Question 1

Assume $1 can buy you either ¥112 or £.78.If a TV in London costs £649,what will that identical TV cost in Tokyo if absolute purchasing power parity exists?

Accepted Answer

A) ¥35,255.45 
B) ¥32,967.00 
C) ¥56,696.64 
D) ¥98,008.18 
E) ¥93,189.74 
A) ¥35,255.45 
B) ¥32,967.00 
C) ¥56,696.64 
D) ¥98,008.18 
E) ¥93,189.74

Question 2

Assume the inflation rate in the United States is 2.2 percent.The spot rate for a foreign currency is 0.947 while the 1-year forward rate is 0.951.What is the approximate rate of inflation in the foreign country?

Accepted Answer

A) 2.62% 
B) 2.37% 
C) 1.49% 
D) 1.63% 
E) 1.78% 
A) 2.62% 
B) 2.37% 
C) 1.49% 
D) 1.63% 
E) 1.78%

Question 3

Assume the spot exchange rate is £.7024.The expected inflation rate in the United Kingdom is 1.8 percent and in the United States it is 2.4 percent.What is the expected exchange rate 3 years from now if relative purchasing power parity exists?

Accepted Answer

A) £.6871 
B) £.6898 
C) £.6962 
D) £.7066 
E) £.7151 
A) £.6871 
B) £.6898 
C) £.6962 
D) £.7066 
E) £.7151

Question 4

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

Accepted Answer

A) S$3,661.20 
B) S$3,911.15 
C) S$4,695.48 
D) S$2,760.10 
E) S$2,922.01 
A) S$3,661.20 
B) S$3,911.15 
C) S$4,695.48 
D) S$2,760.10 
E) S$2,922.01

Question 5

Which one of the following conditions does not exist if absolute purchasing power parity exists?

Accepted Answer

A) Goods are identical. 
B) Trade barriers are nonexistent. 
C) Transaction costs are equal to zero. 
D) Goods have equal economic values. 
E) Goods differ based on geographic location. 
A) Goods are identical. 
B) Trade barriers are nonexistent. 
C) Transaction costs are equal to zero. 
D) Goods have equal economic values. 
E) Goods differ based on geographic location.

Question 6

An agreement to trade currencies based on the exchange rate today for settlement within two business days is called a(n)________ trade.

Accepted Answer

A) spot 
B) forward 
C) futures 
D) option 
E) swap 
A) spot 
B) forward 
C) futures 
D) option 
E) swap

Question 7

You want to import $327,000 of merchandise from New Zealand.How many New Zealand dollars will you need to pay for this purchase if the indirect quote is 1.1136?

Accepted Answer

A) NZ$364,147.20 
B) NZ$308,000.00 
C) NZ$330,018.02 
D) NZ$299,607.50 
E) NZ$293,642.24 
A) NZ$364,147.20 
B) NZ$308,000.00 
C) NZ$330,018.02 
D) NZ$299,607.50 
E) NZ$293,642.24

Question 8

Suppose the spot rate on the Canadian dollar is Can$1.023.The risk-free nominal rate in the United States is 2.6 percent while it is 3.25 percent in Canada.Which one of the following 1-year forward rates best establishes the approximate interest rate parity condition?

Accepted Answer

A) Can$1.0296 
B) Can$1.0164 
C) Can$1.0552 
D) Can$1.0867 
E) Can$1.0923 
A) Can$1.0296 
B) Can$1.0164 
C) Can$1.0552 
D) Can$1.0867 
E) Can$1.0923

Question 9

According to the unbiased forward rate theory,the current 90-day forward rate should fairly accurately predict the

Accepted Answer

A) interest rate differential between two countries 90 days from now. 
B) difference in the inflation rate between two countries 90 days from now. 
C) forward rate 90 days from now. 
D) real rate 90 days from now. 
E) spot rate 90 days from now. 
A) interest rate differential between two countries 90 days from now. 
B) difference in the inflation rate between two countries 90 days from now. 
C) forward rate 90 days from now. 
D) real rate 90 days from now. 
E) spot rate 90 days from now.

