国际金融Chapter.ppt

Chapter 4,Answer:C($0.73$0.69)/$0.69=5.80%,1.The value of the Australian dollar(A$)today is$0.73.Yesterday,the value of the Australian dollar was$0.69.The Australian dollar _ by _%.A)depreciated;5.80B)depreciated;4.00C)appreciated;5.80D)appreciated;4.00,Answer:C,2.If a currencys spot rate market is _,its exchange rate is likely to be _ to a single large purchase or sale transaction.A)liquid;highly sensitiveB)illiquid;insensitiveC)illiquid;highly sensitiveD)none of these,Answer:E,3._ is not a factor that causes currency supply and demand schedules to change.A)Relative inflation ratesB)Relative interest ratesC)Relative income levelsD)ExpectationsE)All of these are factors that cause currency supply and demand schedules to change.,Answer:B,4.A large increase in the income level in Mexico along with no growth in the U.S.income level is normally expected to cause(assuming no change in interest rates or other factors)a(n)_ in Mexican demand for U.S.goods,and the Mexican peso should _.A)increase;appreciateB)increase;depreciateC)decrease;depreciateD)decrease;appreciate,Answer:A,5.An increase in U.S.interest rates relative to German interest rates would likely _ the U.S.demand for euros and _ the supply of euros for sale.A)reduce;increaseB)increase;reduceC)reduce;reduceD)increase;increase,Answer:E,6.Baylor Bank believes the New Zealand dollar will appreciate over the next five days from$.48 to$.50.The following annual interest rates apply:CurrencyLendingRate BorrowingRate Dollars 7.10%7.50%New Zealand dollar(NZ$)6.80%7.25%Baylor Bank has the capacity to borrow either NZ$10 million or$5 million.If Baylor Banks forecast if correct,what will its dollar profit be from speculation over the five day period(assuming it does not use any of its existing consumer deposits to capitalize on its expectations)?Daily interest rate is 1/360 of the annual rate.A)$521,325.B)$500,520.C)$104,262.D)$413,419.E)$208,044.,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 1+6.80%(5/360)=NZ$10,426,5054.Convert the NZ$back to dollars:NZ$10,426,505$.50=$5,213,2525.Repay the dollars borrowed.The repayment amount is:$5,000,000 1+7.5%(5/360)=$5,000,000 1.00104=$5,005,2086.After repaying the loan,the remaining dollar profit is:$5,213,252$5,005,208=$208,044,Answer:A,7.Assume the following information regarding U.S.and European annualized interest rates:Currency Lending Rate Borrowing Rate U.S.Dollar($)6.73%7.20%Euro()6.80%7.28%Trensor Bank can borrow either$20 million or 20 million.The current spot rate of the euro is$1.13.Furthermore,Trensor Bank expects the spot rate of the euro to be$1.10 in 90 days.What is Trensor Banks dollar profit from speculating if the spot rate of the euro is indeed$1.10 in 90 days?A)$579,845.B)$583,800.C)$588,200.D)$584,245.E)$980,245.,SOLUTION:,Borrow 20 million.Convert the 20 million to 20,000,000$1.13=$22,600,000.Invest the$22,600,000 at an annualized rate of 6.73%for 90 days.$22,600,000 1+6.73%(90/360)=$22,980,245Determine euros owed:20,000,000 1+7.28%(90/360)=20,364,000.Determine dollars needed to repay euro loan:20,364,000$1.10=$22,400,400.The dollar profit is:$22,980,245$22,400,400=$579,845.,Answer:D,8.The equilibrium exchange rate of pounds is$1.70.At an exchange rate of$1.72 per pound:A)U.S.demand for pounds would exceed the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.B)U.S.demand for pounds would be less than the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.C)U.S.demand for pounds would exceed the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.D)U.S.demand for pounds would be less than the supply of pounds for sale and there would be a surplus of pounds in the foreign exchange market.E)U.S.demand for pounds would be equal to the supply of pounds for sale and there would be a shortage of pounds in the foreign exchange market.,Answer:C,9.Assume that Swiss investors have francs available to invest in securities,and they initially view U.S.and British interest rates as equally attractive.Now assume that U.S.interest rates increase while British interest rates stay the same.This would likely cause:A)the Swiss demand for dollars to decrease and the dollar will depreciate against the pound.B)the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc.C)the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc.D)the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.,Answer:C,10.The real interest rate adjusts the nominal interest rate for:A)exchange rate movements.B)income growth.C)inflation.D)government controls.E)none of these.,Answer:D,11.If U.S.inflation suddenly increased while European inflation stayed the same,there would be:A)an increased U.S.demand for euros and an increased supply of euros for sale.B)a decreased U.S.demand for euros and an increased supply of euros for sale.C)a decreased U.S.demand for euros and a decreased supply of euros for sale.D)an increased U.S.demand for euros and a decreased supply of euros for sale.,Answer:A,12.If inflation in New Zealand suddenly increased while U.S.inflation stayed the same,there would be:A)an inward shift in the demand schedule for NZ$and an outward shift in the supply schedule for NZ$.B)an outward shift in the demand schedule for NZ$and an inward shift in the supply schedule for NZ$.C)an outward shift in the demand schedule for NZ$and an outward shift in the supply schedule for NZ$.D)an inward shift in the demand schedule for NZ$and an inward shift in the supply schedule for NZ$.,Answer:D,13.If the U.S.and Japan engage in substantial financial flows but little trade,_ directly influence their exchange rate the most.If the U.S.and Switzerland engage in much trade but little financial flows,_ directly influence their exchange rate the most.A)interest rate differentials;interest rate differentialsB)inflation and interest rate differentials;interest rate differentialsC)income and interest rate differentials;inflation differentialsD)interest rate differentials;inflation and income differentialsE)inflation and income differentials;interest rate differentials,Answer:B,14.If inflation increases substantially in Australia while U.S.inflation remains unchanged,this is expected to place _ pressure on the value of the Australian dollar with respect to the U.S.dollar.A)upwardB)downward C)either upward or downward(depending on the degree of the increase in Australian inflation)D)none of these;there will be no impact,Answer:C,15.Assume that Japan places a strict quota on goods imported from the U.S.and the U.S.places a strict quota on goods imported from Japan.This event should immediately cause the U.S.demand for Japanese yen to _,and the supply of Japanese yen to be exchanged for U.S.dollars to _.A)increase;increaseB)increase;declineC)decline;declineD)decline;increase,Answer:E,16.Which of the following is not mentioned in the text as a factor affecting exchange rates?A)relative interest rates.B)relative inflation rates.C)government controls.D)expectations.E)All of these are mentioned in the text as factors affecting exchange rates.,Answer:C,17.If a country experiences an increase in interest rates relative to U.S.interest rates,the inflow of U.S.funds to purchase its securities should _,the outflow of its funds to purchase U.S.securities should _,and there is _ pressure on its currencys equilibrium value.A)increase;decrease;downwardB)decrease;increase;upwardC)increase;decrease;upwardD)decrease;increase;downwardE)increase;increase;upward,