Fin 6605 MC Set A Model

Fixed a managed float b beggar thy neighbor

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Unformatted text preview: ed float b. ‘Beggar-thy-neighbor” devaluation c. Dirty float d. Target-zone agreement e. Free float 11. Under the classic gold standard, if prices began rising in the U.S. began a. The dollar value of the pound would rise a. b. The dollar value of the pound would fall b. c. The U.S. would begin running a balance of c. The trade surplus trade d. Gold would flow out of the U.S. and the U.S. d. money supply would drop money 12. A weak peso is most likely to cause: 12. a. b. c. d. More competition and less inflation in Mexico Less unemployment but more inflation in Mexico More unemployment but less inflation in Mexico Less unemployment and less inflation in Mexico 13. If expected inflation is 20% and the real required return is 10%, then the exact Fisher Equation says that the nominal interest rate should be: should a. b. c. d. e. e. 30% 32% 22% 10% 200% 14. If annualized interest rates in the U.S. and annualized Switzerland are 9% and 13%, respectively, and the spot value of the franc is $.1109, then at what 180‑day forward rate will interest rate parity 180‑day hold? a. a. b. c. d. $.1070 $.1150 $.1088 $.1130 15. Suppose the pound devalues from $/£=1.25 at Suppose 1.25 the start of the year to $/£=1.00 at the end of the the 1.00 year. Inflation during the year is 15% in UK and 5% in the U.S. What is the change in the real value of the pound during the year? pound a. b. c. d. e. e. ‑ 12.38% 12.38% ‑ 20.71% + 2.39% + 1.46% None of the above 16. Suppose inflation rates in the U.S. and Sweden are expected to be 4% and 9%, respectively, next year and 6% and 7%, respectively, in the following year. If the current spot rate is $/krona = . 1050, then according to relative PPP, the 1050, expected spot rate for the krona in 2 years is: expected a. b. c. d. $.1111 $.1024 $.0992 $.1074 17. In a freely floating exchange rate system, if freely the capital account is running a deficit, the a. a. b. c. d. d. e. The balance of payments must run a deficit must deficit The balance of payments must be zero The current account must run a surplus Both b and c above Both None of the above 18. The overwhelming majority of foreign exchange transactions involve: exchange a. Multinational corporations buying and Multinational selling foreign exchange selling b. Importers and exporters buying and Importers selling foreign exchange selling c. Banks buying and selling foreign Banks exchange (interbank transactions) exchange d. Governments buying and selling foreign d. Governments exchange exchange 19. Hedgers, mostly _____________, engage in forward contracts on the foreign exchange markets to protect the home currency value of various foreign currency-denominated assets and liabilities on their balance sheets. and a. b. c. d. Commercial banks Public utilities Multinational corporations Multinational Speculators 20. Suppose the New York spot direct quotes for the pound sterling and euro are $1.3981‑89 and $1.1230‑33, respectively. What is the direct quote for the pound in Paris? quo...
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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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