Question

3-)

Changes in the BOP may predict the imposition or removal of foreign exchange controls.

Select one:

True

False

37-)

Given the following exchange rates, what arbitrage profit is available if you have $1 million? ¥129.87/$, €1.1226/$, ¥115.74/€

Select one:

a. $460

b. -$460

c. $878

d. $259,652

38-)

Assume an international regime of fixed exchange rates. When countries do not want to engage in direct intervention, countries with a BOP ________ should consider ________ their currency while countries with a BOP ________ should consider ________ their currency.

Select one:

a. surplus, revaluing; deficit, devaluing

b. surplus, devaluing; deficit, revaluing

c. deficit, devaluing; surplus, devaluing

d. deficit, revaluing; surplus, revaluing

Answer 1

let me know if you need any clarification.

Ans – 3) Statement is TRUE : Changes in the BOP may predict the imposition or removal of foreign exchange controls.

Ans – 37) Correct answer is option a. $460

yen/USD	129.87
Euro/USD	1.1226
Yen/Euro	115.74
Based on above implied Yen/Euro rate =				=129.87/1.1226
				115.687
Therefore we have miss pricing situation and arbitrage situation exist
using $ 1 mil buy Euro =			1,122,600	Euro
Using Euro buy Yen =			129,929,724	Yen
Using yen buy USD =			1,000,460	USD
gain = 460
Therefore correct answer is option :				a. 460

Ans 38) correct answer is option a. a. surplus, revaluing; deficit, devaluing