IN-CLASS QUIZZ 03


A forward trade for 90 days on the pair CZK/EUR was concluded at the exchange rate of 25 CZK/EUR.
At what exchange rate at the maturity of the contract will the long position (buying EUR) be in
profit?

a)       23 CZK/EUR

b)      24 CZK/EUR

c)       25 CZK/EUR

d)      26 CZK/EUR


What does hedging mean in the foreign exchange market?

a)       A bet on a certain development of the exchange rate

b)      elimination of possible losses from unfavourable development of the exchange rate

c)       setting up a fixed-rate term deposit in a foreign currency

d)      taking advantage of differences in foreign exchange rates


How many currencies are involved in triangular arbitrage?

a)       2

b)      3

c)       4

d)      5


Which currency is often used in the carry trade for borrowing capital?

a)       AUD

b)      USD

c)       JPY

d)      SEK


The yield of a bond in CZK is 6%, the yield of an identical bond in EUR is 3%. What should be the
exchange rate trend according to interest rate parity?

a)       The EUR should appreciate by 3%

b)      the exchange rate should remain unchanged

c)       CZK should appreciate by 2%

d)      EUR should depreciate by 3%