Hw3 - ECN 162 International Economic Relations Ina...

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1 ECN 162 International Economic Relations University of California - Davis Ina Simonovska Fall 2009 Assignment 3 (Maximum Score = 100) Due: Thursday, October 29, at the beginning of class. Multiple-Choice Questions Each question is worth 3 points. Explanation is not required. 1. The difference between bid (buying) rates and ask (selling) rates is called the (a) profit. (b) arbitrage. (c) spread. (d) forward transaction. 2. The size of the spread that a dealer will quote for a foreign exchange transaction will vary depending on (a) the degree of market volatility at the time. (b) the degree of risk associated with a particular currency. (c) the size of the market for the currency being traded. (d) All of above. 3. The euro is said to be selling at a ______ if the spot dollar price is $1.18 and the nine-month forward rate is $1.16 (a) forward discount (b) forward premium (c) forward spread (d) none of the above 4. A is a transaction in which both a spot transaction and a forward transaction are agreed upon simultaneously. (a) arbitrage (b) call (c) swap (d) put 5. An important feature of a is that the holder has the right, but not the obligation, to buy or sell currency. (a) swap (b) foreign exchange arbitrage (c) foreign exchange option (d) futures market contract 6. In order from highest to lowest, the top 3 trading locations for foreign exchange are:
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Hw3 - ECN 162 International Economic Relations Ina...

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