciesdecrease; U.S. dollar1 points Question 8 Any event that increases the U.S. demand for euros should result in a(n) ____ in the value of the euro with respect to ____, other things being equal.Answer increase; U.S. dollarincrease; nondollar currenciesdecrease; nondollar currenciesdecrease; U.S. dollar1 points Question 9 Any event that reduces the supply of Swiss francs to be exchanged for U.S. dollars should result in a(n) ____ in the value of the Swiss franc with respect to ____, other things being equal.Answer increase; U.S. dollarincrease; nondollar currenciesdecrease; nondollar currenciesdecrease; U.S. dollar1 points Question 10 Which of the following events would most likely result in an appreciation of the U.S. dollar?Answer U.S. inflation is very high.The Fed indicates that it will raise U.S. interest rates.Future U.S. interest rates are expected to decline.Japan is expected to increase interest rates in the near future.1 points Question 11 If the U.S. and Japan engage in substantial financial flows but little trade, ____ directly influences their exchange rate the most. If the U.S. and Switzerland engage in much trade but little financial flows, ____ directly influences their exchange rate the most.Answer interest rate differentials; interest rate differentialsinflation and interest rate differentials; interest rate differentialsincome and interest rate differentials; inflation differentialsinterest rate differentials; inflation and income differentialsinflation and income differentials; interest rate differentials1 points Question 12 Assume that British corporations begin to purchase more supplies from the U.S. as a result of several labor strikes by British suppliers. This action reflects:Answer an increased demand for British pounds.a decrease in the demand for British pounds.an increase in the supply of British pounds for sale.a decrease in the supply of British pounds for sale.1 points Question 13 Any event that reduces the U.S. demand for Japanese yen should result in a(n) ____ in the value of the Japanese yen with respect to ____, other things being equal.Answer increase; U.S. dollarincrease; nondollar currenciesdecrease; nondollar currenciesdecrease; U.S. dollar1 points Question 14 Assume that the U.S. experiences a significant decline in income, while Japan's income remains steady. This event should place ____ pressure on the value of the Japanese yen, other things being equal. (Assume that interest rates and other factors are not affected.)Answer upwarddownwardnoupward and downward (offsetting)1 points Question 15 If the Fed announces that it will decrease the U.S. interest rates, and European Central Bank takes no action, then the value of euro will ____ against the value of U.S. dollar. The Fed's action is called ____ intervention.Answer appreciate; directdepreciate; directappreciate; indirectdepreciate; indirect1 points Question 16 Currency options sold through an options exchange:Answer contain a commitment to the owner, and are standardized.contain a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and are standardized.1 points Question 17 If you expect the British pound to appreciate, you could speculate by ____ pound call options or ____ pound put options.Answer purchasing; sellingpurchasing; purchasingselling; sellingselling; purchasing1 points Question 18 If the spot rate of the euro increased substantially over a one-month period, the futures price on euros would likely ____ over that same period.Answer increase slightlydecrease substantiallyincrease substantiallystay the same1 points Question 19 When the futures price on euros is below the forward rate on euros for the same settlement date, astute investors may attempt to simultaneously ____ euros forward and ____ euro futures.Answer sell; sellbuy; sellsell; buybuy; buy1 points Question 20 When you own ____, there is no obligation on your part; however, when you own ____, there is an obligation on your part.Answer call options; put optionsfutures contracts; call optionsforward contracts; futures contractsput options; forward contracts1 points Question 21 When the existing spot rate exceeds the exercise price, a call option is ____, and a put option is ____.Answer out of the money; in the moneyout of the money; out of the moneyin the money; in the moneyin the money; out of the money1 points Question 22 In the U.S., the typical currency futures contract is based on a currency value in terms of:Answer euros.U.S. dollars.British pounds.Canadian dollars.1 points Question 23 Currency futures contracts sold on an exchange:Answer contain a commitment to the owner, and are standardized.contain a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and are standardized.1 points Question 24 A forward rate for a currency is said to exhibit a discount ifAnswer the forward rate exceeds the existing spot rate.the forward rate is less than the existing spot rate.the forward rate exceeds the expected future spot rate.the forward rate is less than the expected future spot rate.1 points Question 25 When the futures price is equal to the spot rate of a given currency, and the foreign country exhibits a higher interest rate than the U.S. interest rate, astute investors may attempt to simultaneously ____ the foreign currency, invest it in the foreign country, and ____ futures in the foreign currency.Answer buy; buysell; buybuy; sellbuy; buy1 points Question 26 Macomb Corporation is a U.S. firm that invoices some of its exports in Japanese yen. If it expects the yen to weaken, it could ____ to hedge the exchange rate risk on those exports.Answer sell yen put optionsbuy yen call optionsbuy futures contracts on yensell futures contracts on yen1 points Question 27 If you have a position where you might be obligated to sell pounds, you are:Answer a call writer.a call buyer.a put writer.a put buyer.1 points Question 28 Forward contracts:Answer contain a commitment to the owner, and are standardized.contain a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and can be tailored to the desire of the owner.contain a right but not a commitment to the owner, and are standardized.1 points Question 29 The greater the variability of a currency, the ____ will be the premium of a call option on this currency, and the ____ will be the premium of a put option on this currency, other things equal.Answer greater; lowergreater; greaterlower; greaterlower; lower1 points Question 30 European currency options can be exercised ____; American currency options can be exercised ____.Answer any time up to the expiration date; any time up to the expiration dateany time up to the expiration date; only on the expiration dateonly on the expiration date; only on the expiration dateonly on the expiration date; any time up to the expiration date
Europe(Continental)