Fin 6605 MC Set A Model

S and 194 in the uk if the actual us exchange rate is

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Unformatted text preview: and £1.94 in the U.K. If the actual U.S. exchange rate is $/£ = 1.88 then according exchange to the absolute PPP, the British Pound is: to a. Undervalued relative to the dollar a. b. Overvalued relative to the dollar b. c. Correctly valued relative to the dollar c. d. It costs more in dollars to buy Big Mac in d. the U.K. the e. Both b and d Both 52. Assume that the Mexican peso depreciates 52 Assume by 40% against the US dollar. Obtain the dollar’s appreciation against the peso. dollar’s a. 67% a. 67% b. 40% b. c. 32% d. 28% d. e. 75% e. 53. If the Euro appreciates by 300% against the Brazilian real, calculate the real’s depreciation against the euro. a. a. b. c. d. d. e. -67% -40% -32% -28% -75% -75% 54. The asset market view of exchange rate determination says that the spot rate: determination a. Should follow a random walk. Should b. Is affected primarily by a nation’s long-run Is economic prospects. economic c. Both a and b. c. Both d. Should be strongly affected by a nation’s balance d. of trade. of e. Should be strongly affected by current relative incomes, relative prices, and relative interest rates. 55. The current international flow model of current exchange rate determination says that the spot rate should: spot Follow a random walk. Follow b. Be affected primarily by a nation’s long-run Be a. economic prospects. economic c. c. d. Be strongly affected by a nation’s balance of trade Be strongly affected by current relative incomes incomes, relative prices, and relative interest rates incomes, e. Both c and d. Both 56. Given that $/£ = 1.6180 and $/C$ = 0.7329, Given then by cross rate, the Canadian dollar price of the British pound is given by: price British a. b. c. d. d. 1.1858 0.4530 1.3644 2.2077 2.2077 57. A relative high domestic inflation, other 57. high other things being equal, would tend to cause the domestic currency to: domestic a. Appreciate. Appreciate. b. c. c. e Depreciation. Depreciation Remain constant. Fluctuate within narrow bands. Fluctuate 58. The following statement is true concerning a strong domestic currency except: strong except a. b. b. c. c. Encourages more imports. Encourages Discourages more exports. Increases domestic competition. d. May induce lower unemployment. May 59. Which of the following statement is true concerning a weak domestic currency? weak a. a. b. b. c. c. d. Encourages more imports. Discourages more exports. Increases domestic competition. May induce lower unemployment. May 60. Whereas the profit margin to the Central Bank for issuing fiat money is almost 100%, the net profit margin on issuing more money under the gold standard is: money a. a. b. b. c. c. d. 150% 50% 10% Zero Zero e. e. None of the above 61. A favorable balance of trade indicates which of the following? which a. A country is importing more than it is exporting. b. The country is importing products and services it The cannot produce itself. cannot c. A country is exporting more than it is importing country d....
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This note was uploaded on 12/17/2012 for the course FIN 3604 taught by Professor Zhang during the Spring '12 term at University of San Francisco.

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