Consider Two Countries, Mondrain and Davenport That Are on the Gold

question 190

Multiple Choice

Consider two countries, Mondrain and Davenport that are on the gold standard exchange rate system.Suppose the exchange rate between monds (Mondrain's currency)
And divas (Davenport's currency)
Is 4 divas per mond and the price of gold in Mondrain is fixed at 60 monds per ounce of gold.What is the price of gold in Davenport?

• A)6.66 divas per ounce of gold
• B)15 divas per ounce of gold
• C)24 divas per ounce of gold
• D)240 divas per ounce of gold

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Definitions:

Relative Value Strategy

An investment strategy that seeks to identify and exploit differences in the price or rate of securities, often aiming to profit from discrepancies in relative valuation rather than absolute price movements.

On-The-Run Bonds

The most recent issue of a government bond, usually more liquid and yielding slightly less interest compared to older ('off-the-run') bonds.

Nearly Identical Duration

A characteristic of two or more financial instruments whose cash-flows occur over a similar time frame, making their sensitivity to interest rate changes similar.

Hedge Fund Fee Structure

The compensation arrangement between hedge funds and their managers, typically involving a management fee plus a performance fee based on the fund's returns.