国际金融英文版试题chapter5

1、international financeassignment problems (5) name: student#: i. choose the correct answer for the following questions (only correct answer) (3 credits for each question, total credits 3 x 20 = 60)1. when the supply of and demand for a foreign exchange in the foreign exchange market are exactly the s

2、ame, the exchange rate is the _.a. real exchange rateb. effective exchange ratec. equilibrium exchange rated. cross exchange rate2. an increase in the demand for french goods and services will _.a. induce a rightward shift in the demand for eurob. induce a leftward shift in the demand for euroc. res

3、ult in a rightward movement along the demand curve for eurod. result in a leftward movement along the demand curve for euro3. if u.s. demand for japanese goods increases and japans demand for u.s. products also rises at the same time, which of the following can you conclude in this situation?a. the

4、u.s. dollar will appreciate against the yen.b. the u.s. dollar will depreciate against the yen.c. the u.s. dollar will not change relative to the yen.d. the u.s. dollar may appreciate, depreciate, or remain unchanged against theyen.4. if the price of a pair of nike sneakers costs $85 in u.s, and the

5、 price of the same sneakers is 80 in paris, the spot rate is $1.35 per euro, the euro _.a. is correctly valued according to pppb. is correctly valued according to relative pppc. is undervalued according to pppd. is overvalued according to ppp5. if the expected exchange rate e (sb/a) according to the

6、 relative purchasing power parity is lower than the spot exchange rate (sb/a), we may conclude that _.a. country b is expected to run huge bop surplus with country ab. country as interest rate is going to be lower than that of country bsc. the expected inflation rate in country a is higher than the

7、expected inflation rate in country bd. the expected inflation rate in country a is lower than the expected inflation rate in country b6. assume that ppp holds in the long run. if the price of a tradable good is $20 in the u.s. and 100 pesos in mexico; and the exchange rate is 7 pesos/$ right now, wh

8、ich of the following changes might we expect in the future?a. an increase in the price of the good in the u.sb. a decrease in the price of the good in mexicoc. an appreciation of the peso in nominal termsd. a depreciation of the peso in nominal terms7. which basket of goods would be most likely to e

9、xhibit absolute purchasing power parity?a. highly tradable commodities, such as wheatb. the goods in the consumer price indexc. specialized luxury goods, which are subject to different tax rates across countriesd. locally produced goods, such as transportation services, which are not easily traded8.

10、 the absolute purchasing power parity says that the exchange rate between the two currencies should be determined by the _ .a. relative inflation rate of the two currenciesb. relative price level of the two countriesc. relative interest rate of the two currenciesd. relative money supply of the two c

11、ountries9. according to the relative ppp, if country as inflation rate is higher than country bs inflation rate by 3%, _.a. country as currency should depreciate against country bs currency by 3%b. country as currency should appreciate against country bs currency by 3%c. it is hard to say whether co

12、untry as currency should appreciate or depreciate against country bs currency. the exchange rate is influenced by many factorsd. none of the above is true10. if the law of one price holds for a particular good, we may conclude that _.a. there is no trade barriers for the good among the different nat

13、ionsb. the price of the good is the same ignoring the other expensesc. arbitrage for the good does not existd. all of the above are true11. an investor borrows money in one market, sells the borrowed money on the spot market, invests the proceeds of the sale in another place and simultaneously buys

14、back the borrowed currency on the forward market. this is called _.a. uncovered interest arbitrageb. covered interest arbitragec. triangular arbitraged. spatial arbitrage12. real return equalization across countries on similar financial instruments is called _.a. interest rate parityb. uncovered int

15、erest parityc. forward parityd. real interest parity13. in which of the following situations would a speculator wish to sell foreign currency on the forward market?14. according to irp, if the interest rate in country a is higher than that in country b, the forward exchange rate, defined as f1a/b is

16、 expected to be _.a. lower than the spot rate s0a/bb. the same as the spot rate s0a/bc. higher than the spot rate s0a/bd. necessary the same as the future spot rate s1a/b15. for arbitrage opportunities to be practicable, _.a. arbitragers must have instant access to quotesb. arbitragers must have ins

17、tant access to executionsc. arbitragers must be able to execute the transactions without an initial sum of money relying on their banks credit standingd. all of the above must be true.16. the _ states that the forward exchange rate quoted at time 0 for delivery at time t is equal to what the spot ra

18、te is expected to be at time t.a. interest rate parityb. uncovered interest parityc. forward parityd. real interest parity17. assume expected value of the u.s. dollar in the future is lower than that now compared to the value of the japanese yen. the u.s. inflation rate must be higher than japans in

19、flation rate according to _.a. relative pppb. fisher equationc. international fisher relationd. irp18. according to covered interest arbitrage if an investor purchases a five-year u.s. bond that has an annual interest rate of 5% rather than a comparable british bond that has an annual interest rate

20、of 6%, then the investor must be expecting the _ to _ at a rate at least of 1% per year over the next 5 years.a. british pound; appreciateb. british pound; revaluec. u.s. dollar; appreciated. u.s. dollar; depreciate19. covered interest arbitrage moves the market _ equilibrium because _.a. toward; in

21、vestors are now more willing to invest in risky securitiesb. toward; purchasing a currency on the spot market and selling in the forward market narrows the differential between the twoc. away from; purchasing a currency on the spot market and selling in the forward market increases the differential

22、between the twod. away from; demand for the stronger currency forces up the interest rates on the weaker security20. if the forward exchange rate is an unbiased predictor of the expected future spot rate, which of the following is not true?a. the future spot rate will actually be equal to what the f

23、orward rate predictsb. the forward premium or discount reflects the expected change in the spot exchange rate.c. speculative activity ensures that the forward rate does not diverge too far from the markets consensus expectation.d. all of the above are true.ii. problems (40 credits)1. the argentine p

24、eso was fixed through a currency board at ps1.00/$ throughout the 1990s. in january 2002 the argentine peso was floated. on january 29, 2003, it was trading at ps3.20/$. during that one year period argentinas inflation rate was 20% on an annualized basis. inflation in the united states during that s

25、ame period was 2.2% annualized. (10 credits)a. what should have been the exchange rate in january 2003 if purchasing power parity held?b. by what percentage was the argentine peso undervalued on an annualized basis?2. assume that the interest rate paid by an american borrower on a ten-year foreign b

26、ond is 10% if the bond is sold in denmark and 7% if the bond is sold in the netherland. will the expected inflation rate in the netherlands likely be higher than the expected inflation rate in denmark? will the danish kroner be expected to increase in value against the dutch guilder? explain your an

27、swer. (5 credits)3. suppose s = $1.25/ and the 1-year forward rate is f = $1.20/. the real interest rate on a riskless government security is 2 percent in both england and the united states. the u.s. inflation rate is 5 percent. (5 credits)a. what is englands nominal required rate of return on riskl

28、ess government securities?b. what is englands inflation rate if the equilibrium relationships hold?4. akira numata, a foreign exchange trader at credit suisse (tokyo), is exploring covered interest arbitrage possibilities. he wants to invest $5,000,000 or its yen equivalent, in a covered interest ar

29、bitrage between u.s. dollars and japanese yen. he faced the following exchange rate and interest rate quotes: (12 credits)5. on a particular day, the spot rate between czech koruna (ckr) and the u.s. dollar is ckr30.35/$, while the interest rate on a one-year financial instrument in czech is7.5% and 3.5% in u.s. (8 credits)a. what is your expected spot exchange rate a year later?