Question : 68.If the law of one price holds and the price : 1325789

 

68.If the law of one price holds and the price of an apple in the U.S. is $1.50 while the price of an apple in Japan is ¥174.00, then what should the spot exchange rate for ¥/$ be?

a..0086

b..5747

c.116.00

d.none of the above

69.If the law of one price holds and the price of a Big Mac in the U.S. is $1.99 while the price of a Big Mac in Britain is £1.50, then what should the spot exchange rate for $/£ be?

a.1.3267

b.1.0000

c..7538

d.none of the above

70.If the spot rate for Marsian Spotlets (MRS) is 4 per U.S. Dollar (USD) and the risk-free rates of return are 10% and 2%, respectively for the Marsian and U.S. economy, then what should the 1-year forward rate be for MRS/USD?

a.4.3137

b.4.0000

c.0.2318

d.none of the above

71.If the spot rate for Jupiter Ringlets (JPR) is 3 USD per Ringlet and the risk-free rates of return are 1% and 2%, respectively for the Jupiter and U.S. economy, then what should the 1-year forward rate be for JPR/USD? Round to the nearest 4th decimal place.

a.3.0297

b.3.0000

c..3301

d.none of the above

72.If the spot rate for Marsian Spotlets (MRS) is 4 per U.S. Dollar (USD) and the one-year risk-free rate of return is 30%, for the Marsian economy, then what should the risk free rate for the U.S. economy if the 1-year forward rate be for MRS/USD is 5?

a..04

b..038

c..625

d.none of the above

73.If the spot rate for Marsian Spotlets (MRS) is 4 per U.S. Dollar (USD) and the one-year risk-free rate of return in the U.S. is 4%, then what should the risk free rate on Mars be if the 1-year forward rate be for MRS/USD is 5?

a.30.00%

b.20.19%

c.20.00%

d.none of the above

74.The 1-year risk-free rate of return in Hobbiton is 10% and the 1-year risk-free rate of return in Gondor is 20%. If the expected rate of inflation in Hobbiton is 5%, the what should be the expected rate of inflation in Gondor? Round to the nearest .01%

a.14.54%

b.12.70%

c.3.89%

d.none of the above

75.The 1-year risk-free rate of return in Hobbiton is 10% and the 1-year risk-free rate of return in Gondor is 20%. If the real rate of return on a 1-year risk-free investment in Hobbiton is 0%, the what should be the expected rate of inflation in Gondor?

a.5.00%

b.20.00%

c.30.00%

d.none of the above

76.You are a French wine producer who has a contract to sell $10,000,000 worth of wine in the U.S. for dollars 6 months in the future. If you would like to hedge this position, what could you do to hedge the currency risk involved in transaction?

a.buy dollars and sell euros in the forward market

b.sell dollars and buy euros in the forward market

c.buy euros and sell dollars in the spot market

d.sell dollars and buy euros in the spot market

77.The type of risk primarily concerned with converting revenues and costs denominated in foreign currencies into a firm’s domestic currency is

a.economic exposure.

b.transaction exposure.

c.translation exposure.

d.none of the above.

 

 

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