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NEW QUESTION: 1
Using covered interest parity, calculate the 3 month CAD/USD forward rate if the spot CAD/USD rate is
1.1239 and the three month interest rates on CAD and USD are 0.75% and 0.4% annually respectively.
A. 1.1278
B. 1.1249
C. 1.1200
D. 1.1229
Answer: B
Explanation:
Explanation
Forward rates can be calculated from spot rates and interest rates using the formula Spot x (1+domestic interest rate)/(1+foreign interest rate), where the 'Spot' is expressed as a direct rate (ie as the number of domestic currency units one unit of the foreign currency can buy). In this case the forward rate will be 1.1239
* (1 + 0.75%*90/360) / (1 + 0.4%*90/360) = 1.1249.
It can be confusing to determine which interest rate should be considered 'domestic', and which 'foreign' for this formula. For that, look at the spot rate. Think of the spot rate as being x units of one currency equal to 1 unit of the other currency. In this case, think of the spot rate 1.1239 as "CAD 1.1239 = USD 1". The currency that has the "1" in it is the 'foreign' and the other one is 'domestic'.
It is also important to remember how exchange rates are generally quoted. Most exchange rates are quoted in terms of how many foreign currencies does USD 1 buy. Therefore, a rate of 99 for the JPY means that USD 1 is equal to JPY 99. These are called 'direct rates'. However, there are four major world currencies where the rate quote convention is the other way round - these are EUR, GBP, AUD and NZD. For these currencies, the FX quote implies how many US dollars can one unit of these currencies buy. So a quote of "1.1023" for the Euro means EUR 1 is equal to USD 1.1023 and not the other way round.
NEW QUESTION: 2
A. Option C
B. Option D
C. Option B
D. Option A
Answer: A
NEW QUESTION: 3
Which pair of definitions is correct?
A. Regression testing is checking that the reported defect has been fixed; retesting is testing that there are no additional problems in previously tested software.
B. Regression testing is checking there are no additional problems in previously tested software; retesting enables developers to isolate the problem.
C. Regression testing is checking that there are no additional problems in previously tested software, retesting is demonstrating that the reported defect has been fixed.
D. Regression testing involves running all tests that have been run before; retesting runs new tests.
Answer: C
Explanation:
Explanation/Reference:
Explanation:
Regression testing is testing that nothing has regressed. Retesting (or confirmation testing) confirms the fix is correct by running the same test after the fix has been made. No other option has both of these as true.