Question 10

Assume that ¥118.62 equal $1.Also assume that 7.4518Skr equal $1.How many Japanese yen can you acquire in exchange for 2,500 Swedish krona?

Accepted Answer

A) ¥157.05 
B) ¥39,795.75 
C) ¥618,309.90 
D) ¥1,054,901.88 
E) ¥2,209,831.29 
A) ¥157.05 
B) ¥39,795.75 
C) ¥618,309.90 
D) ¥1,054,901.88 
E) ¥2,209,831.29

Question 11

Assume the direct quote for the Swedish krona is 0.1360 while it is 1.0462 for the Swiss franc.What is the cross-rate between the Swedish krona and the Swiss franc?

Accepted Answer

A) SKr7.6926 = Fr$1 
B) SKr7.2093 = Fr $1 
C) SKr1.7028 = Fr $1 
D) SKr.1300= Fr $1 
E) SKr.1387 = Fr $1 
A) SKr7.6926 = Fr$1 
B) SKr7.2093 = Fr $1 
C) SKr1.7028 = Fr $1 
D) SKr.1300= Fr $1 
E) SKr.1387 = Fr $1

Question 12

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

Accepted Answer

A) Can$.9169 = €1 
B) Can$1.0907 = €1 
C) Can$1.2619 = €1 
D) Can$1.4216 = €1 
E) Can$1.1358 = €1 
A) Can$.9169 = €1 
B) Can$1.0907 = €1 
C) Can$1.2619 = €1 
D) Can$1.4216 = €1 
E) Can$1.1358 = €1

Question 13

Assume the spot exchange rate is A$.8629.The expected inflation rate is 2.8 percent in Australia and 3.4 percent in the United States.What is the expected exchange rate one year from now if relative purchasing power parity exists?

Accepted Answer

A) A$.8681 
B) A$.8618 
C) A$.8523 
D) A$.8577 
E) A$.8669 
A) A$.8681 
B) A$.8618 
C) A$.8523 
D) A$.8577 
E) A$.8669

Question 14

Which one of these combinations of country,currency,and currency symbol is incorrect?

Accepted Answer

A) Mexico,peso,Ps 
B) Japan,yen,¥ 
C) United Kingdom,pound,£ 
D) Saudi Arabia,riyal,Ry 
E) EMU,euro,€ 
A) Mexico,peso,Ps 
B) Japan,yen,¥ 
C) United Kingdom,pound,£ 
D) Saudi Arabia,riyal,Ry 
E) EMU,euro,€

Question 15

Assume the spot exchange rate is 6.22 Chinese yuan per U.S.dollar.If the inflation rate in China is expected to be double that in the U.S.for the next 2 years,then the

Accepted Answer

A) exchange rate will be unaffected as inflation is irrelevant to exchange rates. 
B) dollar will weaken against the yuan. 
C) yuan will appreciate relative to all other currencies. 
D) dollar will remain constant against the yuan. 
E) dollar will strengthen against the yuan. 
A) exchange rate will be unaffected as inflation is irrelevant to exchange rates. 
B) dollar will weaken against the yuan. 
C) yuan will appreciate relative to all other currencies. 
D) dollar will remain constant against the yuan. 
E) dollar will strengthen against the yuan.

Question 16

Assume the current spot rate is Can$.9892 and the 1-year forward rate is Can$.9901.The nominal risk-free rate in Canada is 3.8 percent while it is 3.9 percent in the U.S.If you use covered interest arbitrage,how much extra profit can you earn over that which you would earn if you invested $100 in the U.S.for one year?

Accepted Answer

A) $.16 
B) −$.02 
C) $.23 
D) −$.19 
E) $.04 
A) $.16 
B) −$.02 
C) $.23 
D) −$.19 
E) $.04

Question 17

The expected inflation rate in Finland is 3.67 percent while it is 2.45 percent in the United States.A risk-free asset in the United States is yielding 3.21 percent.What real rate of return should you expect on a risk-free Finnish security?

