Exam 4: The International Flow of Funds and Exchange Rates

The system in which the country pegs its currency at a fixed rate to a major currency or basket of currencies, while the exchange rate fluctuates within a narrow margin around a central rate is called a(n)_____.

The net of investment income from abroad and investment payments to foreigners is called the _____.

Differentiate between purchasing power parity and interest rate parity.

Insurance that reduces future risk is referred to as a(n)_______.

The ________ consists of domestic-country-owned assets abroad, foreign-owned assets in the domestic country, and net financial derivatives.

Together, the dollar, euro, and yen account for around 60 percent of the world economy.

_____ refers to the added return required by investors for risk associated with a security or asset.

Of the following, which is NOT listed in the text as a reason why currency values can change?

In the forward market, the selling of a currency at a spot rate that is more than the forward rate is called _____.

Which of the following represents the top trading partner of the United States?

When a new client signs on with the Whoppler Firm, its financial experts attempt to provide an educational orientation on finance for their newest customer.  One of the many financial items discussed is the recommended primary reserve asset of the international monetary system.  Which one of the following is most likely being discussed?    

One forecasting approach is to use a multiple regression model to estimate the relationship between changes in spot rates and fundamental factors.

Scenario - S & I Creations Sven and Ingrid Allgertson developed the idea for their thriving business while awaiting the birth of their first child, Olga.  Finding nowhere to purchase fine handmade baby clothing and other items, the couple decided to start their own business.  Neither Sven nor Ingrid imagined just how successful this endeavor would turn out to be for them. Their designer baby clothes and products were an instant hit in the world marketplace.  And even though the baby items are quite expensive to purchase, shoppers from around the world are only too happy to spend large sums of money on their beloved children. Originally S & I Creations only sold products within Sweden, but soon global demand necessitated the company offer its products in several other foreign markets.  Now the proud parents of baby Olga are also the proud owners of a $10 billion per year business.  Sven and Ingrid cannot wait to see what the future holds for their family and their business operations.When S & I Creations exports its products to foreign marketplaces, which one of the following is most likely to be affected for the country of Sweden?    

According to the trade balance, the "+" sign refers to _____ and the "-" sign refers to _____.

A system that sets the values of major currencies based on their demand and supply in world currency markets are referred to as a(n)________ floating exchange rate system.

In flow of funds analysis, money moving into a country is a debit (negative sign), while money leaving the same country is a credit (plus sign).

Balance of payments is generally split into two major components with major business implications: (1)the current account and (2)the _____ account.

The law of one price is the underlying principle of the ______ theory.

The three largest foreign exchange markets are in London, New York, and _____.

If the dollar was expected to appreciate in the 60-day forward market against the Japanese yen, it would be selling at a premium.