11.The theory of interest rate parity means that the .A.interest rates are equal in two countriesB.difference between a forward rate and a spot rate equals the difference between adomestic interest rate and a foreign interest rateC.difference between the spot rate and the future spot rate reflects the interest ratedifference between two countriesD.future spot rate reflects the inflation difference between two countriesE.all of the above*12.A forward rate is equal to a future spot rate if foreign exchange markets are .*13.Actual exchange market participants include .*14.Commercial banks play the flowing role in international transactions ___.*15.___ is used a major means of reducing risk in international transactions.A.exchange tradingB.the payment mechanismC.letter of creditD.the US Federal ReserveE.bank trading rooms*16.Central banks ___.*205
17.If the spot rate of the Malaysian ringgit is $.30 and the six month forward rate of theringgit is $.32, what is the forward premium or discount on an annual basis?*18. If the spot rate of the Israel shekel is $.32 and the six month forward rate is $.30, what isthe forward premium or discount on an annual basis?*19.If the Canadian dollar is equal to $.86 and the Brazilian real is equal to $.28, what is thevalue of the Brazilian real in terms of Canadian dollars?*A.about .3256 realsB.about .3568 realsC.about 1.2 realsD.about 1.5 realsE.about .5600 realsSolution: cross rate.28/.86 = .325620.If the Japanese yen was worth $.0035 six months ago and is worth $.0045 today, howmuch has the yen appreciated or depreciated? *
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