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sample_quiz_2[1]

# sample_quiz_2[1] - Version Fin 536 Sample Quiz 2...

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Version Fin 536 Sample Quiz 2 Name____________Section_4pm/7pm Note: You must review all potential topics for the quiz. This sample quiz does not cover all testable topics. 1. Fill out the answers. a. Citibank quotes ¥98.40-100.30/\$. Then the bid price of yen is ________________ and the bid price of dollar is ________________ . b. Three banks are quoting the following rates: Citibank quotes \$1.52/£; UBS quotes €1.30/£; Deutsche Bank quotes \$1.45/€. If you start with \$1000, you profit will be \$________________ from arbitrage. The direction of arbitrage includes________________ (buying/selling) € from/to UBS. c. The exchange rate between yen and U.S. dollar was ¥100/\$ in Jan 2009 and ¥90/\$ in August 2009, then U.S. dollar ________________ (appreciated/depreciated) by %_________________ _ d. A Big Mac costs €2.8 in Europe , while it costs \$3.5 in the U.S. The implied PPP exchange rate between euro and dollar is \$________________ /€. If the actual market exchange rate is S(\$/€)=1.15, then the real effective exchange rate is ________________ and euro is ________________ (over-valued/under-valued) compared to the PPP rate. 2. (Covered Interest Arbitrage) You are facing the following exchange rates and interest rates. You can borrow €1,000,000 or equivalent amount of \$. Show how

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sample_quiz_2[1] - Version Fin 536 Sample Quiz 2...

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