# 89 as a rule when the interest rate of the foreign

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Chapter 31 / Exercise 4
Principles of Economics
Mankiw
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89) As a rule, when the interest rate of the foreign currency is greater than the interest rate of the quoting currency, A) the outright forward rate is less than the spot exchange rate. B) the outright forward rate is more than the spot exchange rate. C) the currency will trade at a premium in the forward contract. D) none of the options
90) Bank dealers in conversations among themselves use a shorthand notation to quote bid and ask forward prices in terms of forward points. This is convenient because
91) Bank dealers in conversations among themselves use a shorthand notation to quote bid and ask forward prices in terms of forward points. Complete the following table: Spot Forward Point Quotations 1.9072-1.9077 One-month 32-30 Three-month 57-54 1.9015-1.9023 Six-month 145-138 1.8927-1.8939
92) An exchange-traded fund (ETF) is
93) The largest and most active financial market in the world is A) the Fleet Street Exchange in London. B) the NYSE in New York. C) the FX market. D) none of the options
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Chapter 31 / Exercise 4
Principles of Economics
Mankiw
Expert Verified
94) Nondollar currency transactions
95) Consider the balance sheets of Bank A and Bank B. Bank A is in Milan, Bank B is in New York. The current exchange rate is €1.00 = \$1.25. Show the correct balances in each account if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for \$125,000 using its correspondent relationship with Bank B.