Question 1

The Japanese currency is called the

Accepted Answer

A)  DM. 
B)  Yen. 
C)  Euro. 
D)  Dollar. 
E)  Pound. 
A)  DM. 
B)  Yen. 
C)  Euro. 
D)  Dollar. 
E)  Pound.

Question 2

Which of the following is NOT an example of a financial derivative?

Accepted Answer

A)  forwards 
B)  bonds 
C)  swaps 
D)  futures 
E)  options 
A)  forwards 
B)  bonds 
C)  swaps 
D)  futures 
E)  options

Question 3

The following is an example of Radio Shack hedging its foreign currency risk:

Accepted Answer

A)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to buy yen. 
B)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to sell yen. 
C)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack buys yen at a spot-exchange 1 month from now. 
D)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack sells yen at a spot-exchange 1 month from now. 
E)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack sells yen in a forward-exchange deal. 
A)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to buy yen. 
B)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack makes a forward-exchange deal to sell yen. 
C)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack buys yen at a spot-exchange 1 month from now. 
D)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack sells yen at a spot-exchange 1 month from now. 
E)  needing to pay 9,000 yen per radio to its suppliers in a month, Radio Shack sells yen in a forward-exchange deal.

Question 4

An appreciation of a country's currency

Accepted Answer

A)  decreases the relative price of its exports and lowers the relative price of its imports. 
B)  raises the relative price of its exports and raises the relative price of its imports. 
C)  lowers the relative price of its exports and raises the relative price of its imports. 
D)  raises the relative price of its exports and lowers the relative price of its imports. 
E)  raises the relative price of its exports and does not affect the relative price of its imports. 
A)  decreases the relative price of its exports and lowers the relative price of its imports. 
B)  raises the relative price of its exports and raises the relative price of its imports. 
C)  lowers the relative price of its exports and raises the relative price of its imports. 
D)  raises the relative price of its exports and lowers the relative price of its imports. 
E)  raises the relative price of its exports and does not affect the relative price of its imports.

Question 5

What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.167 per euro, next year's expected exchange rate is $1.10 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%?

Accepted Answer

A)  10% 
B)  11% 
C)  -1% 
D)  0% 
A)  10% 
B)  11% 
C)  -1% 
D)  0%

Question 6

Discuss the effects of a rise in the dollar interest rate on the exchange rate.

Accepted Answer

There are two effects to consider. A ris

Question 7

Assume the U.S. interest rate is 10 percent, and the interest rate on euro deposits is 5 percent. For the following exchange rates, find the forward exchange rates.

Accepted Answer

Using the covered in

Question 8

If the goods' money prices do NOT change, an appreciation of the dollar against the pound

Accepted Answer

A)  makes British sweaters cheaper in terms of American jeans. 
B)  makes British sweaters more expensive in terms of American jeans. 
C)  doesn't change the relative price of sweaters and jeans. 
D)  makes American jeans cheaper in terms of British sweaters. 
E)  makes British jeans more expensive in Britain. 
A)  makes British sweaters cheaper in terms of American jeans. 
B)  makes British sweaters more expensive in terms of American jeans. 
C)  doesn't change the relative price of sweaters and jeans. 
D)  makes American jeans cheaper in terms of British sweaters. 
E)  makes British jeans more expensive in Britain.

Question 9

What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 50 dollars in New York and 100 Pounds in London?

Accepted Answer

A)  1.5 dollars per British pound 
B)  0.5 dollars per British pound 
C)  2.5 dollars per British pound 
D)  3.5 dollars per British pound 
E)  2 dollars per British pound 
A)  1.5 dollars per British pound 
B)  0.5 dollars per British pound 
C)  2.5 dollars per British pound 
D)  3.5 dollars per British pound 
E)  2 dollars per British pound

Question 10

The action of arbitrage is

Accepted Answer

A)  the process of buying a currency cheap and selling it dear. 
B)  the process of buying a currency dear and selling it cheap. 
C)  the process of buying and selling currency at the same price. 
D)  the process of selling currency at different prices in different markets. 
E)  the process of buying a currency and holding onto it to take it off the market. 
A)  the process of buying a currency cheap and selling it dear. 
B)  the process of buying a currency dear and selling it cheap. 
C)  the process of buying and selling currency at the same price. 
D)  the process of selling currency at different prices in different markets. 
E)  the process of buying a currency and holding onto it to take it off the market.

Question 11

Which one of the following statements is the MOST accurate?

