Глава 4
1. Assume the spot rate of the euro (€) is $0.90. The expected spot rate one year from now is assumed to be $0.85. This percentage change reflects a: b. 5.56% depreciation of the euro оо 2. The current spot rate of the British pound (£) is $1.45. One year from now, the spot rate of the British pound is $1.51. This percentage change reflects a:
a. 4.14% appreciation of the U.S. dollar. 3. Suppose the inflation rate in Australia goes up relative to the U.S. inflation rate. What effect will that have on the supply, demand, and equilibrium exchange rate of the Australian dollar?
a. the supply of Australian dollars will go up, the demand for Australian dollars will go down, and the Australian dollar will depreciate
4. Suppose interest rates in Europe increase relative to U.S. interest rates. What effect will that have on the supply, demand, and equilibrium exchange rate of the euro (€)? d. the supply of euros will go down, the demand for euros will go up, and the euro will appreciate
5. Suppose income levels in Australia go up relative to the U.S. levels. What effect will that have on the supply, demand, and equilibrium price of U.S. dollars?
d. the supply of U.S. dollars will not change, the demand for U.S. dollars will go up, and the U.S. dollar will appreciate
6. If a bank thinks the British pound is overvalued, it should do which of the following?
c. sell the pound before it depreciates 7. Assume the U.S. and Argentina have high levels of trade flows but low levels of capital flows. Which of the following statements is true regarding exchange rate determination?
d. both a and c 8. Which of the following is not a factor that affects exchange rates?
e. all of the above are factors that affect exchange rates
9. If the U.S. intervenes in the foreign exchange market by buying U.S. dollars with Japanese yen, then the U.S. dollar should appreciate against the Japanese yen.
b. False
10. If the U.S. government places a high tax on interest income earned on foreign investments, it would most likely encourage the exchange of U.S. dollars for other currencies.
b. False
11. Currency speculators can be especially influential on the exchange rate movements of emerging markets because those markets have a smaller amount of foreign exchange trading.
a. True b. False
12. A higher foreign interest rate tends to place downward pressure on the foreign currency and therefore can have an unfavorable affect on expected dollar cash flows.
b. False
13. If two countries engage in a large volume of international trade but very small international capital flows, relative inflation rates would likely be more influential than relative interest rates.
a. True b. False
Глава 9
1. Which of the following is not a corporate function that makes exchange rate forecasting necessary?
e. all of the above are corporate functions that make exchange rate forecasting necessary
2. Which of the following is not a method of forecasting exchange rates?
a. institutional 3. Which of the following is a limitation in fundamental forecasting?
d. both a and c 4. Market-based forecasting is based on what?
c. either a or b 5. ___________ forecasting involves use of historical exchange rate data to predict future values.
b. technical 6. Using the mixed forecasting method to predict the value of the Japanese yen, which of the following factors should be considered?
d. all of the above 7. If a forecaster predicts the British pound to be $1.70 in one year, but the spot rate of the pound turns out to be $1.80 in one year, what is the absolute forecast error as a percentage of realized value?
b. -5.56% 8. MNC A uses a regression model to forecast the value of the euro in the upcoming period. €t = b0 + b1INFt-1 + b2INCt-1,: b0 = 0.005, b1 = 0.9, and b2 = 0.7. U.S. inflation increased by 1%, while European inflation increased by 2%. U.S. income growth increased by 1.5%, while European income growth increased by 2%. what is the expected change in the euro?
d. 0.05% depreciation 9. From a corporate point of view, use of technical forecasting may be limited in that it typically focuses on the near future.
a. True 10. Regression analysis, sensitivity analysis, and purchasing power parity (PPP) can be used for fundamental forecasting of exchange rates.
a. True 11. The forward rate is considered biased in market-based forecasting because of implications of interest rate parity.
b. False
12. Some studies have shown forecast services to be not much more accurate than freely available forecasts.
a. True 13. On a graph with X as the predicted value, Y as the realized value, and a 45 degree line drawn from the apex, upward bias would be shown if more points are below the line than above the line.
a. True 14. If currency markets are weak-form efficient, then fundamental forecasting cannot be used to improve forecasts.
b. False
Глава 21
1. Which of the following is not a technique to optimize cash flows?
e. all of the above are techniques to optimize cash flows
2. Which of the following is not a complication an MNC may encounter in optimizing cash flows?
b. managing intersubsidiary cash transfers 3. Assume a company invested $100,000 in Canada for one year at 10%. The spot rate of the Canadian dollar was $0.65 when the investment was made and $0.70 when the investment matured. What was the approximate effective yield on this investment?
d. 18.46% 4. If covered interest arbitrage is feasible for investors residing in the home country, then which of the following is true?
c. Interest rate parity exists and the forward rate is expected to overestimate the future spot rate. 5. An MNC has an investment in Greece at an interest rate of 8%. The interest rate in the U.S. is 6%. What expected change in the euro over the investment period would make the MNC indifferent between investing in Greece and investing in the U.S.?
a. 1.89% appreciation
6. A lockbox system is used to help reduce mail float.
a. True 7. A multilateral netting system reduces administrative and currency conversion costs.
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