Accepted Answer

A) 2.91% 
B) 4.15% 
C) 6.20% 
D) 4.43% 
E) 3.15% 
A) 2.91% 
B) 4.15% 
C) 6.20% 
D) 4.43% 
E) 3.15%

Question 18

Which one of these is a U.S.company-sponsored security that trades on an exchange and has an underlying value based on foreign securities?

Accepted Answer

A) Yankee bond 
B) Foreign bond 
C) American Depository Receipt 
D) Gilt 
E) Eurobond 
A) Yankee bond 
B) Foreign bond 
C) American Depository Receipt 
D) Gilt 
E) Eurobond

Question 19

Suppose the spot exchange rate between U.S.dollars and the U.K.pound is $2/£ while the forward rate is $1.90/£.Which one of the following is true?

Accepted Answer

A) The value of the U.K.pound is expected to remain constant. 
B) The U.K.pound is selling at a premium. 
C) The U.K.pound is selling at a discount. 
D) The U.K.pound is expected to appreciate. 
E) The U.S.dollar is expected to depreciate. 
A) The value of the U.K.pound is expected to remain constant. 
B) The U.K.pound is selling at a premium. 
C) The U.K.pound is selling at a discount. 
D) The U.K.pound is expected to appreciate. 
E) The U.S.dollar is expected to depreciate.

Question 20

Which one of the following statements is correct?

Accepted Answer

A) A firm's long-run exchange rate risk can be reduced by borrowing money in the foreign country where it has operations. 
B) FASB requires that all translation gains and losses be recorded annually on the firm's income statement. 
C) Unexpected changes in economic conditions are classified as short-run exposure to exchange rate risk. 
D) Foreign assets are recorded on the parent firm's balance sheet based on the exchange rate at the time each asset is acquired. 
E) The usage of forward rates primarily addresses the long-run exposure to exchange rate risk. 
A) A firm's long-run exchange rate risk can be reduced by borrowing money in the foreign country where it has operations. 
B) FASB requires that all translation gains and losses be recorded annually on the firm's income statement. 
C) Unexpected changes in economic conditions are classified as short-run exposure to exchange rate risk. 
D) Foreign assets are recorded on the parent firm's balance sheet based on the exchange rate at the time each asset is acquired. 
E) The usage of forward rates primarily addresses the long-run exposure to exchange rate risk.

Assume $1 can buy you either ¥112 or £.78.If a TV in London costs £649,what will that identical TV cost in Tokyo if absolute purchasing power parity exists?

Assume the inflation rate in the United States is 2.2 percent.The spot rate for a foreign currency is 0.947 while the 1-year forward rate is 0.951.What is the approximate rate of inflation in the foreign country?

Assume the spot exchange rate is £.7024.The expected inflation rate in the United Kingdom is 1.8 percent and in the United States it is 2.4 percent.What is the expected exchange rate 3 years from now if relative purchasing power parity exists?

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

Which one of the following conditions does not exist if absolute purchasing power parity exists?

An agreement to trade currencies based on the exchange rate today for settlement within two business days is called a(n)________ trade.

You want to import $327,000 of merchandise from New Zealand.How many New Zealand dollars will you need to pay for this purchase if the indirect quote is 1.1136?

Suppose the spot rate on the Canadian dollar is Can$1.023.The risk-free nominal rate in the United States is 2.6 percent while it is 3.25 percent in Canada.Which one of the following 1-year forward rates best establishes the approximate interest rate parity condition?

According to the unbiased forward rate theory,the current 90-day forward rate should fairly accurately predict the

Assume that ¥118.62 equal $1.Also assume that 7.4518Skr equal $1.How many Japanese yen can you acquire in exchange for 2,500 Swedish krona?

Assume the direct quote for the Swedish krona is 0.1360 while it is 1.0462 for the Swiss franc.What is the cross-rate between the Swedish krona and the Swiss franc?

