-54 - Homework 10 Submitted by [email protected] on 10:51:10 PM Points Awarded 16 Points Missed 0 Percentage 100 1 Suppose that on July 1 1

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Unformatted text preview: Homework 10 Submitted by [email protected] on 11/5/2008 10:51:10 PM Points Awarded 16 Points Missed 0 Percentage 100% 1. Suppose that on July 1, 1 Australian dollar exchanged for 86 U.S. cents. Suppose that on July 15, 1 Australian dollar exchanged for 87 U.S. cents. In this example, we say that A. the Australian dollar appreciated. B. the U.S. dollar depreciated. C. both of the above. D. none of the above. A currency is said to appreciate when it becomes more expensive relative to another. In this case, the second currency becomes relatively cheaper in terms of the first, so the second currency is said to depreciate. See lesson 50. Points Earned: 1/1 Correct Answer: C Your Response: C 2. An American merchant purchases one million dollars worth of yen from a bank, with an agreement that the transaction will be completed within 2 business days. In this case, the merchant is participating in the A. spot market. B. forward market. C. swap market. D. first-tier market. E. futures market. This is a definition. See Lesson 50. Points Earned: 1/1 Correct Answer: A Your Response: A 3. The difference between the bid price for a currency and the ask price for that currency is called the A. premium. B. discount. C. swap. D. spread. E. strike. This is a definition. See Lesson 50. Points Earned: 1/1 Correct Answer: D Your Response: D 4. Suppose that a Mexican importer of Malaysian cloth wants to exchange Mexican pesos for Malaysian ringgit. To do so, the importer first exchanges pesos for dollars, then exchanges the dollars for ringgit. In this case, the dollar is known as a A. reserve currency. B. center currency. C. triangular currency. D. vehicle currency. E. enabling currency. This is a definition. See Lesson 50. Points Earned: 1/1 Correct Answer: D Your Response: D 5. An American merchant purchases one million dollars worth of euros from a bank, with an agreement that the actual exchange of currency will take place in 30 days, though the exchange rate is agreed upon today. In this case, the merchant is participating in the A. spot market.spot market....
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This note was uploaded on 02/25/2011 for the course ECON 340 taught by Professor Leidholm during the Spring '08 term at Michigan State University.

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-54 - Homework 10 Submitted by [email protected] on 10:51:10 PM Points Awarded 16 Points Missed 0 Percentage 100 1 Suppose that on July 1 1

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