6．e three-month forward rate for the Byzantine solidus (BYZ) against the Venetian ducat (VEN) is quoted as 11.98 – 12.03 VEN/BYZ. The bid-ask spread on the direct quote to a Byzantine investor is closest to: A) 0.05 VEN/BYZ B) 0.05 BYZ/VEN C) 0.0003 BYZ/VEN D) 0.0003 VEN/BYZ The correct answer was C) The direct quote for a Byzantine investor is BYZ/VEN. The bid and ask quotes are 1/11.98 = 0.0834 BYZ/VEN and 1/12.03 = 0.0831 BYZ/VEN. The spread is 0.0834 - 0.0831 = 0.0003 BYZ/VEN. 7．ven the following information: §
The U.S. interest rate is 6%. §
The GBP/USD spot rate is 2.2. §
The GBP forward rate is 2 GBP/USD §
The domestic Great Britain interest rate is 8%. Which of the following statements is FALSE? A) Capital will flow into Great Britain. B) If you start by borrowing 1,000 GBP, your arbitrage profits will be 116 GBP. C) If you start by borrowing $1,000, your arbitrage profits will be $128. D) To arbitrage borrow Dollars at 6%, convert them to GBPs and lend the GBPs out at 8%. The correct answer was B) If rD– rF < (forward–spot)/spot then borrow domestic and lend foreign.
If rD– rF > (forward–spot)/spot then borrow foreign and lend domestic. rD– rF = 0.08 - 0.06 = 0.02 > –0.09 = [(2 – 2.2)/2.2] so borrow USD, lend GBP. Borrow $1,000 pay 6% (to pay $1,060); convert the $1,000 to 2,200 GBP
Lend out the GBP 2,200 at 8% (to receive GBP 2,376)
Forward contract to convert the GBP 2,376 to dollars at 2 GBP/$ (to receive $1,188)
At end receive GBP 2,376, convert $1,188, pay off loan of $1,060, your profit is $128. 8．mmediate delivery is assumed in which market? A) Forward market. B) Currency swap market. C) Interest rate swap market. D) Spot market. The correct answer was D) Forward markets are contracts for future delivery. Currency swaps involve a combination of spot and forward transactions. 9．ich of the following statements related to the foreign exchange market is FALSE? A) Foreign exchange brokers provide information, anonymity, and reduced trading time. B) The bid-ask spread is a function of trading volume, volatility, and term of the forward contract. C) The foreign exchange market is the largest financial market in the world. D) The settlement date in the spot market is two days after the trade. A Friday trade would be settled on Monday. The correct answer was D) In the spot market, currency trades are for immediate delivery, which is defined as two business days after the transaction. 10．ch of the following would least likely be a participant in the forward market? A) Arbitrageurs. B) Traders. C) Long-term investors. D) Speculators. The correct answer was C) Forward contracts are for 30, 90, 180, and 360-day periods and would, therefore, be considered short-term investment choices. Other participants in the forward market are hedgers who use forward contracts to protect the home currency value of foreign currency denominated assets on their balance sheets over the life of the contracts involved. | 
发表于 2008-5-12 12:17
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