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

Assume the spot exchange rate is A$.8629.The expected inflation rate is 2.8 percent in Australia and 3.4 percent in the United States.What is the expected exchange rate one year from now if relative purchasing power parity exists?

Which one of these combinations of country,currency,and currency symbol is incorrect?

Assume the spot exchange rate is 6.22 Chinese yuan per U.S.dollar.If the inflation rate in China is expected to be double that in the U.S.for the next 2 years,then the

The expected inflation rate in Finland is 3.67 percent while it is 2.45 percent in the United States.A risk-free asset in the United States is yielding 3.21 percent.What real rate of return should you expect on a risk-free Finnish security?

Which one of these is a U.S.company-sponsored security that trades on an exchange and has an underlying value based on foreign securities?

Suppose the spot exchange rate between U.S.dollars and the U.K.pound is $2/£ while the forward rate is $1.90/£.Which one of the following is true?

Which one of the following statements is correct?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

Mergers and Acquisitions Web Only

Filters

Exam 20: International Corporate Finance

Assume $1 can buy you either ¥112 or £.78.If a TV in London costs £649,what will that identical TV cost in Tokyo if absolute purchasing power parity exists?

Assume the inflation rate in the United States is 2.2 percent.The spot rate for a foreign currency is 0.947 while the 1-year forward rate is 0.951.What is the approximate rate of inflation in the foreign country?

Assume the spot exchange rate is £.7024.The expected inflation rate in the United Kingdom is 1.8 percent and in the United States it is 2.4 percent.What is the expected exchange rate 3 years from now if relative purchasing power parity exists?

How many Singapore dollars can you get for $3,600 if the indirect quote is 1.3043?

Which one of the following conditions does not exist if absolute purchasing power parity exists?

An agreement to trade currencies based on the exchange rate today for settlement within two business days is called a(n)________ trade.

You want to import $327,000 of merchandise from New Zealand.How many New Zealand dollars will you need to pay for this purchase if the indirect quote is 1.1136?

Suppose the spot rate on the Canadian dollar is Can$1.023.The risk-free nominal rate in the United States is 2.6 percent while it is 3.25 percent in Canada.Which one of the following 1-year forward rates best establishes the approximate interest rate parity condition?

According to the unbiased forward rate theory,the current 90-day forward rate should fairly accurately predict the

Assume that ¥118.62 equal $1.Also assume that 7.4518Skr equal $1.How many Japanese yen can you acquire in exchange for 2,500 Swedish krona?

Assume the direct quote for the Swedish krona is 0.1360 while it is 1.0462 for the Swiss franc.What is the cross-rate between the Swedish krona and the Swiss franc?

Assume $1 will buy Can$1.1417 while $1.2452 will buy €1.What is the Canadian dollar/euro exchange rate?

Assume the spot exchange rate is A$.8629.The expected inflation rate is 2.8 percent in Australia and 3.4 percent in the United States.What is the expected exchange rate one year from now if relative purchasing power parity exists?

Which one of these combinations of country,currency,and currency symbol is incorrect?

Assume the spot exchange rate is 6.22 Chinese yuan per U.S.dollar.If the inflation rate in China is expected to be double that in the U.S.for the next 2 years,then the

The expected inflation rate in Finland is 3.67 percent while it is 2.45 percent in the United States.A risk-free asset in the United States is yielding 3.21 percent.What real rate of return should you expect on a risk-free Finnish security?

Which one of these is a U.S.company-sponsored security that trades on an exchange and has an underlying value based on foreign securities?

Suppose the spot exchange rate between U.S.dollars and the U.K.pound is $2/£ while the forward rate is $1.90/£.Which one of the following is true?

Which one of the following statements is correct?

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements Analysis and Financial Models

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, and Capital Budgeting

Risk and Return: Lessons From Market History

Return and Risk: The Capital Asset Pricing Model Capm

Risk, Cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividends and Other Payouts

Options and Corporate Finance

Short-Term Finance and Planning

Raising Capital

Mergers and Acquisitions Web Only

Filters