Briefly explain each of the following terms: a. Forward exchange rateb. Foreign exchange swapc. Arbitraged. Triangular arbitrage
What will be an ideal response?
POSSIBLE RESPONSE:
a. It is the price agreed now for a currency exchange that will occur sometime more than a day or two in the future.
b. It is a package trade that includes both a spot exchange of two currencies and an agreement to the reverse forward exchange of the two currencies. It is useful when the parties to the trade have only a temporary need for the currency.
c. It the process of buying and selling to make a riskless (or nearly riskless) profit.
d. It is the arbitrage taking place through the three exchange rates between three different currencies.
You might also like to view...
Reserves are a bank ________ consisting of ________
A) asset; vault cash plus bank deposits with the Federal Reserve B) asset; checking account deposits and savings account balances C) liability; vault cash plus bank deposits with the Federal Reserve D) liability; checking account deposits and savings account balances
A Nash equilibrium occurs when:
a. a unilateral move by a participant makes him better off. b. one can deviate from the equilibrium and improve the outcome. c. no one can move from the equilibrium and improve the outcome. d. participants have an incentive to deviate from the equilibrium. e. no one is better off.
The cross elasticity between two goods is 2.5 . These goods are
a. perfect complements b. imperfect complements c. unrelated d. substitutes e. inferior
The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. All of the following are reasons for these anti-globalization
protests except A) protestors believe the WTO favors the interests of high-income countries at the expense of lower-income countries. B) protesters believe that tariffs are needed to protect domestic firms from foreign competition. C) protesters believe that free trade destroys the distinctive cultures of many countries. D) protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.