Author: Anonymous

Consider an MNC that is exposed to the Bulgarian lev (BGL) and the Romanian leu (ROL). 30% of the MNC’s funds are lev and 70% are leu. The standard deviation of exchange movements is 15% for lev and 10% for leu. The correlation coefficient between movements in the value of the lev and the leu is .85. Based on this information, the standard deviation of this two-currency portfolio is approximately:

The spot rate of British pound is quoted at $1.49. The 90-day forward rate exhibits a 2% premium. What is the 90-day forward rate of the pound?

The basic difference(s) between forward and futures contracts is that: (Select all that apply.)

Both call and put option premiums are affected by the level of the existing spot price relative to the strike price; for example, a high strike price relative to the spot price will result in a relatively high premium for a put option but a relatively low premium for a call option.

When you own ____, there is no obligation on your part; however, when you sell ____, there is an obligation on your part. (Select all that apply.)

Also known as the “central banks’ central bank,” the __________ attempts to facilitate cooperation among countries with regard to international transactions and provides assistance to countries experiencing a financial crisis.

The 180-day forward rate for the euro is $1.29, while the current spot rate of the euro is $1.34. What is the annualized forward premium or discount of the euro?

The exchange rate mechanism (ERM) refers to the method of linking ____ currencies to each other within boundaries.

Assume the Canadian dollar is equal to $.88 and the Peruvian Sol is equal to $.35.  The value of the Peruvian Sol in Canadian dollars is:

According to purchasing power parity (PPP), if a foreign country’s inflation rate is below the inflation rate at home, home country consumers will increase their imports from the foreign country and foreign consumers will lower their demand for home country products. These market forces cause the foreign currency to appreciate.