# Multiple Choice Questions

Topics: 1, Prime number, Multiple choice Pages: 12 (2524 words) Published: November 3, 2011
CH 1
Multiple Choice Questions
1. E 8. E 15. E
2. E 9. E 16. A
3. E 10. C 17. D
4. E 11. E 18. E
5. D 12. A
6. B 13. D
7. E 14. E

CH 2
Multiple Choice Questions
1. C 11. B 21. E
2. C 12. E 22. A
3. B 13. E 23. C
4. B 14. E 24. D
5. D 15. B 25. C
6. E 16. D 26. A
7. A 17. D 27. D
8. D 18. E 28. B
9. A 19. C
10. D 20. E

CH 3
Multiple Choice Questions
1 B 9. B 17. D
2. C 10. A 18. E
3. B 11. A 19. C
4. D 12. B 20. D
5. E 13. D 21. C
6. A 14. A
7. C 15. D
8. E 16. A
CH 4
Multiple Choice Questions
1 B 9. B 17. D
2. C 10. A 18. E
3. B 11. A 19. C
4. D 12. B 20. D
5. E 13. D 21. C
6. A 14. A
7. C 15. D
8. E 16. A
9. D 18. B
CH 5
Multiple Choice Questions
1. E 11. B 21. C
2. B 12 B 22. A
3. C 13. B 23 B
4. C 14. E 24 A
5. B 15. E 25. C
6. B 16. C 26. E
7. D 17. D 27. B
8. A 18. A 28. A
9. B 19. D 29. D
10. B 20. A
Solutions
16. Solution: use Equation (5-4) [(.32 - .30)/.30] x (360/180) = 13.3% 17. Solution: use Equation (5-4) [(.30 - .32)/.32] x (360/180) = -12.5% 18. Solution: cross rate .28/.86 = .3256
19. Solution: cross rate DM.31/FF: FF1/DM.31 = FF3.23/DM FF3.23/\$.35 = FF9.228/\$
20. Solution: use Equation (5-1) [(.0045 - .0035)/.0035 = 29% 21. Solution: use Equation (5-8) [(.3864 - S)/S) x (360/90)] = .10 - .04 S = .3807 22. Solution: use Equation (5-6). Remember that Cr\$3342.63 = \$0.0002991. new exchange rate = \$0.0002991[(1 + .05)/(1 + .90)] = \$.0001652/Cr\$; or Cr\$1/\$.0001653 = Cr\$6053.27/\$

23. Solution: Use Equation (5-7): nominal rate = real rate + inflation rate. nominal rate = 5% + 4% = 9% Solution: invest in the U.S.: \$10,000 x 1.01 = \$10,100 invest in the U.K. and cover in the forward market. buy pounds at the present spot rate: \$10,000/1.8 = £5,555 invest in the U. K: £5,555 x 1.015 = £5,638 sell pounds forward: £5,638 x 1.78 = \$10,036 The investor would earn \$64 more by investing in the United States instead of the United Kingdom. 25. Solution: use Equation (5-8) and solve for the forward rate: [(F - 1.800)/1.800 x (360/90)] = 0.04 - 0.06 F = £1.809 26. Solution: use Equation (5-8) and solve for the U.K. interest rate. [(1.780 - 1.800)/1.800 x (360/90)] = 0.04 – if if = 0.084 27. Solution: Use Equation (5-1). % Change = (0.68 - 0.64)/0.64 = 0.0625 or 6.25% 28. Solution: Converting the above example into indirect quotations, the Swiss franc changes from 1.5625 francs to 1.4706 francs. Use Equation (5-2) to solve this problem.% Change = (1.5625 - 1.4706)/1.4706 = 6.25% 29. Solution: Use Equation (5-3). Spread = (0.68 - 0.64)/0.64 = 0.0625 or 6.25%

CH 6
Multiple Choice Questions
1. E 10. E 19. B
2. E 11. B 20. E
3. E 12. E 21. E
4. B 13. A 22. C
5. C 14. A 23. D
6. E 15. D 24. A
7. C 16. C 25. B
8. B 17. D
9. B 18. A
Solutions
16. \$value = \$0.50 x DM10,000,000 = \$5,000,000
17. Investment =£62,500 x \$1.65 x 0.02 = \$2,062.50 Profit = £62,500 (\$1.67 - \$1.65) = 1,250 Rate of return = (1,250/2,062.50) x (12/6) = 121% 18. Potential profit = \$1.65 - \$1.62 = \$0.03
19. Potential loss = \$1.62 - \$1.65 = -\$0.03
20. Buy call options on March 19 -\$0.04 Exercises the option on September 19 -\$0.80 Sell the pounds on September 19 +\$0.92 Net profit as of September 19 +\$0.08 Net profit for three contracts = Can\$150,000 x \$0.08= \$12,000 21. Total loss = Can\$150,000 x \$0.04 = \$6,000

22. Intrinsic value = \$0.16 - \$0.15 = \$0.01
23. Breakeven point = \$1.75 + \$0.07 = \$1.82
24. Total receipts = FF10,000,000 x \$0.20 = \$2,000,000 total premium = FF10,000,000 x \$0.05 =\$ 500,000 net receipts = \$1,500,000
25. Breakeven point = \$0.70 - \$0.05 = \$0.65

CH 7

Multiple Choice Questions
1. E 10. C 19. C
2. E 11. B 20. B
3. E 12. B 21. D
4. C 13. A 22. E
5. E 14. B 23. A
6. A 15. B 24. C
7. E 16. C 25. D
8. A 17. E 26. A
9. C 18. A 27. D
Solutions
20. \$7,500,000 x (0.082 - 0.08) = \$15,000.
21. \$15,000 x...