Due to _______, market forces should realign the relationship between the interest rate differential of two currencies and the forward premium (or discount) on the forward exchange rate between the two currencies. 


· Question 2
5 out of 5 points
Due to _______, market forces should realign the spot rate of a currency among banks. 


· Question 3
0 out of 5 points
Due to _______, market forces should realign the cross exchange rate between two foreign currencies based on the spot exchange rates of the two currencies against the U.S. dollar. 


· Question 4
5 out of 5 points
If interest rate parity exists, then _______ is not feasible. 


· Question 5
5 out of 5 points
In which case will locational arbitrage most likely be feasible? 


· Question 6
5 out of 5 points
When using _______, funds are not tied up for any length of time. 


· Question 7
7 out of 7 points
If the interest rate is lower in the U.S. than in the United Kingdom, and if the forward rate of the British pound is the same as its spot rate: 


· Question 8
8 out of 8 points
Assume the bid rate of a New Zealand dollar is $.33 while the ask rate is $.335 at Bank X. Assume the bid rate of the New Zealand dollar is $.32 while the ask rate is $.325 at Bank Y. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with? 


· Question 9
8 out of 8 points
Assume the following information:
If you use covered interest arbitrage for a 90day investment, what will be the amount of U.S. dollars you will have after 90 days? 


· Question 10
8 out of 8 points
Assume the following information:
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is _______%. 


· Question 11
7 out of 7 points
Assume the following bid and ask rates of the pound for two banks as shown below:
As locational arbitrage occurs: 


· Question 12
8 out of 8 points
Assume the bid rate of a Singapore dollar is $.40 while the ask rate is $.41 at Bank X. Assume the bid rate of a Singapore dollar is $.42 while the ask rate is $.425 at Bank Z. Given this information, what would be your gain if you use $1,000,000 and execute locational arbitrage? That is, how much will you end up with over and above the $1,000,000 you started with? 


· Question 13
8 out of 8 points
Assume the following exchange rates: $1 = NZ$3, NZ$1 = MXP2, and $1 = MXP5. Given this information, as you and others perform triangular arbitrage, the exchange rate of the New Zealand dollar (NZ) with respect to the U.S. dollar should _______, and the exchange rate of the Mexican peso (MXP) with respect to the U.S. dollar should _______. 


· Question 14
8 out of 8 points
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? 


· Question 15
8 out of 8 points
Assume the following information for a bank quoting on spot exchange rates:
Based on the information given, as you and others perform triangular arbitrage, what should logically happen to the spot exchange rates? 
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