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Multiple Choice Quiz
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1

A(n) ____________ is a foreign bond issued in the U.S. and denominated in dollars for sale in other countries.
A)Yankee bond
B)American Depository Receipt
C)Eurobond
D)Swap
E)Gilt
2

A(n) ____________ is a foreign bond issued in Japan and denominated in yen for sale in other countries.
A)American Depository Receipt
B)Samurai bond
C)Eurobond
D)Yankee bond
E)Gilt
3

A(n) ____________ is a bond issued in multiple countries but denominated in one currency.
A)American Depository Receipt
B)Samurai bond
C)Gilt
D)Eurobond
E)Foreign bond
4

The rate that most international banks charge one another for loans of Eurodollars overnight in the London market is called the ______________.
A)American Depository rate
B)Samurai rate
C)European Currency Unit
D)London Interbank Offer Rate
E)Eurobond rate
5

_________ describes the implicit spot exchange rate between two currencies.
A)Purchasing power parity
B)Cross-rate
C)Forward trade
D)London Interbank Offer Rate
E)Swap
6

__________ describes the price of one country's currency expressed in terms of another country's currency.
A)Forward rate
B)Prime rate
C)Exchange rate
D)London Interbank offer rate
E)Swap
7

Which of the following is NOT true about exchange rates quoted in the United States?
A)They are usually quoted in terms of the foreign currency
B)An exchange rate is the price of one country's currency expressed in terms of another country's currency
C)A direct exchange rate quotation in the Wall Street Journal tells you literally how many U.S. dollars it takes to buy one unit of the foreign currency quoted
D)When an exchange rate is quoted in the Wall Street Journal as a U.S. $ equivalent it is called a direct quote
E)A European exchange rate quoted in the Wall Street Journal will tell you how much of a foreign currency you can purchase with one U.S. dollar
8

___________ will tell you the price of agreeing today to take delivery of a Canadian Dollar 60 days from now.
A)The cross-rate
B)The spot exchange rate
C)The forward exchange rate
D)The London Interbank Offer Rate
E)The swap rate
9

If a commodity costs the same regardless of what currency is used to purchase it or where it is selling, then _________________.
A)forward exchange rates are equal
B)interest rate parity holds
C)relative purchasing power parity holds
D)uncovered interest rate parity holds
E)absolute purchasing power parity holds
10

If absolute purchasing power parity is said to hold for some good, then it must be true that
I. the good in question is standardized enough that it is virtually identical in the markets being considered
II. there are significant barriers to trading the good
III. there are no transactions costs
A)I only
B)I and II only
C)II and III only
D)I and III only
E)I, II, and III





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