国际金融英文版试题chapter7汇编

INTERNATIONAL FINANCEAssignment Problems (3) Name: Student#:I. Choose the correct answer for the following questions (only ONE correct answer) (2 credits for each question, total credits 2 x 25 = 50)1. Interbank quotations that include the United States dollars are conventionally given in, which state the foreign currency price of one U.S. dollar, such as a bid price of SFr 0.85/$.A. indirect quoteB. direct quoteC. American quoteD. European quote2. The spot exchange rate published in financial newspapers is usually the .A. nominal exchange rateB. real exchange rateC. effective exchange rateD. equilibrium exchange rate3. The foreign exchange refers to the .A. foreign bank notes and coinsB. demand deposits in foreign banksC. foreign securities that can be easily cashedD. all of the above4. The functions of the foreign exchange market come down to .A. converting the currency of one country into the currency of anotherB. providing some insurance against the foreign exchange riskC. making the foreign exchange speculation easyD. Only A and B are true.5. Which of the following is NOT true regarding the foreign exchange market.A. It is the place through which people exchange one currency for another.B. The exchange rate nowadays is mainly determined by the market forces.C. Most foreign exchange transactions are physically completed in this market.D. All of the above are true.6. The world largest foreign exchange markets are respectively.A. London, New York and TokyoB. London, Paris and FrankfurtC. London, Hong Kong and SingaporeD. London, Zurich and Bahrain7. The foreign exchange market is NOT efficient because .A. monetary authorities dominate the foreign exchange market and everybody knows that by definition, central banks are inefficientB. commercial banks and other participants of the market do not compete with one another due to the fact that transaction takes place around the world and not in a single centralized locationC. foreign exchange dealers have different prices such as bid and ask pricesD. None of the reasons listed are correct because the foreign exchange market is an efficient market8. earn a profit by a bid-ask spread on currencies they buy and sell.on the other hand, earn a profit by bringing together buyers and sellers of foreign exchanges and earning a commission on each sale and purchase.A. Foreign exchange brokers; foreign exchange dealersB. Foreign exchange dealers; foreign exchange brokersC. arbitragers; speculatorsD. commercial banks; central banks9. Most foreign exchange transactions are through the U.S. dollars. If the transaction is expressed as the currencies per dollar, this is known as whereas are expressed as dollars per currency.A. direct quote; indirect quoteB. indirect quote; direct quoteC. European quote; American quoteD. American quote, European quote10. From the viewpoint of a Japanese investor, which of the following would be a direct quote..B. .C. ￥110/.D. . ￥11. Which of the following is true about the foreign exchange market.A. It is a global network of banks, brokers, and foreign exchange dealers connected by electronic communications system.B. The foreign exchange market is usually located in a particular place.C. The foreign exchangerates are usually determined by the related monetary authorities.D. The main participants in this market are currency speculatorsfrom different countries.12. The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values is considered to be .A. Translation exposureB. economic exposureC. transaction exposureD. accounting exposure13. Which of the following exchange rates is adjusted for price changes.A. nominal exchange rateB. real exchange rateC. effective exchange rateD. equilibrium exchange rate14. Suppose the exchange rate of the RMB versus U.S. dollar is ￥6.8523/$ n RMB were to undergo a 10% depreciation, the new exchange rate in terms ofbe:A. B. C. D.15. At least in a U.S. MNC’s financial accounting statement, if the value of the euro depreciatesrapidly againstthat of the dollar over a year, this would reducethe dollarvalue of the euro profit made by the European subsidiary. This is a typical .A. transaction exposureB. translation exposureC. economic exposureD. operating exposure16. A Japanese-based firm expects to receive pound-payment in 6 months. The companyhas a (an) .A. economic exposureB. accounting exposureC. long position in sterlingD. short position in sterling17 The exposure to foreign exchangerisk known as Translation Exposure may bedefined as .A. change in reported owne’r s equity in consolidated financial statements caused bya change in exchange ratesB. the impact of settling outstanding obligations entered into before change in exchange rates but to be settled after change in exchange ratesC. the changein expectedfuture cashflows arisingfrom an unexpectedchangein exchange ratesD. All of the above18 When a firm deals with foreign trade or investment, it usually has foreignexchange risk exposure. So if an American firm expects to receive a dollar-payment from a Chinese company