INTERNATIONAL FINANCIAL
MANAGEMENT 9TH EDITION CHEOL EUN
BRUCE RESNICK TEST BANK ALL
CHAPTERS 100% ORIGINAL VERIFIED A+
COMPREHENSIVE TEST PAPER 2026
COMPLETE ANSWERS ACCURATE
⫸ Due to ____, market forces should realign the spot rate of a currency
among banks.
a. forward realignment arbitrage
b. triangular arbitrage
c. covered interest arbitrage
d. locational arbitrage Answer: d. locational arbitrage
⫸ Due to ____, market forces should realign the cross exchange rate
between two foreign currencies based on the spot exchange rates of the
two currencies against the U.S. dollar.
a. forward realignment arbitrage
b. triangular arbitrage
c. covered interest arbitrage
d. locational arbitrage Answer: b. triangular arbitrage
,⫸ If interest rate parity exists, then ____ is not feasible.
a. forward realignment arbitrage
b. triangular arbitrage
c. covered interest arbitrage
d. locational arbitrage Answer: c. covered interest arbitrage
⫸ In which case will locational arbitrage most likely be feasible?
a. One bank's ask price for a currency is greater than another bank's bid
price for the currency.
b. One bank's bid price for a currency is greater than another bank's ask
price for the currency.
c. One bank's ask price for a currency is less than another bank's ask
price for the currency.
d. One bank's bid price for a currency is less than another bank's bid
price for the currency. Answer: b. One bank's bid price for a currency is
greater than another bank's ask price for the currency
⫸ When using ____, funds are not tied up for any length of time.
a. covered interest arbitrage
b. locational arbitrage
c. triangular arbitrage
,d. B and C Answer: d. B and C
⫸ When using ____, funds are typically tied up for a significant period
of time.
a. covered interest arbitrage
b. locational arbitrage
c. triangular arbitrage
d. B and C Answer: a. covered interest arbitrage
⫸ Assume that the interest rate in the home country of Currency X is a
much higher interest rate than the U.S. interest rate. According to
interest rate parity, the forward rate of Currency X:
a. should exhibit a discount.
b. should exhibit a premium.
c. should be zero (i.e., it should equal its spot rate).
d. B or C Answer: a. should exhibit a discount.
⫸ If the interest rate is higher in the U.S. than in the United Kingdom,
and if the forward rate of the British pound (in U.S. dollars) is the same
as the pound's spot rate, then:
a. U.S. investors could possibly benefit from covered interest arbitrage.
, b. British investors could possibly benefit from covered interest
arbitrage.
c. neither U.S. nor British investors could benefit from covered interest
arbitrage.
d. A and B Answer: b. British investors could possibly benefit from
covered interest arbitrage.
⫸ If the interest rate is lower in the U.S. than in the United Kingdom,
and if the forward rate of the British pound is the same as its spot rate:
a. U.S. investors could possibly benefit from covered interest arbitrage.
b. British investors could possibly benefit from covered interest
arbitrage.
c. neither U.S. nor British investors could benefit from covered interest
arbitrage.
d. A and B Answer: a. U.S. investors could possibly benefit from
covered interest arbitrage.
⫸ Assume that the U.S. investors are benefiting from covered interest
arbitrage due to high interest rates on euros. Which of the following
forces should result from the act of this covered interest arbitrage?
a. downward pressure on the euro's spot rate.
b. downward pressure on the euro's forward rate.
c. downward pressure on the U.S. interest rate.
MANAGEMENT 9TH EDITION CHEOL EUN
BRUCE RESNICK TEST BANK ALL
CHAPTERS 100% ORIGINAL VERIFIED A+
COMPREHENSIVE TEST PAPER 2026
COMPLETE ANSWERS ACCURATE
⫸ Due to ____, market forces should realign the spot rate of a currency
among banks.
a. forward realignment arbitrage
b. triangular arbitrage
c. covered interest arbitrage
d. locational arbitrage Answer: d. locational arbitrage
⫸ Due to ____, market forces should realign the cross exchange rate
between two foreign currencies based on the spot exchange rates of the
two currencies against the U.S. dollar.
a. forward realignment arbitrage
b. triangular arbitrage
c. covered interest arbitrage
d. locational arbitrage Answer: b. triangular arbitrage
,⫸ If interest rate parity exists, then ____ is not feasible.
a. forward realignment arbitrage
b. triangular arbitrage
c. covered interest arbitrage
d. locational arbitrage Answer: c. covered interest arbitrage
⫸ In which case will locational arbitrage most likely be feasible?
a. One bank's ask price for a currency is greater than another bank's bid
price for the currency.
b. One bank's bid price for a currency is greater than another bank's ask
price for the currency.
c. One bank's ask price for a currency is less than another bank's ask
price for the currency.
d. One bank's bid price for a currency is less than another bank's bid
price for the currency. Answer: b. One bank's bid price for a currency is
greater than another bank's ask price for the currency
⫸ When using ____, funds are not tied up for any length of time.
a. covered interest arbitrage
b. locational arbitrage
c. triangular arbitrage
,d. B and C Answer: d. B and C
⫸ When using ____, funds are typically tied up for a significant period
of time.
a. covered interest arbitrage
b. locational arbitrage
c. triangular arbitrage
d. B and C Answer: a. covered interest arbitrage
⫸ Assume that the interest rate in the home country of Currency X is a
much higher interest rate than the U.S. interest rate. According to
interest rate parity, the forward rate of Currency X:
a. should exhibit a discount.
b. should exhibit a premium.
c. should be zero (i.e., it should equal its spot rate).
d. B or C Answer: a. should exhibit a discount.
⫸ If the interest rate is higher in the U.S. than in the United Kingdom,
and if the forward rate of the British pound (in U.S. dollars) is the same
as the pound's spot rate, then:
a. U.S. investors could possibly benefit from covered interest arbitrage.
, b. British investors could possibly benefit from covered interest
arbitrage.
c. neither U.S. nor British investors could benefit from covered interest
arbitrage.
d. A and B Answer: b. British investors could possibly benefit from
covered interest arbitrage.
⫸ If the interest rate is lower in the U.S. than in the United Kingdom,
and if the forward rate of the British pound is the same as its spot rate:
a. U.S. investors could possibly benefit from covered interest arbitrage.
b. British investors could possibly benefit from covered interest
arbitrage.
c. neither U.S. nor British investors could benefit from covered interest
arbitrage.
d. A and B Answer: a. U.S. investors could possibly benefit from
covered interest arbitrage.
⫸ Assume that the U.S. investors are benefiting from covered interest
arbitrage due to high interest rates on euros. Which of the following
forces should result from the act of this covered interest arbitrage?
a. downward pressure on the euro's spot rate.
b. downward pressure on the euro's forward rate.
c. downward pressure on the U.S. interest rate.
