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Finance questions




Question;Question 1.1.;Under;the gold standard of currency exchange that existed from 1879 to 1914, an;ounce of gold cost $24.57 in U.S. dollars and ?5.2474 in British pounds.;Therefore, the exchange rate of pounds per dollar under this fixed exchange;regime was;(Points: 5);?4.8665/$.;?0.2055/$.;?0.2136/$.;always;changing because the price of gold was always changing.;unknown;because there is not enough information to answer this question.;Question 2.2.;A;small economy country whose GDP is heavily dependent on trade with Europe;could use a(n) ________ exchange rate regime to minimize the risk to their;economy that could arise due to unfavorable changes in the exchange rate.;(Points: 5);pegged exchange rate with;the United States;pegged exchange rate with;the Euro;independent floating;managed float;None of the above;Question 3.3.;The;euro is an example of a rigidly fixed system, acting as a single currency;for its member countries. However, the euro itself is not an independently;floating currency against all other currencies.;(Points: 5);True;False;Question 4.4.;Based;on the premise that, other things equal, countries would prefer a fixed;exchange rate, which of the following statements is true?;(Points: 5);Fixed;rates do not provide stability in international prices for the conduct of;trade.;Fixed;exchange rate regimes do not necessitate that central banks maintain large;quantities of international reserves for use in the occasional defense of the;fixed rate.;Fixed rates are not;inherently inflationary in that they require the country to follow loose;monetary and fiscal policies.;Stable;prices do not aid in the growth of international trade and lessen exchange;rate risks for businesses.;All of the above;Question 5.5.;Firm;A created a subsidiary in Russia last year to mine copper ore. The proportion;of net income paid back to the parent company as a dividend would be;recorded in the current account subcategory of;(Points: 5);services trade.;income trade.;goods trade.;current transfers.;current aids;Question 6.6. Coffee Beans opened its;first store in Moscow, Russia in October 2009. The price of a tall;vanilla latte in Moscow is 2.70 euros. In New York City, the price of;a tall vanilla latte is $3.65. The exchange rate between euro;and U.S. dollars is Euro 0.80/$. According to purchasing power;parity, is Euro overvalued or undervalued?;(Points: 5);78.08% overvalued;77.05% overvalued;-78.08% undervalued;-77.05 undervalued;None of the above;Question 7.7. John determined US/Japanese;financial conditions are at parity. The current spot rate is a flat;?91.00/$, while the 360-day forward rate is ?85.90/$. Forecast inflation is;1.100% for Japan, and 5.900% for the US. The 360-day euro-yen deposit rate;is 4.700%, and the 360-day euro-dollar deposit rate is 9.500%.;Find the forecasted change in the Japanese yen/U.S. dollar (?/$) exchange;rate one year from now.;(Points: 5);3.65%;3.85%;3.9%;4.9%;5.9%;Question 8.8.;Which;of the following is NOT true regarding the market for foreign exchange?;(Points: 5);The market provides the;physical and institutional structure through which the money of one country;is exchanged for another.;The rate of exchange is;not determined in the market.;Foreign exchange;transactions are physically completed in the foreign exchange market.;All of the above are;true.;None of the above;Question 9.9.;It;is characteristic of foreign exchange dealers to;(Points: 5);bring;buyers and sellers of currencies together but never to buy and hold an;inventory of currency for resale.;trade;only with clients in the retail market and never operate in the wholesale;market for foreign exchange.;act as market makers;willing to buy and sell the currencies in which they specialize.;All of the;above;None of the;above;Question 10.10.;The;following is an example of an American term foreign exchange quote;(Points: 5);$1.3/?;?0.85/$;?85/?;?95/?;none of the above;Question 11.11.;If;the direct quote for a U.S. investor for British pounds is $1.23/?, then;the indirect quote for the U.S. investor would be ________ and the direct;quote for the British investor would be ________.;(Points: 5);?0.699/$, ?0.699/$;$0.699/?, ?0.699/$;?1.43/?, ?0.699/$;?0.699/$, $1.43/?;?0.813/$, ?0.813/$;Question 12.12.;The;European and American terms for foreign currency exchange are not the;reciprocal of one another.;(Points: 5);True;False;Question 13.13.;Ireland;and Greece had the same issues lead to their financial crises in 2009. In;each case, the previous government had dramatically understated the size of;their federal budget deficit as a percentage of GDP.;(Points: 5);True;False;Question;14.14. Assume the United States has the following import/export;volumes and prices. It undertakes a major "devaluation" of the;dollar, say 15% on average, against all major trading partners' currencies.;What is the pre-devaluation and post-devaluation trade balance?;Assumptions;Values;Initial spot exchange rate, $/fc;1.50;Price of exports, dollars ($);15.0000;Price of imports, foreign currency (fc);11.0000;Quantity of exports, units;100;Quantity of imports, units;105;Percentage devaluation of the dollar;15.00%;Price elasticity of demand, imports;(0.900);(Points: 5);-$880, -$1398;$880, $1398;-$233, -$492;$233, $492;$233, -$492;Question 15.15. Before World War I, $18.67;was needed to buy one ounce of gold. If, at the same time one ounce of gold;could be purchased in France for FF380.00, what was the exchange rate;between French francs and U.S. dollars?;(Points: 5);20.35;19.75;18.75;17.75;15.25;Question 16.16. A prominent investor is;evaluating investment alternatives. If he believes an individual equity;will rise in price from $69 to $81 in the coming one-year period, and the;share is expected to pay a dividend of $1.85 per share, and he expects at;least a 15% rate of return on an investment of this type, what would be his;return? (Points: 5);20.07%;21%;21.07%;19.15%;19.45%;Question;17.17. Isaac D?ez Peris lives in Rio de Janeiro. While attending;school in Spain he meets Juan Carlos Cordero from Guatemala. Over the;summer holiday Isaac decides to visit Juan Carlos in Guatemala City for a;couple of weeks. Isaac's parents give him some spending money, R$4,500.;Isaac wants to exchange it to Guatemalan quetzals (GTQ). He collects the;following rates;Spot rate on the GTQ/? cross rate;GTQ 11.635/?;Spot rate on the ?/reais cross rate;?0.5443/R$;What is the Brazilian reais/Guatemalan;quetzal cross rate?;(Points: 5);4.89;4.49;5.49;6.33;7.19;Question 18.18. The Venezuelan government;officially floated the Venezuelan bolivar (Bs) in February of 2002. Within;weeks, its value had moved from the pre-float fix of BS645/$ to Bs978/$. By;what percentage did its value change?;(Points: 5);29.85%;23.85%;34.05%;-33.45%;-34.05%;Question 19.19.;A;well-established, large Mexican-based MNE will probably be most adversely;affected by which of the following elements of firm value?;(Points: 5);high-quality strategic;management;an open marketplace;access to capital;access to qualified labor;pool;None of the above.;Question 20.20.;International trade might have approached the comparative advantage model;in the 19th century, but it certainly does not today.(Points: 5);True;False


Paper#50150 | Written in 18-Jul-2015

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