Chapter 4 Exchange Rate Determination
1. The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the
Australian dollar was $0.69. The Australian dollar ________ by _______%.
A) depreciated; 5.80
B) depreciated; 4.00
C) appreciated; 5.80
D) appreciated; 4.00
ANSWER: C
SOLUTION: ($0.73 - $0.69)/$0.69 = 5.80%婚礼摄像师
阳江特色美食2. If a currency's spot rate market is ________, its exchange rate is likely to be __________ to a single large purcha or sale transaction.
A) liquid; highly nsitive
B) illiquid; innsitive
C) illiquid; highly nsitive
D) none of the above.
ANSWER: C
3. _________ is not a factor that caus currency supply and demand schedules to
change.
A) Relative inflation rates
B) Relative interest rates
C) Relative income levels
D) Expectations
E) All of the above are factors that cau currency supply and demand schedules to change.
ANSWER: E
4. A large increa in the income level in Mexico along with no growth in the U.S. income
level is normally expected to cau (assuming no change in interest rates or other factors)
a(n) ______ in Mexican demand for U.S. goods, and the Mexican peso should _______.
A) increa; appreciate
B) increa; depreciate
C) decrea; depreciate
D) decrea; appreciate
ANSWER: B
5. An increa in U.S. interest rates relative to German interest rates would likely
________ the U.S. demand for euros and _________ the supply of euros for sale.
A) reduce; increa
B) increa; reduce
C) reduce; reduce
D) increa; increa
ANSWER: A
6. Investors from Germany, the United States, and Britain frequently invest in each other
bad on prevailing interest rates. If British interest rates increa, German investors are
likely to buy ________ dollar-denominated curities, and the euro is likely to _________
relative to the dollar.
A) fewer; depreciate
B) fewer; appreciate
C) more; depreciate
D) more; appreciate
ANSWER: A
7. When the "real" interest rate is relatively low in a given country, then the currency of that
country is typically expected to be:
A) weak, since the country's quoted interest rate would be high relative to the inflation
rate.
B) strong, since the country's quoted interest rate would be low relative to the inflation
绳镖rate.
C) strong, since the country's quoted interest rate would be high relative to the inflation
rate.
D) weak, since the country's quoted interest rate would be low relative to the inflation
rate.
ANSWER: D
8. Assume that the inflation rate becomes much higher in the U.K. relative to the U.S. This
will place ____________ pressure on the value of the British pound. Also, assume that
interest rates in the U.K. begin to ri relative to interest rates in the U.S. The change in
interest rates will place ____________ pressure on the value of the British pound.
A) upward; downward
B) upward; upward
C) downward; upward
D) downward; downward
ANSWER: C
9. In general, when speculating on exchange rate movements, the speculator will borrow
the currency that is expected to appreciate and invest in the country who currency is
expected to depreciate.
A) true.
B) fal.
ANSWER: B
10. Baylor Bank believes the New Zealand dollar will appreciate over the next five days from
$.48 to $.50. The following annual interest rates apply:
Currency Lending Rate Borrowing Rate
Dollars 7.10% 7.50%
New Zealand dollar (NZ$) 6.80% 7.25%
Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor
Bank's forecast if correct, what will its dollar profit be from speculation over the five-day 高中自评
period (assuming it does not u any of its existing consumer deposits to capitalize on its
expectations)?
A) $521,325.
B) $500,520.
C) $104,262.
有趣的昆虫
D) $413,419.
win10服务E) $208,044.合作养鸡
ANSWER: E
SOLUTION:
1. Borrow $5 million.
2. Convert to NZ$: $5,000,000/$.48 = NZ$10,416,667.
3. Invest the NZ$ at an annualized rate of 6.80% over five days.
NZ$10,416,667 x [1 + 6.80% (5/360)]
= NZ$10,426,505
4. Convert the NZ$ back to dollars:
NZ$10,426,505 x $.50 = $5,213,252
5. Repay the dollars borrowed. The repayment amount is:
$5,000,000 x [1 + 7.5% (5/360)]
= $5,000,000 x [1.00104]
= $5,005,208
陶渊明不为五斗米折腰6. After repaying the loan, the remaining dollar profit is:
