For an Investor Who Starts with Dollars and Wants to End

question 52

Multiple Choice

For an investor who starts with dollars and wants to end up with dollars in the future,which of the following choices is an example of uncovered international investment?

• A) Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy the foreign currency.
• B) Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and sign a forward exchange contract to buy dollars.
• C) Sell dollars at the spot rate, invest the proceeds in foreign currency-denominated financial instruments, and then buy dollars at the future spot rate.
• D) Buy a dollar-denominated financial asset.

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Definitions:

Prototype View

The prototype view is a theory in cognitive science suggesting that people categorize objects and ideas based on a mental image or "prototype" that represents the most typical example of a category.

Prototype

An abstract representation of an idealized member of a class of objects or events.

Exemplar

A specific instance, example, or case that is representative of a concept, category, or phenomenon.

Schema

An organized framework for representing knowledge that typically includes characters, plots, and settings and incorporates both general knowledge about the world and information about particular events. See also script and story grammar.