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1、Chapter 4 Forward Exchange and International Financial Investment1. _ a position exposed to rate risk is the act of reducing or eliminating a net asset or net liability position in the foreign currency. a. Hedgingb. Speculatingc. Investing ind. Buying2. _ is the act of taking a net asset position or
2、 a net liability position in some asset class. a. Hedgingb. Speculatingc. Investingd. Buying3. A _ exchange contract is an agreement to exchange one currency for another on some date in the future at a price set now. a. Spot domesticb. Forward domesticc. Spot foreignd. Forward foreign4. _ means comm
3、itting oneself to an uncertain future value of ones net worth in terms of home currency. a. Sellingb. Hedgingc. Speculatingd. Importing5. Assume you are a Chinese exporter and expect to receive $250,000 at the end of 60 days. You can remove the risk of loss due to a devaluation of the dollar by:a. S
4、elling dollars in the forward market for 60-day delivery.b. Buying dollars now and selling it at the end of 60 days.c. Selling the yuan equivalent in the forward market for 60-day delivery.d. Keeping the dollars in the United States after they are delivered to you.6. Assume you are an American impor
5、ter who must pay 500,000 euros at the end of 90 days when you receive 1,000 cases of French wine at your warehouse in New York. If you do not cover this transaction in the forward market, you face a risk of loss if the euro:a. Depreciates against the dollar.b. Appreciates against the dollar.c. Eithe
6、r appreciates or depreciates against the dollar.d. Is fixed.7. Assume you are an American importer who must pay 500,000 euros at the end of 90 days when you receive 1,000 cases of French wine at your warehouse in New York. If you do not hedge this transaction, you face exchange rate risk. The best w
7、ay to remove the risk of loss due to currency fluctuations is to:a. Buy 500,000 euros in the forward market for delivery in 60 days.b. Buy 500,000 euros now, hold them for 60 days, and then sell them at the current spot rate. c. Sell 500,000 euros in the forward market for delivery after 60 days.d.
8、Sell 500,000 euros now in the spot market.8. An import-export business that finds itself in a “short” foreign-currency position risks a financial loss if:a. Exports fall.b. Domestic currency appreciates.c. Domestic currency depreciates.d. Foreign currency depreciates.9. In a _ contract you can effec
9、tively lock in the price at which you buy or sell a foreign currency at a set date in the future. a. Securities spotb. Securities futuresc. Currency futuresd. Spot foreign exchange10. An investment is _ if it is fully hedged against exchange rate risk. a. Coveredb. Uncoveredc. Speculatived. Contract
10、ed11. Concerning the covering of exchange market risksassuming that a depreciation of the domestic currency is feared, one can say that there is an incentive for:a. Exporters to rush to cover their future needs.b. Importers to rush to cover their future needs.c. Both exporters and importers to rush
11、to cover their future needs.d. Neither exporters nor importers to rush to cover their future needs.12. If the spot price of the euro is $1.10 per euro and the 30-day forward rate is $1.00 per euro, and you believe that the spot rate in 30 days will be $1.05 per euro, you can maximize speculative gai
12、ns by:a. Buying euros in the spot market and selling the euros in 30 days at the future spot rate.b. Signing a forward foreign exchange contract to sell the euros in 30 days.c. Signing a forward foreign exchange contract to sell the dollars in 30 days.d. Buying dollars in the spot market and selling
13、 the dollars in 30 days at the future spot rate.13. For an investor who starts with dollars and wants to end up with dollars in the future, which of the following choices is an example of covered international investment?a. Sell dollars at the spot rate, invest the proceeds in foreign currency-denom
14、inated financial instruments, and sign a forward exchange contract to buy the foreign currency.b. Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy dollars.c. Sell dollars at the spot rate, invest the
15、 proceeds in foreign currency-denominated financial instruments, and then buy dollars at the future spot rate.d. Buy a dollar-denominated financial asset.14. For an investor who starts with dollars and wants to end up with dollars in the future, which of the following choices is an example of hedging?a. Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy the foreign currency.b. Sell dollars at the spot rate, invest the proceeds in forei
