Question

QUESTION 7 Which of the following is NOT a possible bid/ask quotation for the Barbados dollar? a. $.51/$.52 b. $.52/$.51 c. $.49/$.50 d. $.50/$.51  

QUESTION 8 The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian dollar was $0.69. The Australian dollar ____ by ____ percent. a. appreciated; 5.80 b. depreciated; 4.00 c. appreciated; 4.00 d. depreciated; 5.80  

QUESTION 9 The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound, U.S. demand for pounds would ________ the supply of pounds for sale and there would be a _______ of pounds in the foreign exchange market. a. be less than; shortage b. be less than; surplus c. exceed; shortage d. exceed; surplus 

QUESTION 10 The value of the euro was $1.30 last week. During last week the euro depreciated by 5 percent. What is the value of the euro today? a. $1.235 b. $1.365 c. $1.30 d. $1.330 

QUESTION 11 If the Fed announces that it will decrease U.S. interest rates, and the European Central Bank takes no action, then the value of the euro will ____ against the value of U.S. dollar (holding other factors constant). a. appreciate b. depreciate c. be unchanged d. depreciate but only briefly

Answer 1

7. b. The "bid" is the price at which the market maker is willing to buy and "Ask" is the price at which the market maker is willing to sell. So the bid price has to be less than ask price. Correct answer is b.$52/$51. This is not a possible combination.

8. d. The Australian dollar has depreciated by ((0.73 - 0.69)/0.69)*100 = 5.80%

9. b. be less than; surplus

10. b. Value of euro today = 1.30*(1+5%) = $1.365

11. a. appreciate