answer questions in attached
QUESTION 1
Suppose that 1-year interest rates on similar assets are 4% in US and 5% in UK. Where will you put your money?
|
| UK | |
|
| US | |
|
| Not sufficient information to make a decision |
10 points
QUESTION 2
1-year $ interest rate is 6% and 1-year Yuan interest rate is 10%. The spot exchange rate is 6 Yuan/$. What's the 1-year forward rate that satisfies CIP?
|
| 6 Yuan/$ | |
|
| 5.78 Yuan/$ | |
|
| 6.23 Yuan/$ |
10 points
QUESTION 3
According to UIP, if $ interest is 6% and Euro interest is 7%, then investors are expecting $ to _____ relative to Euro.
|
| Appreciate | |
|
| Depreciate |
10 points
QUESTION 4
According to UIP, if $ interest is 2% and Yen interest is 0%, then investors are expecting $ to _____ relative to Yen.
|
| Appreciate | |
|
| Depreciate |
10 points
QUESTION 5
According to UIP, if Argentina peso interest is 6% and Yuan interest is 4%, then investors are expecting peso to _____ relative to Yuan by _____ percent.
|
| Depreciate; 10 | |
|
| Depreciate; 2 | |
|
| Appreciate; 10 | |
|
| Appreciate; 2 |
10 points
QUESTION 6
According to UIP, if pound interest is 7% higher than Yen interest, then investors are expecting pound to _____ relative to Yen by _____ percent.
|
| Depreciate; 7 | |
|
| Appreciate; 7 |
10 points
QUESTION 7
1-year $ interest rate is 6% and 1-year Yuan interest rate is 10%. According to UIP, investors are expecting $ to _____ relative to Yuan by _____ percent.
|
| Appreciate; 4 | |
|
| Depreciate; 4 | |
|
| Depreciate; 16 | |
|
| Appreciate; 16 |
10 points
QUESTION 8
1-year $ interest rate is 6% and 1-year Yuan interest rate is 10%. Suppose investors are risk-averse instead of risk-neutral. According to UIP, investors are expecting $ to _____ relative to Yuan by _____ than _____ percent.
|
| Depreciate; less; 16 | |
|
| Appreciate; less; 16 | |
|
| Appreciate; more; 4 | |
|
| Appreciate; less; 4 |
10 points
QUESTION 9
1-year $ interest rate is 6% and 1-year Yuan interest rate is 10%. Investors (risk-neutral) are expecting the Yuan/$ exchange rate to be 5Yuan/$. What does this imply about spot exchange rate?
|
| Not enough information | |
|
| Spot rate is 6.23 Yuan/$ | |
|
| Spot rate is 4.82 Yuan/$ |
10 points
QUESTION 10
Suppose euro interest is 4% and investors are expecting euro to depreciate by 1% relative to $ in 1 year. What is the gross return if an investor converts $ into euro, invest in euro saving account, and then convert the euro back to $ after 1 year?
|
| 4% | |
|
| 5% | |
|
| 1% | |
|
| 3% |
10 points
QUESTION 11
Suppose euro interest is 2% and investors are expecting euro to appreciate by 9% relative to $ in 1 year. What is the gross return if an investor converts $ into euro, invest in euro saving account, and then convert the euro back to $ after 1 year?
|
| 7% | |
|
| 11% | |
|
| 9% | |
|
| 2% |
10 points
QUESTION 12
Suppose $ interest is 2% and investors are expecting euro to appreciate by 9% relative to $ in 1 year. What is the gross return if an European investor converts euro into $, invest in $ saving account, and then convert the $ back to euro after 1 year?
|
| 7% | |
|
| -11% | |
|
| -7% | |
|
| 11% |
10 points
QUESTION 13
A Chinese investor is speculating US housing market. He strongly expects housing price in US to go up by 15% in the year 2018 and US $ will depreciate 5% relative to Yuan in 2018. What is the gross return if the Chinese investor converts his Yuan into $, buy the house at beginning of 2018, hold it for 1 year, sell it at the end of 2018, then convert $ back to Yuan?
|
| -20% | |
|
| -10% | |
|
| 20% | |
|
| 10% |
10 points
QUESTION 14
An American artist is speculating Italian art market. He strongly expects the painting Mona Lisa will appreciate by 55% in year 2018, and $ will appreciate 2% relative to euro in 2018. What is the gross return if the American investor converts his $ into euro, buy the painting at beginning of 2018, hold it for 1 year, sell it at the end of 2018, then convert euro back to $?
|
| 53% | |
|
| 57% | |
|
| -57% | |
|
| -53% |
