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Assignment 3 - UCONN Stamford — International Trade Name...

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Unformatted text preview: UCONN Stamford — International Trade Name: HW 3 __ Due on or before 11/16/2010 1) The idea that like goods should sell for the same price between international markets is called the a. Law of discriminating prices @ Law of one price c. Law of diverging international prices d. Law of interest rate parity 2) The principle of purchasing power parity is the macroeconomic counterpart to the a. Law of discriminating prices ® Law of one price c. Law of diverging international prices d. Law of interest rate parity 3) When the value of a currency declines in the forex market, we call this a(n) a. Devolution b. Devastation c. Depreciation .Appreciation 4) Purchasing power parity implies that the FX rate at which two currencies trade is equal to the a. Absolute prices of manufactured goods in the two countries Relative price levels of the two countries c. Relative price ievels ofthe U.S. and the EU cl. Ratio of prices to interest rates in the two countries 5) if country A’s rate of inflation is higher than country's B, then according to PPP, the currency of country A relative to country 8 should a. Appreciate b. Speculate Disassociate @ Depreciate 6) Because all FX quotes include the doiiar in the quotation, we say that the dollar is a a. Vehicle currency b. Violent currency c. Volatile currency d. Votive currency 7) The idea that an investor should not be able to earn more abroad than at home on like investments is called @ Purchasing power parity b. Interest rate disparity c. Interest rate parity d. Exchange rate parity 8) The contract that ailows you to lock in a FX rate for the future is caiied a (5? Forward contract b. Backward contract c. Free contract (I. Foreign exchange contract 9) On way in which covered interest parity can be made moot is when a government imposes a. Price controls b. Wage and price controls c. Credit controls d. Capital controls 10) Employing uncovered interest parity in a FX transaction would be considered a. Very conservative b. Very risky c. Neither risky nor conservative d. a brilliant idea 11) the forward premium in a forward contract is based on the proportional difference between a. the forward and spot rates b. the spot and option strike price rates c. the forward and interest rate d. the spot and inflation rates 12) In balance of payments accounting, GNE stands for a. Gross national energy b. Gross native enterprises ®Gross national expenditure d. Gross notional expenditure 13) Factor service exports are a. income payments made to foreign entities @ income payments made to domestic entities c. Income payments made to both foreign and domestic entities d. Income payments channeled through New York banks 14) in terms of national income accounting, GDP is defined as a. GNI + NUT b. TB + NUT @ GNE + T3 d. GNDI + TB 15) in recent years, the U.S. current account has been a. Mostly in surplus b. Just about break even c. Mostly positive cl. Mostly in deficit 16) in recent years, Japan’s CA has been in a. Surplus b. Arrears c. Deficit d. Decline 17) According to the text, a change of 1% of GDP in a government’s deficit coincides with a. A 2% to .4% of GDP change in the CA deficit b. A 2% to 4% of GDP change in the CA deficit c. A 2 to 4% of GDP change in the CA surplus d. A 4% to 8% of GDP change in the CA surplus 18) A nation’s financial account records transactions between residents and nonresidents that involve a. Manufactured products b. Service-related expenditures c. Financial assets d. Financial transaction costs 19) LTCM stands for a. Long—Term Country Movements b. Long—Term Capital Management c. Long-Tiered Country Management d. Long—Term Current Management 20) The BIack~Scholes model deals with a. Stock pricing b. Bond pricing' c. Options pricing d. Optical pricing 21) in Balance of Payments accounting, the U.S. capital account tends to be a. Quite smaii b. Quite large c. Greater than the current account d. Greater than the trade balance 22) External wealth tells us the a. Net credit or debit position of a country b. Net value of internal assets c. Net value of all stocks and bonds within a country d. Gross credit or debit position of a country 23) In accounting terms the BOP must a. Broaden b. Behave c. Balance d. Equal GDP 24) Ralph buys some Lever Brothers stock traded on the LSE. This transaction would be considered a(n) a. Export b. import c. Non—financial flow _ d. Negative component of external wealth 25) Debt forgiveness on the part of the US. for Vietnam would show up in the U.S.’s a. Current account b. Trade balance ct Statisticaldiscrepancy d. Capital account 26) The Mexican government intervenes in the forex market to reduce the value of the peso. This is called a a. Revaluation b. Devaluation c. Explanation d. Devolution 27) The organized exchange’s equivalent to a forward contract on FX is called a(n) a. Financial contract b. Externai contract c. Futures contract d. Options contract 28) The cost of purchasing a call or put options is the a. Product b. Premium c. Precept d. Strike price 29) The price at which a financial instrument can be purchased in a cali option is the a. Exclusion price b. Evaluation price c. Expianatory price d. Exercise price 30) The U.S.’s trade deficit with China has a. Been expanding in recent years b. Been shrinking in recent years c. Been in balance in recent years d. Nothing to do with trade between the U.S. and China ...
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