Reference no: EM13515723
Multiple Choice
1.Suppose a U.S. investor buys shares on a foreign stock exchange. When the shares are eventually sold, the holding period return will be
a.greater if the dollar appreciated relative to the foreign currency.
b.lower if the dollar appreciated relative to the foreign currency.
c.independent of foreign exchange movements.
d.equal to the implied interest rate in the foreign currency futures contract.
2.A U.S. manufacturer who sells goods abroad is most likely to hedge foreign exchange risk by
a.buying U.S. dollar futures.
b.selling U.S. dollar futures.
c.buying foreign currency futures.
d.selling foreign currency futures.
3.A U.S. manufacturer who buys goods from abroad is most likely to hedge foreign exchange risk by
a. buying U.S. dollar futures.
b.selling U.S. dollar futures.
c.buying foreign currency futures.
d.selling foreign currency futures.
4.Suppose German interest rates rise by 1%, while U.S. rates do not change. The price of a Deutschmark futures contract will most likely _______.
a. rise
b. fall
c. be unaffected
d.become less volatile
5.With foreign exchange futures, which of the following is most analogous to "the storage costs" associated with agricultural futures?
a.interest rates
b.commission rates
c.forward market rates
d.the good faith deposit
6.Foreign exchange futures pricing is explained by all of the following except
a.purchasing power parity
b.put/call parity
c.interest rate parity
d.cost of carry model
6.Two key factors in bullet immunization are
a.present value of outflows and their duration.
b.future value of outflows and one minus their duration.
c.the cheapest to deliver bond and its duration.
d.implied interest rates and convexity.
7.Bank immunization is concerned with bank
a.assets only.
b.liabilities only.
c.assets and liabilities.
d.budgets.
8.Duration is reduced by _____ coupons and _____ maturities.
a.raising, lengthening
b.raising, reducing
c.lowering, lengthening
d.lowering, reducing
9.The basis point value is the change in
a.bond price for a one basis point change in yield to maturity.
b.bond price for a one point change in yield to maturity.
c.bond yield for a one percent change in bond price.
d.bond yield for a one basis point change in bond price.