| 3.435%
Risk that CAN BE eliminated through proper diversification is called _____. Answer |
|
| market risk | |
|
| firm-specific risk | |
|
| systematic risk | |
|
| non-diversifiable risk |
GIVEN: Spot Rate: 1 X = 1.02 Y
30 Day Forward Rate: 1 X = 1.15 Y
Your currency is "X" and you will be paying 345Y. You would ____ because _____. Answer |
|
| pay now; of the irrelevance of payment time | |
|
| pay now; it will take less "X" | |
|
| pay in 30 days; it will take less "X" |
The amount of one currency needed to purchase one unit of another currency is the _____. Answer |
|
| derivative rate | |
|
| exchange rate | |
|
| backwardation rate | |
|
| over-the-counter rate |
The price of an option is called a(n) _____. Answer |
|
| expiration cost | |
|
| holding cost | |
|
| premium | |
|
| proceeds |
When a futures contract expires, the parties usually _____. Answer |
|
| have a party when losses are low | |
|
| take delivery of the contract asset | |
|
| do a cash settlement | |
|
| swap off liabilities. |
When a forward contract expires, the parties will _____. Answer |
|
| have a party when losses are low | |
|
| deliver the contract asset | |
|
| do a cash settlement | |
|
| swap off liabilities. |
Any asset whose value is derived from the value of some underlying asset is a(n) ____. Answer |
|
| derivative | |
|
| primary capital | |
|
| spot asset | |
|
| intermediary asset |
Which of the following is not traded on an exchange? Answer |
|
| options | |
|
| futures | |
|
| forwards | |
|
| they are all exchange-traded |
A system under which a country's exchange rates are tied to another currency by government policy is _____. Answer |
|
| floating exchange rates | |
|
| pegged exchange rates | |
|
| convertible exchange rates | |
|
| forward rates |
One of the _______ for business with a floating exchange rate system is the _______ planning business activities in an international market. Answer |
|
| disadvantages; difficulty of | |
|
| advantages; easiness of | |
|
| irrelevant situations; normal | |
|
| none of the above |
U.S. dollars deposited in foreign banks are called _____ and interest paid on these deposits is normally tied to _____. Answer |
|
| non-foreign deposits; FED funds rate | |
|
| indirect dollars; Discount Funds Rate | |
|
| Eurodollars; LIBOR | |
|
| none of the above |
____ is a disadvantage of the gold standard. Answer |
|
| Excess currency slowing economic growth | |
|
| Excess inflation | |
|
| A non-variable beta | |
|
| Lack of currency to promote continued economic expansion |
A monetary system in which paper money can be converted directly to gold is a(n) ___. Answer |
|
| dollar backed float | |
|
| gold standard | |
|
| currency float | |
|
| Americanized gold standard | |
|
| none of the above |
Reason(s) for the Great Depression following the Great War include: Answer |
|
| trade protectionism | |
|
| isolationism | |
|
| nationalism | |
|
| all of the above | |
|
| none of the above |
An agreement between the WW II allies in 1944 designed to prevent the problems leading to the Great Depression and WW II and to rebuild Asia and Europe was the _____. Answer |
|
| Armistice of 1945 | |
|
| Bretton Woods Agreement | |
|
| Lend Lease Act for Asia and Europe | |
|
| none of the above |
A derivative is used to ____ thereby _____. Answer |
|
| float; gaining excess currency for expansion | |
|
| peg currency; improving trade with a primary partner | |
|
| hedge; reducing/eliminating risk | |
|
| none of the above |
Easier business planning is an advantage of the ______ system. Answer |
|
| mixed exchange rate | |
|
| floating exchange rate | |
|
| derivative exchange rate | |
|
| gold standard | |
|
| none of the above |
____ is the chance that some unfavorable event will occur. Answer |
|
| Expected return | |
|
| Risk | |
|
| Coefficient of variation | |
|
| Correlation |
| 
