Question

13. The Bretton Woods system fixed the rate of exchange of every currency to: a. The U.S. dollar. b. The British pound. c. The Japanese yen. d. Each other.

14. In any given period of time, a nation’s “balance of payments” is:

A. Its imports minus its exports.

B. The amount of foreign investment coming into the country.

C. The amount of gold it gains or loses.

D. The difference between its money inflows and outflows.

17. The risk that rising interest rates will reduce security values is:

A. Default risk.

B. Interest-rate risk.

C. Reinvestment risk.

D. Marketability risk.

18. The risk that low interest rates will provide poor investment opportunities when previous investments mature is:

A. Default risk.

B. Interest-rate risk.

C. Reinvestment risk.

D. Call risk.

Answer 1

13. US Dollar; All countries under Brettonwoods system agreed to fixed rate of exchange to us dollar, since gold was pledged with US dollar that time.

14. The difference between money inflows and outflows ; difference of imports minus exports is termed as Balance of trade, also option B and C is also not valid

17. Interest Rate risk : This is mainly for fixed rate instruments like bonds. As interest rate increases bonds price will fall and vice versa.

18. Reinvestment Risk: Generally we have long term instruments and due to the market condition when the instrument is getting matured we will end up with less returns if we reinvest the money again at that point of time.