Key to Test Two
(1)—(5): cdead (6)—(10): babee (11)—(15): dddcb (16)—(20): bbcba (21)—(25): cbeda(26)Retail clients—they need foreign exchange for the purposes of operating their businesses.
Commercial banks—the commercial banks carry out buy/sell orders from their retail clients and buy/sell currencies on their own account (known as proprietary trading)so as to alter the structure of their assets and liabilities in different currencies.
Foreign exchange brokers—they collect buy and sell quotations for most currencies from many banks, so that the most favorable quotations is obtained quickly and at very low cost.
Central banks—they frequently intervene to buy and sell their currencies in a bid to influence the rate at which their currency is traded.Under a fixed exchange-rate system the authorities are obliged to purchase their currencies when there is excess supply and sell the currency when there is excess demand.
(27)4.0000×=0.32
F(CHF/GBP)=S0(CHF/GBP)+0.32=4.3200
(28)Bretton Woods established a system of fixed but adjustable exchange rates.Under the Articles of Agreement of the IMF, each currency was assigned a central parity against the US dollar and was allowed to fluctuate by plus or minus 1 percent either side of this parity.The dollar itself was fixed to the price of gold at $35 per ounce.
Reason: the liquidity problem; lack of an adequate adjustment mechanism; the seigniorage problem
(29)2,000,000/1.6500 = 1,212,121.2
If the rate goes to 1.6500, then my income in sterling will be 1,212,121.2.
2,000,000/1.6647 = 1,201,417.7
If F1/12(USD/GBP)ask = 1ª±6647 and I sell forward, the income will be 1,201,417.7 in sterling.
(30)Advantages of the fixed exchange rates: promote international trade and investment;provide discipline for macroeconomic policies; promote international cooperation;speculation under floating rates is likely to be destabilizing.
Advantages of the floating exchange rates: ensure balance-of-payments equilibrium;ensure monetary autonomy; insulate economies; promote economic stability; private speculation is stabilizing.