Money Corp. frequently uses a forward hedge to hedge its Malaysian ringgit (MYR) receivables. For the next month, Money has identified its net exposure to the ringgit as being MYR1,500,000. The 30-day forward rate is $.23. Furthermore, Money’s financial center has indicated that the possible values of the Malaysian ringgit at the end of next month are $.20 and $.25, with probabilities of .30 and .70, respectively. Based on this information, the revenue from hedging minus the revenue from not hedging receivables is____.

An advantage of freely floating exchange rates is that a country with floating exchange rates is more insulated from unemployment problems in other countries.

The inflation rate in the U.S. is 3%, while the inflation rate in Japan is 10%. The current exchange rate for the Japanese yen (¥) is $0.0075. After supply and demand for the Japanese yen has adjusted in the manner suggested by purchasing power parity, the new exchange rate for the yen will be:

The FOMC finally moved to ________ on January 25, 2012, when it issued its “Statement on Long-Run Goals and Monetary Policy Strategy.”

The primary indicator of the Fed’s stance on monetary policy is

The premium on a pound put option is $.03 per unit. The exercise price is $1.66. The break-even point is ____ for the buyer of the put, and ____ for the seller of the put. (Assume zero transactions costs and that the buyer and seller of the put option are speculators.)

When currency options are traded over-the-counter and not standardized, there is ____ liquidity and a ____ bid/ask spread.

Assume that Kramer Co. will receive SF800,000 in 90 days. Today’s spot rate of the Swiss franc is $.62, and the 90-day forward rate is $.645. Kramer has developed the following probability distribution for the spot rate in 90 days:  Possible Spot Rate   in 90 Days Probability $.61 10% $.63 20% $.64 40% $.65 30%  The probability that the forward hedge will result in more dollars received than not hedging is:

Which of the following is an example of economic exposure but not an example of transaction exposure?

If the Fed expects currency holdings to fall, it conducts open market ________ to offset the expected ________ in reserves.