in the next 30 days, the U.S. firm has the possible .A. economic exposureB. transaction exposureC. translation exposureD. none of the above19. In order to avoid the possible loss because of the exchange rate fluctuations, a firm that has a position in foreign exchanges can that position in the forward market.A. short; sellB. long; sellC. long; buyD. none of the above20. A forward contract to deliver Japaneseyens for Swissfrancs could be describedeither as or ,A. selling yens forward; buying francs forwardB. buying francs forward; buying yens forwardC. selling yens forward; selling francs forwardD. selling francs forward; buying yens forwardSFr/$21. Dollars are trading at S0=SFr0.7465/$ in the spot market. The 90-dayforwardSFr/$rate is F1=SFr0.7432/$. So the forward on the dollar in basis points is :A. discount,B. discount, 33C. premium,D. premium, 3322. If the spot rate is /. , 3-month forward rate is6./, which of the following is NOT true.A. euro is at forward premium by 100 points.B. dollar is at forward discount by 100 points.C. dollar is at forward discount by 55 points.D. euro is at forward premium by 2.96% p.a.23. If the spot C$/$ rate is 1.0305/15, forward dollar is 25/30 premium, the outright forward quote in American term should be .A. –B. –C. ––24. If the spot C$/$ rate is 1.0305/15, forward dollar is 25/30 premium, the $/C$ forward quote in terms of points should be .A. 30/25B. 25/30C. –(23/28)D. –(28/23)25. The current U.S. dollar exchange rate is￥85/$. If the 90-day forward dollar rate is ￥90/$, then the yen is selling at a per annum of .A. premium; 5.88%B. discount; 5.56%C. premium; 23.52%D. discount; 22.23%II. ProblemsQuestions1through10are based on the information presented in Table 3.1(2.credits for each question, total credits 2 x 10 = 20)TableCountry Exchange rate(2021) Exchange rate CPI Volume of Volume ofimports from U.S.(2021) (2021)Germany Mexico U.S.. 0.75/$Mex$11.8/$. 0.70/$Mex$12.20/$$200m$120m$350m$240m1. The real exchange rate of the dollar against the euro in 2021 was .2. The real exchange rate of the dollar against the peso in 2021 was .3. The dollar was against the euro in nominal term by .A. appreciated; 6.67%B. depreciated; 6.67%C. appreciated; 7.14%D depreciated; 7.14%4. The Mexican peso was against the dollar in nominal term by.A. appreciated; 3.39%B. depreciated; 3.39%C. appreciated; 3.28%D. depreciated; 3.28%5. The volume of the German foreign trade with the U.S. was .6. The volume of the Mexican foreign trade with the U.S. was .7. Assume the U.S. trades only with the Germany and Mexico. Now if we want to calculate the dollar effective exchange rate in 2021 against a basket of currencies of euroand Mexican peso, the weight assigned to the euro should be .8. The weight assigned to the peso should be .9. Assumethe 2021 is the baseyear. The dollar effective exchangerate in 2021 was.10. Was the dollar generally stronger or weaker in 2021 according to your calculation.11. The following exchange rates are available to you.Fuji Bank ￥80.00/$United Bank of Switzerland SFr0.8900/$Deutsche Bank ￥Assume you have an initial SFr10 million. Can you make a profit via triangular arbitrage. If so, show steps and calculate the amount of profit in Swiss fra n8cs c.r e(dit s)12. If the dollar appreciates 1000% against the ruble, by what percentage does the ruble depreciate against the dolla(r5. credits)13. As a percentage of an arbitrary starting amount, about how large would transactions costs have to be to make arbitrage between the exchange rat e S s Fr/$S= SFr1.7223/$, S$/￥￥/SFr= ￥, and S = ￥unprofitable. Explain(.7 credits14. You are given the following exchange rates:￥/A$S = 67.05 –￡/A$S –￥/ ￡Calculate the bid and ask rate of S : (5 credits)15.Suppose the spot quotation on the Swiss franc (CHF) in New York is4–42–68. Compute the percentage bid-ask spreads on the CHF/EUR quo t(e5. credits)Answers to Assignment Problems (3)Part I1. D2. A3. D4. D5. D6. A7. D8. B9. C 10. C11. A 12. A 13. B 14. D 15. B16. C 17. A 18. D 19. B 20. A21. B 22. B 23. C 24. C 25. D Part II1. 0.70 x (105.3/102.5) = 0.7 x 1.0273 =2. 12.2 x (105.3/110.5) = 12.2 x .9529 =3. B (0.7 /.75)–1 = -6.67%4. D (1/12.2)/(1/11.8) –1 = -3.28%5. 5506. 3607. 550/910 = 60.44%8. 360/910 =9. (0.70/0.75)(60.44%) + (12.2/11.8)(39.56%) = .5641 + 0.4090 = .9731 = 97.31%10. weaker, because dollar depreciated by 2.69%.￥/$ $/SFr SFr/ ￥11. Since S S S = 0.946186< 1, there is an arbitrage opportunity.Steps: ①Buy ￥from Deutsche Bank, SFr10 million x =￥950million② m③ mProfit (ignoring transaction fees):–SFr10 = 0.56875 million = 568,75012. (x–1) = 1000%; 1/11 –1 = 90.9%13. S SFr/$ S$/ ￥S￥/SFr = SFr1.7223/$ x x￥￥F=rIf transaction costs exceed $0.0326 (3.26%), the arbitrage is unprofitable.￥/A$14. Given: S = –￡/A$S –￥/.(bid)￡/.(ask)15. Given: –52/SFr–68/SFrSo, S SRr/ . (bid)S SFr/ . (ask)Bid-ask margin = –1.424) / 1.4264 = 0.1683%。

