Internation financial markets

Assume that a bank's bid rate on Swiss francs is $0.45 and its ask rate is $0.47. Its bid/ask percentage spread is

• about 4.44%.

• about 4.26%.

• about 4.03%.

• about 4.17%.

The bid/ask spread for small retail transactions is commonly in the range of ____ percent.

• 3 to 7

• .01 to .03

• 10 to 15

• .5 to 1

Which of the following is not a factor that affects the bid/ask spread?

• order costs

• inventory costs

• volume

• All of the above factors affect the bid/ask spread

What is the primary function of the stock market?

• To facilitate the trading of goods and services

• To provide a platform for investment in companies

• To enable the exchange of currencies

• To regulate the money supply

According to the text, the forward rate is commonly used for:

• hedging.

• immediate transactions.

• previous transactions.

• bond transactions.

If a U.S. firm is receiving 100,000 euros in 90 days and wishes to avoid the risk from exchange rate fluctuations, it could:

• purchase a 90-day forward contract on euros.

• sell a 90-day forward contract on euros.

• purchase euros 90 days from now at the spot rate.

• sell euros 90 days from now at the spot rate.

If a U.S. firm will need C$200,000 in 90 days to pay for imports from Canada and it wishes to avoid the risk from exchange rate fluctuations, it could:

• purchase a 90-day forward contract on Canadian dollars.

• sell a 90-day forward contract on Canadian dollars.

• purchase Canadian dollars 90 days from now at the spot rate.

• sell Canadian dollars 90 days from now at the spot rate.

Assume the Canadian dollar is equal to $0.88 and the Peruvian nuevos soles is equal to $0.35. The value of the Peruvian nuevos soles in Canadian dollars is:

• about 0.3621 Canadian dollars.

• about 0.3977 Canadian dollars.

• about 0,236 Canadian dollars.

• about 2.51 Canadian dollars.

Which of the following is not true with respect to spot market liquidity?

• The more willing buyers and sellers there are, the more liquid a market is.

• The spot markets for heavily traded currencies such as the Japanese yen are very liquid.

• A currency's liquidity affects the ease with which an MNC can obtain or sell that currency.

• If a currency is illiquid, an MNC is typically able to quickly purchase that currency at a reasonable exchange rate.

Forward markets for currencies of developing countries are:

• prohibited.

• less liquid than markets for currencies of developed countries.

• more liquid than markets for currencies of developed countries.

• only available for use by government agencies.