If the home currency begins to appreciate against other currencies, this should ___ the current account balance, other things equal (assume that substitutes are readily available in the countries, and that the prices charged by firms remain the same).
B) have no impact on
D) all of these are equally possible
The direct foreign investment positions by US firms have generally ___ over time; the direct foreign investment positions in the US by non-US firms have generally ___ over time
A) increased; increased
B) increased; decreased
C) decreased; decreased
D) decreased; increased
The demand for US exports tends to increase when:
A) economic growth in foreign countries decreases
B) the currencies of foreign countries strengthen against the dollar
C) US inflation rises
D) none of these
Assume a Japanese firm invoices exports to the US in US dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the US dollar to ___ against the yen, it would likely wish to hedge. It could hedge by ___ dollars forward.
a) depreciate; buying
b) depreciate; selling
c) appreciate; selling
d) appreciate; buying
A large increase in the income level in Mexico along with no growth in the US income level is normally expected to cause (assuming no change in interest rates or other factors) a (n) ___ in Mexican demand for US goods and teh Mexican peso should ___
a) increase; appreciate
b) increase; depreciate
c) decrease; depreciate
d) decrease; appreciate
Investors from Germany, the US and Britian frequently invest in each other based on prevailing interest rates. If British interest rates increase, German investors are likely to buy ___ dollar-denominated securities, and the euro is likely to ___ relative to the dollar.
a) fewer; depreciate
b) fewer; appreciate
c) more; depreciate
d) more; appreciate
If inflation increases substantially in Australia while US inflation remains unchanged this is expected to place ____ pressure on the value of the Australian dollar with respect to the US dollar
c) either upward or downward (depending on the degree of the increase in Australian inflation)
D) none of these
Any event that reduces the US demand for Japanese yen should result in a (n)____ in the value of the Japanese yen with respect to ____, other things being equal
a) increase;U.S. dollar
b) increase; nondollar currencies
c) decrease; nondollar currencies
d) decrease; US dollar
The 90-day forward rate for the euro is $1.07 while the current spot rate of the euro is $1.05. What is the annualized forward premium or discount of the euro?
a) 1.9% discount
b) 1.9% premium
c) 7.6% premium
d) 7.6% discount (PLEASE SHOW YOUR WORK)
You purchase a put option on Swiss francs for a premium of $.02 with an exercise price of $.61. The option will not be exercised until the expiration date, if at all. If the spot rate on the expiration is $.58 your net profit per unit is:
E) none of these (PLEASE SHOW YOUR WORK)
To strengthen the dollar using sterilized intervention, the Fed would ___ dollars and simutaneously ___ Treasury securities.
A) buy; sell
B) sell; buy
C) buy; buy
D) sell; sell
Assume that a US firm can invest funds for one year in the US at 12% or invest funds in Mexico at 14%. The spot rate of the peso is $.10 while the one-year forward rate of the peso is $.10 IF US firms attempt to use covered interest arbitrage, what forces should occur?
A) spot rate of peso increase; forward rate o peso decrease
B) spot rate of peso decreases; forward rate of peso increase
C) spot rate of peso decrease; forward rate of peso decreases
D) spot rate of peso increases; forward rate of peso increases
Assume that British interest rates are higher than US rates, and that the spot rate equals the forward rate. Covered interest arbitrage puts ___ pressure ont he pound's spot rate, and ___ pressure on the pound's forward rate.
A) downward; downward
B) downward; upward
C) upward; downward
D) upward; upward
Assume that inflation rate in Barbados is 3.20% while the inflation rate int he US is 3%. According to PPP, the Barbados dollar should ___ by ___%
A) appreciate; 0.1938%
B) depreciate; 0.1938%
C) appreciate; 0.1942%
D) depreciate; 0.1942% (PLEASE SHOW WORK)
Assume that your firm is an importer of Mexican chairs denominated in pesos. Your competition is mainly US producers of chairs. You wish to assess the realtionship between the percentage change in its stock price(SPt) and the percentage change in the peso's value relative to the dollar(PESOt). SPt is the dependent variable. You apply the regression model to an earlier subperiod and a more recent subperiod. In the recent subperiod, you incrased your importing volume. You should expect that the regression coeffient in the PESOt variable would be___ in the first subperiod and ____ in the second subperiod
A) negative; positive
B) positive; positive
C) positive; negative
D) negative; negative
The US inflation rate is expected to be 4percent over the next year, while the European inflation rate is expected to be 3 percent. The current spot rate of the euro is $1.03. Using purchasing power parity, what would be the expected spot rate at the end of one year.
Assume the following information:
US investors have $1m
1-year deposit rate offered by US banks = 12%
1-year deposit rate offered on Swiss francs = 10%
1-year forward rate of Swiss francs = $.62
Spot rate of Swiss franc = $.60
Based on the above information, what will be the investor yield if the money is invested in Switzerland?
Assume the following information:
Period Predicted Value of NZ dollar Realized Value of NZ $
1 $.52 $.50
2 .54 .60
3 .44 .40
4 .51 .50
Given this information, the mean absolute forecast error as a percentage of the realized value is about?