英文版国际金融练习题

1、INTERNATIONAL FINANCEAssignment Problems (5) Name: Student#: I. Choose the correct answer for the following questions (only ONE 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 t

2、he same, the exchange rate is the _. A. real exchange rate B. effective exchange rate C. equilibrium exchange rate D. 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 eu

3、roC. result 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

4、?A. The 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 the yen.4. If the price of a pair of Nike sneakers costs $85 in U.S,

5、and the 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

6、 to the 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 Bs C. the expected inflation rate in country A is higher t

7、han the expected inflation rate in country B D. 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 $20 in the U.S. and 100 pesos in Mexico; and the exchange rate is 7 pesos/$ righ

8、t now, which 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 lik

9、ely to exhibit 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

10、traded8. 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 currencies B. relative price level of the two countries C. relative interest rate of the two currencies D. relative money supply

11、of the two countries9. 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

12、 say whether country As currency should appreciate or depreciate against country Bs currency. The exchange rate is influenced by many factors D. 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

13、the different nations B. the price of the good is the same ignoring the other expenses C. arbitrage for the good does not exist D. 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

14、simultaneously buys back the borrowed currency on the forward market. This is called _. A. uncovered interest arbitrage B. covered interest arbitrage C. triangular arbitrage D. spatial arbitrage12. Real return equalization across countries on similar financial instruments is called _. A. interest ra

15、te parity B. uncovered interest parity C. forward parity D. real interest parity13. In which of the following situations would a speculator wish to sell foreign currency on the forward market?A. If ES1d/f F1d/fC. If ES1d/f = F1d/fD. If ES1d/f = 1/F1d/f14. According to IRP, if the interest rate in co

16、untry A is higher than that in country B, the forward exchange rate, defined as F1A/B is expected to be _. A. lower than the spot rate S0A/B B. the same as the spot rate S0A/B C. higher than the spot rate S0A/B D. necessary the same as the future spot rate S1A/B15. For arbitrage opportunities to be

17、practicable, _. A. arbitragers must have instant access to quotes B. arbitragers must have instant access to executions C. arbitragers must be able to execute the transactions without an initial sum of money relying on their banks credit standing D. All of the above must be true.16. The _ states tha

18、t the forward exchange rate quoted at time 0 for delivery at time t is equal to what the spot rate is expected to be at time t. A. interest rate parity B. uncovered interest parity C. forward parity D. real interest parity17. Assume expected value of the U.S. dollar in the future is lower than that

19、now compared to the value of the Japanese yen. The U.S. inflation rate must be higher than Japans inflation rate according to _. A. relative PPP B. Fisher equation C. International Fisher relation D. IRP18. According to covered interest arbitrage if an investor purchases a five-year U.S. bond that h

20、as an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate 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; appreciate B. British pound; revalue C. U.S. dollar; appreciate D.

21、U.S. dollar; depreciate19. Covered interest arbitrage moves the market _ equilibrium because _. A. toward; investors are now more willing to invest in risky securities B. toward; purchasing a currency on the spot market and selling in the forward market narrows the differential between the two C. aw

22、ay from; purchasing a currency on the spot market and selling in the forward market increases the differential between the two D. 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 f

23、uture spot rate, which of the following is NOT true? A. The future spot rate will actually be equal to what the forward rate predicts B. 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

24、far from the markets consensus expectation. D. All of the above are true.II. Problems (40 credits)1. The Argentine peso was fixed through a currency board at Ps1.00/$ throughout the1990s. In January 2002 the Argentine peso was floated. On January 29, 2003, it was trading at Ps3.20/$. During that one

25、 year period Argentinas inflation rate was 20% on an annualized basis. Inflation in the United States during that same 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 under

26、valued on an annualized basis?2. Assume that the interest rate paid by an American borrower on a ten-year foreign bond 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

27、rate in Denmark? Will the Danish kroner be expected to increase in value against the Dutch guilder? Explain your answer. (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 St

28、ates. The U.S. inflation rate is 5 percent. (5 credits) a. What is Englands nominal required rate of return on riskless 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 co

29、vered interest arbitrage possibilities. He wants to invest $5,000,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes: (12 credits)Spot rate: 118.60/$ 180-day forward rate: 117.80/$180-day dol

30、lar 4.8% per yearinterest rate180-day yen 3.4% per yearinterest rate The bank does not calculate transaction costs on any individual transaction because these costs are part of the overall operating budget of the arbitrage department. Plot the given information on the covered interest parity grid. E

31、xplain and illustrate the specific steps Akira must take to make a covered interest arbitrage profit.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 is 7.5% and 3.5% in U.S. (8 cre

32、dits) a. What is your expected spot exchange rate a year later? b. Youre concerned your investment in the Czech Republic because of the economic uncertainty in that country. When you expect the future value of the koruna, you require a risk premium of 2%. What is the expected future spot rate suppos

33、ed to be?Answers to Assignment Problems (5)Part I1. C2. A3. D4. D5. C6. C7. A8. B9. A10. D11. B12. D13. B14. C15. D16. C17. A18. C19. B20. APart II1. a. inflation differential (20% - 2.2%) = 17.8%U.S. should have appreciated by 17.8%Implied exchange rate 1(1 + 17.8%) = Ps1.178/$ b. (1.178 3.2 ) / 3.

34、2 = -63.19%2. a. According to international Fisher equation: (1 + id) / (1 + if) = (1 + Ed) / (1 + Ef) id: interest rate in Denmarkif: interest rate in Netherlandd: Danish inflation rate f Dutch inflation rateSince (1 + id) / (1 + if) = (1 +10%)/(1 + 7%) 0 So, (1 + Ed) / (1 + Ef) 0, which means the expected inflation rate in Denmark would be greater than that in Netherland. b. If Danish inflation is higher than Dutch inflation, Danish kroner will be expected to decrease in value against the Dutch guilder. (relative PPP theory)3. a. U.S. nominal interes