3. Answer the following multiple choice questions (No explanation needed just choose the right answer) - Total mark 6 ( 1 mark each)

1. Based on interest rate parity, the larger the degree by which the foreign interest rate exceeds the UK interest rate, the larger will be the forward discount of the foreign currency.

True

False

2. Assume that the forward rate is used to forecast the spot rate. The forward rate of the Canadian dollar contains a 6% discount. Today's spot rate of the Canadian dollar is 0.47. The spot rate forecasted for one year ahead is:

1. 0.3418.
2. 0.4418
3. 0.2418
4. 0.5418.

3. The capital account of the Balance of payments does not include purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses.

True

False

4. The commonly accepted goal of the MNC is to:

1. maximize profit
2. maximize shareholder wealth
3. maximize sales
4. minimize expenses

5. The Bid rate for the British pound is $1.65 and the Ask rate is $1.68. What is the bid/ask spread?

1. about -1.79%
2. about 1.82%
3. about 1.79%
4. about -1.82%

6. A floating exchange rate is largely market determined, without an ascertainable or predictable path for the rate.

False

True