Question

5) The WSJ Dollar Index A) measures stock performance of 500 large companies listed on the stock exchange. B) is composed of 16 currencies that make up 80% of the Forex market. C) was created in 2001. D) All of the above. 6) Suppose your U.S. firm will receive EUR1,000,000 in one year. The interest rate on the euro is 5% pa and on the U.S. dollar is 3% pa. The current spot rate for the euro is $1.00. If you use a money market hedge, how much will you receive in one year? Note: 1,000,000/1.03 = 970,874; 1,000,000/1.05 = 952,381: 970874 1.05 = 1,019,418; 952,381 * 1.03 = 980,952. A) $980,952 B) $970,874 $1,019,418 D) None of the above.

Answer 1

(5)

B - It is an index of the US dollar relative to 16 currencies.

A is incorrect - it is not a stock market index.

C is incorrect - It was created in 2012.