Exchange Rate Determination
1. The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian
dollar was $0.69. The Australian dollar _ by _ %.
A) depreciated; 5.80
B) depreciated; 4.00
C) appreciated; 5.80
International Arbitrage and Interest Rate Parity
1. Due to _, market forces should realign the relation ship between the interest rate
differential of two currencies and the forward premium (or discount) on the forward exchange
rate between the
Measuring Exposure to Exchange Rate Fluctuations
1. Translation exposure reflects:
A) the exposure of a firms ongoing international transac tions to exchange rate fluctuations.
B) the exposure of a firms local currency value to transac tions be
Identify the letter of the choice that best completes the statement or answers the question.
1. Which of the following theories identifies specialization as a reason for international business?
a. theory of comparative advant
Relationships among Inflation,
Interest Rates, and Exchange Rates
1. Assume a two -country world: Country A and Country B. Which of the following is correct
about purchasing power parity (PPP) as related to these two countries?
A) If Country As
Managing Transaction Exposure
1. Assume zero transaction costs. If the 90 -day forward rate of the euro is an accurate estimate of
the spot rate 90 days from now, then the real cost of hedging payables will be:
a) Typically, an acquisition will result in greater growth for an MNC; however,
acquisitions are risky in nature, as they require a larger investment and the decision to acquire is
difficult to re
Chapter 2 (Questions and Applications)
1) a) The current account is generally composed of the balance-of-trade, payments from
international tourism, private gifts and/or grants, and the net amount of paymen
Chapter 7 (Questions and Applications)
2) With $1,000,000 available to use, 2.5 million New Zealand dollars could be purchased
from at Yardley Bank. If New Zealand dollars are purchased at $0.40 and sold to B