Question

Subjects : international finance

NAME cate the answer choice that best completes the statement or answers the question Please show your Calculations for Credit 1. When usingfunds are not tied up for any length of time a covered interest arbitrage b. locational arbitrage c triangular arbitrage d, B and C 2. Assume that the Fed intervenes by exchanging dollars for euros in the foreign exchange market. This will cause an U.S. dollars and an curos a inward shift in demand for, inward shift in supply of b. outward shift in supply of, outward shift in demand for c outward shift in supply of, inward shift in demand for d. inward shift in demand for, outward shift in supply of 3. China's yuan is presently a allowed to fluctuate freely without any central bank intervention b. pegged to the dollar c. allowed to fluctuate but with central bank intervention d. pegged to the euro 4. Under a fixed exchange rate system a. central bank intervention in the foreign exchange market is not allowed b central bank intervention in the foreign exchange market is not necessary e. a foreign exchange market does not exist d. central bank intervention in the foreign exchange market is often necessary S. If the Fed desires to weaken the dollar without affecting the dollar money supply, it should a. exchange foreign currencies for dollars, and buy existing Treasury securities with dollars b exchange dollars for foreign currencies, and buy existing Treasury securities with dollars c. exchange dollars for foreign currencies, and sell some of its existing Treasury security holdings for dollars d. exchange foreign currencies for dollars, and sell some of its existing Treasury security holdings for dollars

Answer 1

Solution to question 1

Locational and triangular arbitrage has the feature of not tiding funds for any length of time

Not tiding funds for any length of time is not the feature of covered interest arbitrage

Hence Option D is the Correct option that B & C i.e

When using Locational and triangular arbitrage funds are not tied up for any length of time.