The International
Monetary System
2-1
2
Chapter Two
The International
Monetary System
Chapter Objective:
This chapter serves to introduce the student to the
institutional framework within which:
International payments are made.
The movement of capital is
Balance of Payments
3
Chapter Three
3-1
Balance of Payments (BOP)
Chapter
Objective:
This
chapter serves to introduce the student to
the balance of payments:
How
BOP is constructed
How BOP data may be interpreted
Balance of Payments Accounting
The
Ba
Globalization and the
Multinational Firm
1-1
1
Chapter One
Globalization and the
Multinational Firm
Chapter Objectives:
Understand why it is important to study
international finance.
Distinguish international finance from domestic
finance.
1-2
The Scope o
Chapter 2:
Additional Material
Financial Crises
The Mexican Peso Crisis (1994)
The Asian Crisis (1997)
The Argentinean Peso Crisis
The Russian Crisis (1998)
The Brazilian Crisis (1999)
Financial Crises
Types of foreign investment
Portfolio investme
Homework: Chapters 3-4
DUE: February 17
ECFI 640
Dr. Schreyer
Show all work in an organized and neat fashion, otherwise credit will not be given. As a general rule,
type your answers and use Microsoft Equation 3.0 to write mathematical statements and symb
Homework: Chapters 1-2
DUE: February 3
ECFI 640
Dr. Schreyer
Show all work in an organized and neat fashion, otherwise credit will not be given. As a general
rule, type your answers and use Microsoft Equation 3.0 to write mathematical statements and
symbo
Homework 3: Chapters 5-6
DUE: March 4th
ECFI 640
Dr. Schreyer
Show all work in an organized and neat fashion, otherwise credit will not be given. As a general rule, type
your answers and use an equation editor such as Microsoft Equation 3.0 to write mathe
Homework 5: Chapters 17-18
DUE: April 28
ECFI 640
Dr. Schreyer
Show all work in an organized and neat fashion, otherwise credit will not be given. As a general rule, type
your answers and use an equation editor such as Microsoft Equation 3.0 to write math
Homework 4: Chapters 15-16
DUE: April 16
ECFI 640
Dr. Schreyer
Show all work in an organized and neat fashion, otherwise credit will not be given. As a general rule, type
your answers and use an equation editor such as Microsoft Equation 3.0 to write math
Ch. 15-18 Exam
Which is NOT a way power divided in Fed? Between importers and exporters
Federal Reserve Act of 1913 made the Fed the lender of last resort On Final
Which is NOT carried out by federal reserve district banks? Open Market operations (FOMC)
M
Ch. 7 & 8 Quiz
The market value of long-term bonds is very sensitive to interest rate movements; as
interest rates fall, the market value of long-term bonds rises.
To determine the present value of a bond that pays semiannual interest, which of the
follow
Quiz 1 (Ch. 1 & 2)
1. The Fisher effect states that the nominal interest rate equals the expected inflation rate plus
the real rate of interest.
2. If the aggregate demand for loanable funds increases without a corresponding increase in
aggregate supply,
Test 1 (Ch. 1, 2, 3 & 6)
1. Savings institutions are the most dominant financial institution. False
2. Equity securities have a higher expected return than most long-term debt securities, and
they exhibit a higher degree of risk.
3. When a depository inst
Ch. 17, 21 & 25 Quiz
If a savings institutions assets have considerably longer duration than its liabilities, it can
reduce its exposure to interest rate risk by increasing its proportion of liabilities in the
long duration category.
For savings instituti
Exam 3 (Ch. 10, 11, 12)
1. Venture capital (VC) funds typically plan to exit from their original investment within a
period of about one year. False
2. A cumulative provision requires that dividends cannot be paid on common stock until all
currency and pr
Quiz 3 (Ch. 7 & 8)
The market value of long-term bonds is very sensitive to interest rate movements; as
interest rates fall, the market value of long-term bonds rises.
To determine the present value of a bond that pays semiannual interest, which of the
fo
Ch. 10 & 11 Quiz
A firm has a current stock price of $15.32. The firms annual dividend is $1.14 per share.
The firms dividend yield is 7.44%.
IPOs tend to occur more primarily during recessions. False
Initial public offerings (IPOs) tend to occur more fre
Test 2 (Ch. 7, 8, 9)
1. If the Treasury issues an unusually large amount of bonds in the primary market, it
places downward pressure on bond prices, and upward pressure on yields to be earned
by investors that purchase bonds and plan to hold them to matur
Test 2
Practice Questions
Refer to the graph below. Assume that this is a competitive
market. Which of the following does not exist when
the price is $2.00?
a.
b.
c.
d.
Economic efficiency.
Economic surplus.
A deadweight loss.
Competitive equilibrium.
1
R
Test 3
Practice Questions
1
a.
b.
c.
d.
This firm is a perfectly competitive firm.
This firm is currently earning zero economic profit
This firm has excess capacity in the amount of (Q4 Q2)
Both b and c are correct.
A market has the following characteris
Test 1: Practice Questions
1
Suppose that for a given activity, we have the
following: MC = 600; MB = 750. In order to
maximize total net benefit (Profit),
a. The level of the activity should be reduced.
b. More should be produced.
c. No change should be
1. Assume a stock is initially priced at $50, and pays an annual $2 dividend. An investor uses cash to pay
$25 a share and borrows the remaining funds at a 12 percent annual interest. What is the return if the
investor setlls the stock for $55 at the end
Chapter 3: Questions and Answers
1. Exchange Rate Effects on Investing. Explain how the appreciation of the Australian dollar
against the U.S. dollar would affect the return to a U.S. firm that invested in an Australian
money market security.
ANSWER: If t
Chapter 4: Questions and Answers
1. Inflation Effects on Exchange Rates. Assume that the U.S. inflation rate becomes high relative to
Canadian inflation. Other things being equal, how should this affect the (a) U.S. demand for
Canadian dollars, (b) supply
Chapter 5: Questions and Answers
1. Forward Premium. Compute the forward discount or premium for the Mexican peso whose 90-day
forward rate is $.102 and spot rate is $.10. State whether your answer is a discount or premium.
ANSWER: (F - S) / S
=($.102 - $
Chapter 2: Questions and Answers
1
Balance of Payments.
a. Of what is the current account generally composed?
ANSWER: The current account balance is composed of (1) the balance of trade, (2) the net
amount of payments of interest to foreign investors and
Chapter 1: Questions and Answers
1
Agency Problems of MNCs.
a. Explain the agency problem of MNCs.
ANSWER: The agency problem reflects a conflict of interests between decision-making
managers and the owners of the MNC. Agency costs occur in an effort to a
Yield to Maturity/Yield Curve
Let us assume that we have 4 zero-coupon bonds, each with a par value of $1000, as follows:
1-year bond with a market price of $925.93
2-year bond with a market price of $841.75
3-year bond with a market price of $758.33
4-ye
Chapter 11/Stock Valuation and Risk 107
Chapter 11: Stock Valuation and Risk
Questions
1. Price-Earnings Model. Explain the use of the price-earnings (PE) ratio for valuing a stock. Why
might investors derive different valuations for a stock when using th
Problems
1. The Robinson family has asked for a 20-year mortgage in the amount of $60,000 to
purchase a home. At a 10 percent loan rate, what is the required monthly payment?
$60,000 * 0.10/12 * (1 0.10/12) 20*12
$579.01
(1 0.10/12) 20*12 - 1
or use a fin