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midterm365_L0101 - UNIVERSITY OF TORONTO Faculty of Arts...

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UNIVERSITY OF TORONTO Faculty of Arts and Science MID-TERM (WINTER 2011) ECO365H1 (L0101) Instructor - Prof. Kunal Dasgupta Duration - 1.5 hours Examination Aids - Only calculators Total points : 100 Read every question carefully. Answers should be to the point. All calculations should be clearly shown on the answer sheet. Good luck!! 1. Multiple Choice Questions (20 points) (Write down the answers on the answer sheet) 1.1 A contract that contains a promise that a specified amount of foreign currency will be delivered on a specified date in the future is : A) A spot contract B) A forward contract C) A foreign exchange option D) A swap 1.2 The interest parity condition involves four variables. Which one adjusts to ensure equilibrium? A) Foreign interest rate B) Current exchange rate C) Expected future exchange rate D) Domestic interest rate 1.3 If the dollar interest rate is 10 percent and the euro interest rate is 6 percent, then A) an investor should invest only in dollars. B) an investor should invest only in euros. C) an investor should be indifferent between dollars and euros. D) It is impossible to tell given the information. Page 1 of 4
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1.4 Which economic agent determines money supply in Canada? A) Government B) Bank of Canada C) Commercial banks D) Consumers 1.5 Which of the following happens during hyperinflations?
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