Question : 51.When two parties agree to exchange currency and execute the : 1299373

51.When two parties agree to exchange currency and execute the deal immediately, the transaction is referred to as _____.  

A. forward exchange

B. countertrade

C. arbitrage

D. spot exchange

E. currency swap

52.How are spot exchange rates determined?  

A. By using historical average prices of different currencies

B. By the interaction between demand and supply of a currency relative to other currencies

C. By taking the average of a basket of currencies

D. By government decree

E. By predicting future currency movements

53.An American company imports laptop computers from Japan. The company knows that after a shipment arrives, it must pay in yen to the Japanese supplier within 30 days. In a particular exchange, the American company must pay the Japanese supplier ¥150,000 for each computer at the current dollar/yen spot exchange rate of $1 = ¥110. The company intends to resell the computers the day they arrive for $1,600 each but it does not have the funds to pay the Japanese supplier until the computers have been sold. Which of the following will happen if the exchange rate after 30 days is $1 = ¥90?  

A. The importer will earn a profit of approximately $236 per computer.

B. The importer will earn a profit of approximately $67 per computer.

C. The importer will incur a loss of approximately $236 per computer.

D. The importer will incur a loss of approximately $67 per computer.

E. The importer will incur a loss of approximately $90 per computer.

54.A U.S. company that imports laptop computers from Japan knows that in 30 days it must pay in yen to a Japanese supplier when a shipment arrives. The company will pay the Japanese supplier ¥150,000 for each computer, and the current dollar/yen spot exchange rate is $1 = ¥110. The importer can sell the computers the day they arrive for $1,600 each. However, the importer will not have the funds to pay the Japanese supplier until the computers have been sold. The importer enters into a 30-day forward exchange transaction with a foreign exchange dealer at $1 = ¥105. Which of the following will happen if the exchange rate after 30 days is $1 = ¥90?  

A. The importer will earn a profit of approximately $236 per computer.

B. The importer will earn a profit of approximately $171 per computer.

C. The importer will earn a profit of approximately $65 per computer.

D. The importer will incur a loss of approximately $67 per computer.

E. The importer will incur a loss of approximately $105 per computer.

55.A(n) _____ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.  

A. forward exchange

B. spot exchange

C. carry trade

D. currency swap

E. arbitrage

56.Which of the following indicates that the dollar is selling at a discount on the 30-day forward market?  

A. When the spot exchange rate is $1 = ¥120 currently and $1 = ¥130 after 30 days

B. When the spot exchange rate is $1 = ¥120 currently and $1 = ¥100 after 30 days

C. When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥110 after 30 days

D. When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥130 after 30 days

E. When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥120 after 30 days

57.Which of the following instances indicates that the dollar is selling at a premium on the 30-day forward market?  

A. When the spot exchange rate is currently $1 = ¥120  and changes to $1 = ¥130 after 30 days

B. When the spot exchange rate is currently $1 = ¥120 and changes to $1 = ¥110 after 30 days

C. When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥110 after 30 days

D. When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥130 after 30 days

E. When the current spot exchange rate is $1 = ¥120 and the 30-day forward rate is $1 = ¥120

58.Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market. Which of the following is true of the foreign exchange dealers’ market’s expectations about the dollar over the next 30 days?  

A. The dollar will depreciate against the euro.

B. The market is undecided about the direction of currency movement.

C. The dollar will appreciate against the euro.

D. The dollar/euro exchange rate will be steady.

E. The dollar will buy more euros with a spot exchange than with a 30-day forward exchange.

59._____ refers to the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.  

A. Carry trade

B. Forward exchange

C. Spot exchange

D. Currency swap

E. Arbitrage

60.Which of the following transactions is used to move out of one currency into another for a limited period without incurring foreign exchange risk?  

A. Currency swap

B. Currency speculation

C. Carry trade

D. Spot exchange

E. Arbitrage