1) In which case will locational arbitrage most likely be feasible?
A) One bank's ask price for a currency is greater than another bank's bid price for the currency.
B) One bank's bid price for a currency is greater than another bank's ask price for the currency.
C) One bank's ask price for a currency is less than another bank's ask price for the currency.
D) One bank's bid price for a currency is less than another bank's bid price for the currency.
2. Assume the British pound is worth $1.60, and the Canadian dollar is worth $.80. What is the value of the Canadian dollar in pounds?
A) 2.0.
B) 2.40.
C) .80.
D) .50.
3. Given a home country and a foreign country, purchasing power parity (PPP) suggests that:
A) a home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate.
B) a home currency will appreciate if the current home interest rate exceeds the current foreign interest rate.
C) a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate.
D) a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate.
4. Which of the following are true statements regarding a county's currency depreciating?
A) Depreciation means that the government has intentionally caused the value of the currency to lower.
B) If your currency is depreciating, another country's currency must be appreciating vs. yours.
C) Your currency can't depreciate unless it first appreciated.
D) none of the above statements are true.
5. An currency swap will save money for both companies if
A) Each company wants to borrow in the currency where the other enjoys a comparative advantage
B) Each company wants to borrow in the currency where the other enjoys an absolute advantage
C) Each company wants to borrow in the currency where they enjoy a comparative advantage
D) Each company wants to borrow in the currency where they enjoy an absolute advantage