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- 3. For currency transactions, the spot exchange rate is the rate _______, and the forward exchange rate is the rate _______. A. on that day; today B. at some specified future date; today C. today; on that date D. on that date; at some specified future date 4. The first currency mentioned in an FX quote is called the: A. basis currency B. base currency C. root currency D. terms currency2. Suppose you observe the following exchange rates: €1 = $1.25; £1 = $2.00. Calculate the £/€ cross rate and €/£ cross rate(TRUE or FALSE?) The forward rate is what you agree to pay for the currency in the future by signing a contract today to buy the currency on a date in the future. O True False
- 7) Discuss the implications of the interest rate parity for the exchange rate determination.Question Which of the following is a determinant of exchange rates? Answer a. A change in consumer preferences b. A change in productivity c. A change in real interest rates d. all of theseWhat are two advantages and two disadvantages of a fixed exchange rate? What are two advantages and two disadvantages of a floating exchange rate? What is the J-curve effect in international finance? What a some reasons that this occurs?
- IF A2 1. Discuss the pros and cons of fixed exchange rate systems and flexible exchange rate systems.1. Will US$/C$ futures exchange rate go up or down? 2. Will US$/C$ spot exchange rate go up or down?E) In this economy, the exchange rate is related to per capita income, interest rate, inflation rate and unemployment rate as Exchange=800+inflation rate-(inflation rate)2+0.001×per capita income+Interest rate+Interest rate2+0.11xUnemployment rate i. Define exchange rate and explain the difference between flexible exchange rate and dirty-float exchange systems (2%) ii. Mention two advantages associated with each system of exchange rate explained above (2%)
