Questions:
Question 1. Generally unfavorable evidence on PPP suggests that: substantial barriers to international commodity arbitrage exist.
tariffs and quotas imposed on international trade can explain at least some of the evidence.
shipping costs can make it difficult to directly compare commodity prices.
all of the above.
Question 2. The world's largest foreign exchange trading center is:
New York.
Tokyo.
London.
Hong Kong.
Question 3.The random walk hypothesis suggests that:
the best predictor of the future exchange rate is the current exchange rate.
the best predictor of the future exchange rate is the current forward rate.
both a) and b) are consistent with the efficient market hypothesis.
none of the above.
Question 4.Yesterday, you entered into a futures contract to sell €62,500 at $1.50 per €. Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted?
$1.5160 per €.
$1.208 per €.
$1.1920 per €.
$1.1840 per €.
Question 5. Relative to the spot price, the forward price will be:
usually less than the spot price.
usually more than the spot price.
usually equal to the spot price.
usually less than or more than the spot price, more often than it is equal to the spot price.
Question 6.In reference to the futures market, a "speculator":
attempts to profit from a change in the futures price.
wants to avoid price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position in the futures contract.
stands ready to buy or sell contracts in unlimited quantity.
b) and c).
Question 7.Consider a trader who takes a long position in a six-month forward contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract, the spot exchange rate is $1.65 = €1.00.
The trader has lost $625.
The trader has lost $6,250.
The trader has made $6,250.
The trader has lost $66,287.88
Question 8.An arbitrage is best defined as:
A legal condition imposed by the CFTC.
The act of simultaneously buying and selling the same or equivalent assets or commodities for the purpose of making reasonable profits.
The act of simultaneously buying and selling the same or equivalent assets or commodities for the purpose of making guaranteed profits.
none of the above.
Question 9.If a foreign country experiences a hyperinflation:
its currency will depreciate against stable currencies.
its currency may appreciate against stable currencies.
its currency may be unaffected-it's difficult to say.
none of the above.
Question 10. An "option" is:
a contract giving the seller (writer) of the option the right, but not the obligation, to buy (call) or sell (put) a given quantity of an asset at a specified price at some time in the future.
a contract giving the owner (buyer) of the option the right, but not the obligation, to buy (call) or sell (put) a given quantity of an asset at a specified price at some time in the future.
a contract giving the owner (buyer) of the option the right, but not the obligation, to buy (put) or sell (call) a given quantity of an asset at a specified price at some time in the future.
a contract giving the owner (buyer) of the option the right, but not the obligation, to buy (put) or sell (sell) a given quantity of an asset at a specified price at some time in the future.