Chapter1 balance of paymentsBalance of Payments Accounting1Balance of paymentsa)is defined as the statistical record of a country’s international transactions over acertain period of time presented in the form of a double-entry bookkeepingb)provides detailed information concerning the demand and supply of a country’scurrencyc)can be used to evaluate the performance of a country in international economiccompetitiond)all of the aboveAnswer: d2Generally speaking, any transaction that results in a receipt from foreignersa)Will be recorded as a debit, with a negative sign, in the U.S. balance of paymentsb)Will be recorded as a debit, with a positive sign, in the U.S. balance of paymentsc)Will be recorded as a credit, with a negative sign, in the U.S. balance ofpaymentsd)Will be recorded as a credit, with a positive sign, in the U.S. balance of payments Answer d3 Generally speaking, any transaction that results in a payment to foreignerse)Will be recorded as a debit, with a negative sign, in the U.S. balance of paymentsf)Will be recorded as a debit, with a positive sign, in the U.S. balance of paymentsg)Will be recorded as a credit, with a negative sign, in the U.S. balance ofpaymentsh)Will be recorded as a credit, with a positive sign, in the U.S. balance of payments Answer a)4 Suppose the McDonalds Corporation imports 100 tons of Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian Beef Conglomerate.i)Payment by McDonalds will be recorded as a debitj)The deposit of the funds by the seller will be recorded as a debitk)Payment by McDonalds will be recorded as a creditl)The deposit of the funds by the buyer will be creditAnswer: a5Since the balance of payments is presented as a system of double-entry bookkeeping,a)Every credit in the account is balanced by a matching debitb)Every debit in the account is balanced by a matching creditc)a) and b) are both trued)None of the aboveAnswer c)6 A country’s international transactions can be grouped into the following threemain types:a)current account, medium term account, and long term capital accountb)current account, long term capital account, and official reserve accountc)current account, capital account, and official reserve accountd)capital account, official reserve account, trade accountAnswer: c7Invisible trade refers to:a)services that avoid tax paymentsb)underground economyc)legal, consulting, and engineering servicesd)tourist expenditures, onlyAnswer: c8The current account is divided into four finer categories:a)Merchandise trade, services, income, and statistical discrepancy.b)Merchandise trade, services, income, and unilateral transfersc)Merchandise trade, services, portfolio investment, and unilateral transfersd)Merchandise trade, services, factor income, and direct investment Answer: b9Factor incomea)Consists largely of interest, dividends, and other income on foreigninvestments.b)Is a theoretical construct of the factors of production, land, labor, capital,and entrepreneurial ability.c)Is generally a very minor part of national income accounting, smaller thanthe statistical discrepancy.d)None of the aboveAnswer: aUSE THE FOLLOWING INFORMA TION TO ANSWER THE NEXT TWO QUESTIONS10 The entries in the “current account” and the “capital account”, combined together, can be outlined (in alphabetic order) as:(i)- direct investment (ii)- factor income (iii)- merchandise (iv)- official transfer (v)- other capital(vi)- portfolio investment (vii)- private transfer (viii)- services11Current account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi) Answer: b12Capital account includesa)(i), (ii), and (iii)b)(ii), (iii), and (vii)c)(iv), (v), and (vii)d)(i), (v), and (vi)Answer: d13The difference between Foreign Direct Investment and Portfolio Investment is that:a)Portfolio Investment mostly represents the sale and purchase of foreign financialassets such as stocks and bonds that do not involve a transfer of control.b)Foreign Direct Investment mostly represents the sale and purchase of foreignfinancial assets such as stocks whereas Portfolio Investment mostly involves thesales and purchase of foreign bonds.c)Foreign direct investment is about buying land and building factories, whereasportfolio investment is about buying stocks and bonds.d)All of the aboveAnswer: a14In the latter half of the 1980s, with a strong yen, Japanese firmsa)Faced difficulty exportingb)Could better afford to acquire U.S. assets that had become less expensive interms of yen.c)Financed a sharp increase in Japanese FDI in the United Statesd)All of the aboveAnswer: d15International portfolio investments have boomed in recent years, as a result ofa) A depreciating U.S. dollarb)Increased gasoline and other commodity prices.c)The general relaxation of capital controls and regulation in many countriesd)None of the aboveAnswer: cAnswer: c)16The capital account measuresa)The sum of U.S. sales of assets to foreigners and U.S. purchases of foreignassets.b)The difference between U.S. sales of assets to foreigners and U.S. purchases offoreign assets.c)The difference between U.S. sales of manufactured goods to foreigners and U.S.purchases of foreign products.d)None of the aboveAnswer: b) page 6417When Honda, a Japanese auto maker, built a factory in Ohio,a)It