国际金融FinanceTestBank4

Chapter 4—Exchange Rate Determination

加息会降低通货膨胀 本国货币就增值

涨价了，出口就会减少 进口就会增加

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 d. appreciated; 4.00

ANS: C SOLUTION: ($0.73 ?? $0.69)/$0.69 = 5.80%

PTS: 1

2. If a currency's spot rate market is ____, its exchange rate is likely to be ____ to a single

large purchase or sale transaction. a. liquid; highly sensitive b. illiquid; insensitive c. illiquid; highly sensitive d. none of the above.

ANS: C PTS: 1

3. ____ is not a factor that causes currency supply and demand schedules to change. a. Relative inflation rates b. Relative interest rates c. Relative income levels d. Expectations e. All of the above are factors that cause currency supply and demand schedules to change.

ANS: E PTS: 1

4. A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) a(n) ____ in Mexican demand for U.S. goods, and the Mexican peso should ____. a. increase; appreciate b. increase; depreciate c. decrease; depreciate d. decrease; appreciate

ANS: B PTS: 1

5. An increase in U.S. interest rates relative to German interest rates would likely ____ the

U.S. demand for euros and ____ the supply of euros for sale. a. reduce; increase b. increase; reduce c. reduce; reduce d. increase; increase

ANS: A PTS: 1

6. Investors from Germany, the United States, and the U.K. frequently invest in each other

based on prevailing interest rates. If British interest rates increase, German investors are likely to buy ____ dollar-denominated securities, and the euro is likely to ____ relative to the dollar. a. fewer; depreciate b. fewer; appreciate c. more; depreciate d. more; appreciate

ANS: A PTS: 1

7. When the \

country is typically expected to be: a. weak, since the country's quoted interest rate would be high relative to the inflation rate. b. strong, since the country's quoted interest rate would be low relative to the inflation rate. c. strong, since the country's quoted interest rate would be high relative to the inflation rate. d. weak, since the country's quoted interest rate would be low relative to the inflation rate.

ANS: D PTS: 1

8. Assume that the inflation rate becomes much higher in the U.K. relative to the U.S. This

will place ____ pressure on the value of the British pound. Also, assume that interest rates in the U.K. begin to rise relative to interest rates in the U.S. The change in interest rates will place ____ pressure on the value of the British pound. a. upward; downward b. upward; upward c. downward; upward d. downward; downward

ANS: C PTS: 1

9. In general, when speculating on exchange rate movements, the speculator will borrow the

currency that is expected to appreciate and invest in the country whose currency is expected to depreciate. a. True b. False

ANS: F PTS: 1

10. Baylor Bank believes the New Zealand dollar will appreciate over the next five days from

$.48 to $.50. The following annual interest rates apply: Currency Lending Rate Borrowing Rate Dollars 7.10% 7.50% New Zealand dollar 6.80% 7.25% (NZ$) Baylor Bank has the capacity to borrow either NZ$10 million or $5 million. If Baylor Bank's forecast is correct, what will its dollar profit be from speculation over the five-day period (assuming it does not use any of its existing consumer deposits to capitalize on its expectations)? a. $521,325. b. $500,520. c. $104,262. d. $413,419. e. $208,044.

ANS: E

SOLUTION: 1. 2. 3. 4. 5. 6. Borrow $5 million. Convert to NZ$: $5,000,000/$.48 = NZ$10,416,667. Invest the NZ$ at an annualized rate of 6.80% over five days. NZ$10,416,667 ? [1 + 6.80% (5/360)] = NZ$10,426,505 Convert the NZ$ back to dollars: NZ$10,426,505 ? $.50 = $5,213,252 Repay the dollars borrowed. The repayment amount is: $5,000,000 ? [1 + 7.5% (5/360)] = $5,000,000 ? [1.00104] = $5,005,208 After repaying the loan, the remaining dollar profit is: $5,213,252 ?? $5,005,208 = $208,044

PTS: 1

11. Assume the following information regarding U.S. and European annualized interest rates:

Currency Lending Rate Borrowing Rate U.S. Dollar ($) 6.73% 7.20% Euro (

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