Question : 51) Forward rates all of the following except: A) quoted in : 1976264

51) Forward rates are all of the following except:

A) quoted in both direct and indirect form.

B) quoted at a premium or discount.

C) beneficial to risk-reduction.

D) equal to future spot rates.

52) Which of the following is true regarding the correct price of the forward contract?

A) If the quote is less than the computed price, the forward contract is undervalued.

B) If the quote is greater than the computed price, the forward contract is overvalued.

C) Both A and B.

D) Neither A nor B.

53) Prior to 1973 the exchange rates between the major currencies of the world were

A) on a floating exchange rate system.

B) on an arbitrage exchange rate system.

C) on a fixed exchange rate system.

D) on a spot exchange rate system.

54) Since 1973 the exchange rates between the major currencies of the world are

A) on a floating exchange rate system.

B) on an arbitrage exchange rate system.

C) on a fixed exchange rate system.

D) on a spot exchange rate system.

55) If you are an importer of goods and you need to make payment for the purchase of inventory before the close of business today, which of the below is the correct term for the exchange rate that you will use?

A) indirect rate

B) spot rate

C) direct rate

D) forward rate

56) If you are an importer of goods and you will make payment for the purchase of inventory on 90-day terms, which of the below is the correct term for the exchange rate that you will use?

A) indirect rate

B) spot rate

C) direct rate

D) forward rate

57) U.S. Wineries purchased 75,000 cases of French wine at a cost of 6,500,000 Euros. If the current exchange rate is 0.6712 Euros to the U.S. dollar, what is the purchase price of the wine in U.S. dollars?

A) $9,684,148

B) $9,328,651

C) $8,350,012

D) $ 7,707,685

58) Assume that the British pound is worth 1.6750 U.S. dollars. If a new Jaguar costs $120,000, what is the cost in British pounds?

A) 201,000

B) 60,633

C) 71,642

D) 119,998

59) If the exchange rate quotes in two different countries were out of line with each other, an enterprising trader could make a profit by buying in the market where the currency was cheaper and simultaneously selling it in the market where the currency was more expensive. Such a person would be known as a:

A) spot trader.

B) arbitrageur.

C) cross trader.

D) capitalist.

60) Why do currency exchange rates throughout the world trade within a very narrow range on any given day?

A) because of purchasing power parity

B) because of the international translation effect

C) because of arbitrage

D) because of the law of one price