Exam 18: International Aspects of Financial Management

Assume the current spot rate between the UK and the U.S.is £0.6058 per $1, the expected inflation rate in the U.S.is 2.2 percent, and the expected inflation rate in the UK is 3 percent.If relative purchasing power parity exists, what will the exchange rate be next year?

Assume you can exchange $1 for either C$1.1417 or ¥118.62.What is the cross-rate between the Canadian dollar and the Japanese yen?

A U.S.firm has total assets valued at €918,000 located in Germany.This valuation did not change from last year.Last year, the exchange rate was €.92 = $1.Today, the exchange rate is €.80 = $1.By what amount did these assets change in value for the year on the firm's U.S.financial statements?

The treasurer of a major U.S.firm has $8.2 million to invest for three months.The interest rate in the U.S.is .53 percent per month.The interest rate in the UK is .54 percent per month.The spot exchange rate is £.64, and the three-month forward rate is £.65.Ignore transaction costs.The treasurer should invest the funds in the ____ because he can earn an additional ____.

Which one of the following is the rate that most international banks charge when they loan Eurodollars to other banks?

Suppose the Swiss franc exchange rate is SF.9703 = $1, and the euro exchange rate is €.8024 = $1.What is the cross-rate in terms of Swiss francs per euro?

Which country is correctly matched with its currency?

Currently, you can exchange €100 for $112.55.The inflation rate in Europe is expected to be 1.4 percent.In one year, it is expected that €100 can be exchanged for $113.50.Assume relative purchasing power parity exists.What is the expected inflation rate in the U.S.?

Assume you can exchange $1 for either €.8031 euro or £.6390.What is the cross-rate between the pound and the euro?

Currently, you can exchange $1 for SF1.14.Assume the average inflation rate in the U.S.over the next two years will be 2.5 percent annually as compared to 3 percent in Switzerland.Based on this information and relative purchasing power parity, which of the following assumptions can you make regarding the next two years?

Suppose the spot exchange rate for the Canadian dollar is C$1.22 and the six-month forward rate is C$1.27.Assuming absolute PPP holds, what is the current cost in the United States of a hamburger if the price in Canada of an equivalent burger in Canada is C$6.00?

Assume the one-year forward rate for the British pound is £.6381 = $1.The spot rate is £.6392 = $1.The interest rate on a risk-free asset in the UK is 4.4 percent.If interest rate parity exists, what is the one-year risk-free rate in the U.S.?

Assume the spot rate for the pound is £.6390 = $1 and for the Canadian dollar is C$1.1417 = $1.What is the £/C$ cross-rate?

Your German friend has decided to come and visit you in the U.S.You estimate the cost of her trip at $2,200.What is the cost to her in euros if the U.S.dollar equivalent of the euro is 1.2452?

Which of the following parties are participants in the foreign exchange market? I.U.S.importers II.U.S.exporters III.U.S.travelers to Europe IV.Foreign portfolio managers who purchase American securities

Currently, you can exchange €100 for $124.15.The inflation rate in Europe is expected to be 3.3 percent as compared to 3.1 percent in the U.S.Assuming that relative purchasing power parity exists, what should the exchange rate be five years from now?

Assume that in New York, you can exchange $1 for €0.89 or £.0.6391 In Berlin, £1 costs €1.16.How much profit can you earn on $1,000 using triangle arbitrage?

Which statement is correct?

Assume $1 = €.8036 = A$1.1757.What is the cross-rate for Australian dollars in terms of euros?

You are planning an extended trip to India and have located some housing that you can lease for 37,250 rupees per month.What is the cost per month in U.S.dollars if the exchange rate is Rs1 = $.01606?