1．Nathan Hawk, CFA, is an economist with National City Bank. He wants to use the asset markets approach in determining the current spot exchange rates for the Mexican peso. Nathan needs to know what components affect the peso. Which of the following groups contain the most important components of the asset markets approach?

A)   Money supply and inflation rates.

B)   Inflation and interest rates.

C)   Forward exchange and risk-free rates.

D)   Risk-free rates and money supply.

2．Valerie Connors, CFA, is an economist with PJ Morton Bank. She wants to use the asset markets approach to make short run forecasts on the value of several currencies. She has decided to use the asset markets approach for the euro. One of the shortcomings of the asset markets approach is that:

A)   it cannot help determine expected future spot exchange rates.

B)   its use is limited to the determination of risk-free rates.

C)   its use is limited to the determination of inflation rates.

D)   it cannot help determine forward rates.

3．Yasmine Patel, CFA, is a currency trader who wishes to use a method of determining current spot rates for the Indian rupee based on long run expectations of inflation and interest rates. Which of the following methods is the best approach to allow her to infer a short run value for rupee?

A)   Asset market approach.

B)   Relative purchasing power parity.

C)   International Fisher relation.

D)   Interest rate parity.

答案和详解如下：

1．Nathan Hawk, CFA, is an economist with National City Bank. He wants to use the asset markets approach in determining the current spot exchange rates for the Mexican peso. Nathan needs to know what components affect the peso. Which of the following groups contain the most important components of the asset markets approach?

A)   Money supply and inflation rates.

B)   Inflation and interest rates.

C)   Forward exchange and risk-free rates.

D)   Risk-free rates and money supply.

The correct answer was B)

Essentially, exchange rates represent the supply and demand for currency based on the market’s forecasts of inflation and interest rates. As a result, only news concerning inflation expectations and real interest rates will affect exchange rates. The asset market approach is used to estimate the change in exchange rates based on some disturbance in the fundamental value of a currency. For example, a sudden change in monetary policy will change inflation expectations and exchange rates.

2．Valerie Connors, CFA, is an economist with PJ Morton Bank. She wants to use the asset markets approach to make short run forecasts on the value of several currencies. She has decided to use the asset markets approach for the euro. One of the shortcomings of the asset markets approach is that:

A)   it cannot help determine expected future spot exchange rates.

B)   its use is limited to the determination of risk-free rates.

C)   its use is limited to the determination of inflation rates.

D)   it cannot help determine forward rates.

The correct answer was D)

The asset markets approach depends on two steps that involve relative purchasing power parity and uncovered interest rate parity. Both methods are not used in the determination of forward rates. Only the interest rate parity method is used to determine forward rates.

3．Yasmine Patel, CFA, is a currency trader who wishes to use a method of determining current spot rates for the Indian rupee based on long run expectations of inflation and interest rates. Which of the following methods is the best approach to allow her to infer a short run value for rupee?

A)   Asset market approach.

B)   Relative purchasing power parity.

C)   International Fisher relation.

D)   Interest rate parity.

The correct answer was A)  

The asset markets approach is the best approach in determining a short run value (spot rate) based on long run expectations of inflation and interest rate differentials. Essentially, exchange rates represent the supply and demand for currency based on the market’s forecasts of inflation and interest rates. As a result, only news concerning inflation expectations and real interest rates will affect exchange rates. The asset market approach is used to estimate the change in exchange rates based on some disturbance in the fundamental value of a currency. For example, a sudden change in monetary policy will change inflation expectations and exchange rates.