Multiple—choice test(only one is correct）：
1. Gresham's Law states that
a)Bad money drives good money out of circulation.
b)Good money drives bad money out of circulation
c)If a country bas its currency on both gold and silver, at an official exchange rate， it will be the more valuable of the two metals that circulate.
d)None of the above.
2. Balance of payments
a)is defined as the statistical record of a country’s international transactions over a certain period of time prented in the form of a double—entry bookkeeping
b)provides detailed information concerning the demand and supply of a country's currency
c)can be ud to evaluate the performance of a country in international economic competition
d)all of the above
3. If the United States imports more than it exports， then
a)The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus。
b)One can infer that the U。S. dollar would be under pressure to depreciate against other currencies
c)a） and b)
d)None of the above
4。 The current spot exchange rate is ＄1.55/£ and the three-month forward rate is $1.50/£. You enter into a short position on £1,000。 At maturity， the spot exchange rate
is $1.60/£. How much have you made or lost?
a)Lost $100
b)Made £100
c)Lost ＄50
d)Made ＄150
5。 The nsitivity of “realized” domestic currency values of the firm’s contractual cash flows denominated in foreign currency to unexpected changes in the exchange rate is：
a)Transaction exposure
b)Translation exposure
c)Economic exposure
d)None of the above
6. Three days ago， you entered into a futures contract to ll €62,500 at $1.20 per €. Over the past three days the contract has ttled at $1。20， $1。22， and $1。24. How much have you made or lost？
a)Lost ＄0.04 per € or $2,500
b)Made $0。04 per € or ＄2,500
c)Lost $0。06 per € or $3,750
d)None of the above
7。 A swap bank
a)Can act as a broker， bringing together counterparties to a swap
b)Can act as a dealer, standing ready to buy and ll swaps
c)Both a) and b)
d)Only sometimes a) but never ever b)
8。 Suppo that the one—year interest rate is 5.0 percent in the United States, the spot exchange rate is ＄1。20/€， and the one—year forward exchange rate is ＄1.16/€. What must one-year interest rate be in the euro zone?
a)5。0%
b)1。09％
c)8。62％
d)None of the above.
9。 Suppo the spot ask exchange rate, Sa($|£）， is $1。90 = £1.00 and the spot bid exchange rate， Sb(＄｜£）， is ＄1.89 = £1。00. If you were to buy ＄10,000,000 worth of British pounds and then ll them five minutes later， how much of your $10,000，000 would be “eaten" by the bid-ask spread？
a)$1,000,000
b)＄52,910.05
c)＄100,000
d)$52，631.58
10。 Under the gold standard, international imbalances of payment will be corrected automatically under the
a)Gresham Exchange Rate regime
b)European Monetary System
c)Price-specie-flow mechanism
d)Bretton Woods Accord
11。 With any hedge
a)Your loss on one side should about equal your gains on the other side
b)You should try to make money on both sides of the transaction: that way you make money coming and going
c)You should spend at least as much time working the hedge as working the underlying deal itlf
d)You should agree to anything your banker puts in front of your face
12. Comparing “forward" and “futures” exchange contracts， we can say that:
a)They are both “marked—to-market" daily.
b)Their major difference is in the way the underlying ast is priced for future purcha or sale： futures ttle daily and forwards ttle at maturity。
c)A futures contract is negotiated by open outcry between floor brokers or traders and is traded on organized exchanges， while forward contract is tailor—made by an internatio
nal bank for its clients and is traded OTC。
d)b） and c)
13. An “option" is
a)a contract giving the ller （writer) the right， but not the obligation， to buy or ll a given quantity of an ast at a specified price at some time in the future
b)a contract giving the owner （buyer） the right， but not the obligation, to buy or ll a given quantity of an ast at a specified price at some time in the future
c)not a derivative, nor a contingent claim, curity
d)unlike a futures or forward contract
14. Economic exposure refers to
a)the nsitivity of realized domestic currency values of the firm’s contractual cash flows denominated in foreign currencies to unexpected exchange rate changes
