International Parity Relationships and Forecasting Foreign Exchang必看课件资料e RatesMultiple Choice Questions.doc

Lecture 6 - International Parity Relationships and Forecasting Foreign Exchange Rates 6- PAGE 4 ? 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. Lecture 6(Chapter 6) International Parity Relationships and Forecasting Foreign Exchange Rates ? Multiple Choice Questions? 1.?An arbitrage is best defined as?A.?A legal condition imposed by the CFTC.B.?The act of simultaneously buying and selling the same or equivalent assets or commodities for the purpose of making reasonable profits.C.?The act of simultaneously buying and selling the same or equivalent assets or commodities for the purpose of making guaranteed profits.D.?None of the above ? 2.?Interest Rate Parity (IRP) is best defined as?A.?When a government brings its domestic interest rate in line with other major financial markets.B.?When the central bank of a country brings its domestic interest rate in line with its major trading partners.C.?An arbitrage condition that must hold when international financial markets are in equilibrium.D.?None of the above ? 3.?When Interest Rate Parity (IRP) does not hold?A.?there is usually a high degree of inflation in at least one country.B.?the financial markets are in equilibrium.C.?there are opportunities for covered interest arbitrage.D.?both b) and c) ? 4.?Suppose you observe a spot exchange rate of $1.50/€. If interest rates are 5% APR in the U.S. and 3% APR in the euro zone, what is the no-arbitrage 1-year forward rate??A.?€1.5291/$B.?$1.5291/€C.?€1.4714/$D.?$1.4714/€ ? 5.?Suppose you observe a spot exchange rate of $1.50/€. If interest rates are 3% APR in the U.S. and 5% APR in the euro zone, what is the no-arbitrage 1-year forward rate??A.?€1.5291/$B.?$1.5291/€C.?€1.4714/$D.?$1.4714/€ ? 6.?Suppose you observe a spot exchange