Accepted Answer

A)  A depreciation of a country's currency makes its goods cheaper for foreigners. 
B)  A depreciation of a country's currency makes its goods more expensive for foreigners. 
C)  A depreciation of a country's currency makes its goods cheaper for its own residents. 
D)  A depreciation of a country's currency makes its goods cheaper. 
E)  An appreciation of a country's currency makes its goods more expensive. 
A)  A depreciation of a country's currency makes its goods cheaper for foreigners. 
B)  A depreciation of a country's currency makes its goods more expensive for foreigners. 
C)  A depreciation of a country's currency makes its goods cheaper for its own residents. 
D)  A depreciation of a country's currency makes its goods cheaper. 
E)  An appreciation of a country's currency makes its goods more expensive.

Question 12

How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.25 dollars per one British pound?

Accepted Answer

A)  50 dollars 
B)  60 dollars 
C)  70 dollars 
D)  62.5 dollars 
E)  40 British pounds 
A)  50 dollars 
B)  60 dollars 
C)  70 dollars 
D)  62.5 dollars 
E)  40 British pounds

Question 13

Which of the following type of funds cater to wealthy individuals, are NOT bound by government regulations, and are actively traded in foreign exchange markets?

Accepted Answer

A)  pension funds 
B)  mutual funds 
C)  hedge funds 
D)  exchange funds 
A)  pension funds 
B)  mutual funds 
C)  hedge funds 
D)  exchange funds

Question 14

Assume that the euro interest rate is constant at 5 percent, and that the expected exchange rate is 1.05 dollars per one euro. Find the expected dollar return on euro deposits for the following cases.

Accepted Answer

The answer of Assume that the euro interest rate is...

The Japanese currency is called the

Which of the following is NOT an example of a financial derivative?

The following is an example of Radio Shack hedging its foreign currency risk:

An appreciation of a country's currency

What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.167 per euro, next year's expected exchange rate is $1.10 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%?

Discuss the effects of a rise in the dollar interest rate on the exchange rate.

Assume the U.S. interest rate is 10 percent, and the interest rate on euro deposits is 5 percent. For the following exchange rates, find the forward exchange rates.

If the goods' money prices do NOT change, an appreciation of the dollar against the pound

What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 50 dollars in New York and 100 Pounds in London?

The action of arbitrage is

Which one of the following statements is the MOST accurate?

How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.25 dollars per one British pound?

Which of the following type of funds cater to wealthy individuals, are NOT bound by government regulations, and are actively traded in foreign exchange markets?

Assume that the euro interest rate is constant at 5 percent, and that the expected exchange rate is 1.05 dollars per one euro. Find the expected dollar return on euro deposits for the following cases.

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters

Exam 14: Exchange Rates and the Foreign Exchange Market: an Asset Approach

The Japanese currency is called the

Which of the following is NOT an example of a financial derivative?

The following is an example of Radio Shack hedging its foreign currency risk:

An appreciation of a country's currency

What is the expected dollar rate of return on euro deposits if today's exchange rate is $1.167 per euro, next year's expected exchange rate is $1.10 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%?

Discuss the effects of a rise in the dollar interest rate on the exchange rate.

Assume the U.S. interest rate is 10 percent, and the interest rate on euro deposits is 5 percent. For the following exchange rates, find the forward exchange rates.

If the goods' money prices do NOT change, an appreciation of the dollar against the pound

What is the exchange rate between the dollar and the British pound if a pair of American jeans costs 50 dollars in New York and 100 Pounds in London?

The action of arbitrage is

Which one of the following statements is the MOST accurate?

How many dollars would it cost to buy an Edinburgh Woolen Mill sweater costing 50 British pounds if the exchange rate is 1.25 dollars per one British pound?

Which of the following type of funds cater to wealthy individuals, are NOT bound by government regulations, and are actively traded in foreign exchange markets?

Assume that the euro interest rate is constant at 5 percent, and that the expected exchange rate is 1.05 dollars per one euro. Find the expected dollar return on euro deposits for the following cases.

Introduction

World Trade: an Overview

Labor Productivity and Comparative Advantage: the Ricardian Model

Specific Factors and Income Distribution

Resources and Trade: the Heckscher-Ohlin Model

The Standard Trade Model

External Economies of Scale and the International Location of Production

Firms in the Global Economy: Export Decisions, Outsourcing, and Multinational Enterprises

The Instruments of Trade Policy

The Political Economy of Trade Policy

Trade Policy in Developing Countries

Controversies in Trade Policy

National Income Accounting and the Balance of Payments

Money, Interest Rates, and Exchange Rates

Price Levels and the Exchange Rate in the Long Run

Output and the Exchange Rate in the Short Run

Fixed Exchange Rates and Foreign Exchange Intervention

International Monetary Systems: an Historical Overview

Financial Globalization: Opportunity and Crisis

Optimum Currency Areas and the Euro

Developing Countries: Growth, Crisis, and Reform

Filters