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LOS n: Discuss the currency exposures of national economies, equity markets, and bond markets.
Q1. Suppose you are an investor that holds foreign bonds. What does it mean if bonds have positive currency exposure to the foreign currency?
A) The exposure is always a return enhance attribute of the foreign bond.
B) As interest rates go up, the value of the foreign currency increases.
C) As interest rates go up, the value of the foreign currency falls.
Q2. Sally Metford, CFA, has just accepted a position working for the Canadian government. As an economic advisor, Metford has been asked to comment on the implications of changes in domestic currency, government policy, and inflation expectations.
According to money demand theory, an increase in economic activity in Canada will most likely lead to a(n):
A) increase in demand for Canadian dollars causing an appreciation in Canadian currency.
B) increase in demand for Canadian dollars causing a depreciation in Canadian currency.
C) decrease in demand for Canadian dollars causing a depreciation in Canadian currency.
Q3. Metford’s supervisor has asked for recommendations regarding interest rate policies. The Canadian government is concerned that the value of the Canadian dollar has approached the upper target range. Assuming the Canadian government introduces a “leaning-against-the-wind” policy, the Canadian government will most likely:
A) induce negative currency exposure.
B) ease interest rates.
C) raise interest rates.
to ease interest rates. This is often referred to as a “leaning-against-the-wind” policy that induces positive currency exposure.
Q4. Which of the following are most likely to occur if the Canadian real rate of interest increases? There will be a(n):
A) increased demand for Canadian currency from abroad.
B) a positive currency exposure from bond investors.
C) capital flow out of Canada.
Q5. What is the likely long-term impact of real depreciation of a nation’s currency?
A) Increased competitiveness of domestic industry.
B) Decreased standard of living.
C) Increased budget deficits. | 
发表于 2009-4-2 14:03
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