Econ 243 Midterm exam AHKING

Econ 243 Midterm exam AHKING - Economics 243-01 Midterm...

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Page 1 Economics 243-01 Midterm examination October 19, 2000 Instruction: Put your name and social security number on the question sheets and the blue book. Put your answers in the blue book only. Turn in both at the end of the examination. Part A: Multiple-choice questions. Choose the best alternative. The total for Part A is 25 points. 1. Ford Motor Company buys an existing manufacturing plant in Canada and pays for the purchase by giving the shareholders of the existing manufacturing plant an equal value of Ford Motor Company stocks. This transaction is recorded in the U.S. BOP as: a. debit in long-term asset abroad and credit in foreign-owned long-term asset b. credit in long-term asset abroad and debit in foreign-owned long-term asset c. debit in import of goods and services and credit in foreign-owned short-term asset d. debit in long-term asset abroad and credit in foreign-owned short-term asset e. none of the above 2. Futures and forward contracts on foreign currency are bought and sold, respectively, on a. the New York Stock Exchange; the American Stock Exchange b. the Chicago Mercantile Exchange; the New York Options Exchange c. the Philadelphia Exchange; the Chicago Mercantile Exchange d. the Chicago Mercantile Exchange; the forward market of the foreign exchange market e. the spot market; the forward market 3. A foreign currency future contract differs from a foreign currency forward contract in that future contracts a. are traded on an organized exchange b. have four maturity dates per year c. can be for any amount d. all of the above e. only (a) and (b) of the above 4. A contract that gives the owner the right (not the obligation) to buy a Eurodollar time deposit at a fixed interest rate is a. an Eurodollar call option b. an Eurodollar put option c. an Eurodollar interest rate swap d. an European put option 5. According to PPP, if the price level in the U.S. in 1998 is 120, and the price level in Canada is 110, the $/C$ exchange rate for 1998 is approximately a. 1.09 b. 0.92 c. 1.10 d. 1.20 e. none of the above 6. If the inflation rate in the U.S. is 4% in 1998, and the German inflation rate is 6% in 1998, then according to relative PPP a. $ depreciates in 1998 b. DM depreciates in 1998 c. $ and DM are trading at par d. none of the above
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Page 2 7. If the domestic and the foreign interest rates are 12% and 10% respectively, then according to uncovered interest rate parity a. foreign currency is expected to appreciate by 4% b. foreign currency is expected to appreciate by 2% c. foreign currency is expected to depreciate by 4% d. foreign currency is expected to depreciate by 2% 8. Globalization of financial markets allows for a. more independent monetary policy b. more interdependent monetary policy c. a more stable world financial market d. all of the above 9. The LIBOR rate is a. a Eurocurrency deposit rate b. a Eurocurrency lending rate to the bank’s best customers c. a Eurocurrency exchange rate d. a Eurocurrency lending rate between Eurobanks
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This test prep was uploaded on 04/21/2008 for the course ECON 243 taught by Professor Ahking during the Spring '08 term at UConn.

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Econ 243 Midterm exam AHKING - Economics 243-01 Midterm...

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