was engaged in foreign direct investmentb)It was engaged in portfolio investmentc)It was engaged in a cross-border acquisitiond)None of the above.Answer: a) page 64.18The capital account may be divided into three categories:a)Cross-border mergers and acquisitions, portfolio investment, and otherinvestmentb)Direct investment, portfolio investment, and Cross-border mergers andacquisitionsc)Direct investment, mergers and acquisitions, and other investmentd)Direct investment, portfolio investment, and other investmentAnswer: d)19When Nestlé, a Swiss firm, bought the American firm Carnation, it was engaged in foreign direct investment. If Nestlé had only bought a non-controlling number ofshares of the firma)Nestlé would have been engaged in portfolio investmentb)Nestlé would have been engaged in a cross-border acquisitionc)It would depend if they bought the shares from an American or a Canadiand)None of the above.Answer: a)20Foreign direct investment (FDI) occursa)when an investor acquires a measure of control of a foreign businessb)when there is an acquisition, by a foreign entity in the U.S., of 10 percent ormore of the voting shares of a businessc)with sales and purchases of foreign stocks and bonds that do not involve atransfer of controld) a and bAnswer: d21Statistical discrepancy, which by definition represents errors and omissionsa)Cannot be calculated directlyb)Is calculated by taking into account the balance-of-payments identityc)Probably has some elements that are honest mistakes, it can’t all be moneylaundering and drugs.d)All of the aboveAnswer: d)22The statistical discrepancy in the balance-of-payments accountsa)Arise since recordings of payments and receipts are done at different times, indifferent places, possibly using different methods.b)Arise since some transactions (illegal transactions?) occur “off the books”.c)Represents omitted and misrecorded transactions.d)All of the aboveAnswer: d)23Regarding the statistical discrepancy in the balance-of-payments accountsa)There is some evidence that financial transactions may be mainly responsible forthe discrepancy.b)The sum of the balance on the capital account and the statistical discrepancy isvery close to the balance of the current account in magnitude.c)It tends to be positive one year and negative in others, so it’s safe to ignore itd)a) and b)Answer: d)24When a country must make a net payment to foreigners because of a balance-of-payments deficit, the central bank of the countrya)Should do nothingb)Should run down its official reserve assets (e.g. gold, foreign exchanges, andSDRs)c)Should borrow anew from foreign central banks.d)b) or c) will workAnswer: d)25Continued U.S. trade deficits coupled with foreigners’ desire to diversify their currency holdings away from U.S. dollarsa)could further diminish the position of the dollar as the dominant reserve currencyb)could affect the value of U.S. dollar (e.g. through the currency diversificationdecisions of Asian central banks)c)Could lend steam to the emergence of the euro as a credible reserve currencyd)All of the aboveAnswer: d26Currently, international reserve assets are comprised ofa)gold, platinum, foreign exchanges, and special drawing rights (SDRs)b)gold, foreign exchanges, special drawing rights (SDRs), and reserve positions inthe International Monetary Fund (IMF)c)gold, diamonds, foreign exchanges, and special drawing rights (SDRs)d)reserve positions in the International Monetary Fund (IMF), onlyAnswer: b27International reserve assets include “foreign exchanges”. These area)Special Drawing Rights (SDRs) at the IMFb)reserve positions in the International Monetary Fund (IMF)c)Foreign currency held by a country’s central bankd)None of the aboveAnswer: c28The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countries isa)Goldb)Foreign exchangesc)Special Drawing Rights (SDRs)d)Reserve positions in the International Monetary Fund (IMF)Answer: b29The vast majority of the foreign-exchange reserves held by central banks are denominated ina)Local currenciesb)U.S. dollarsc)Yend)EuroAnswer: b30The U.S. Trade Deficita)Is a capital account surplusb)Is a current account deficitc)Is both a capital account surplus and a current account deficitd)None of the aboveAnswer: c31Over the last several years the U.S. has run persistenta)Balance-of-payments deficitsb)Balance-of-payments surplusesc)Current Account deficitsd)Capital Account deficitsAnswer: c32More important than he absolute size of a country’s balance-of-payments disequilibriuma)is the nature and cause of the disequilibriumb)is whether it is a trade surplus or deficitc)is whether the local government is mercantilist or notd)Nothing is more important than he absolute size of a country’sbalance-of-payments disequilibriumAnswer: aThe Relationship between Balance of Payments and National Income AccountingFor questions in this section, the notation isY = GNP = national incomeC = consumptionI = private investmentG = government spendingX = exportsM = imports33National income, or Gross National Product is given by:a)GNP = Y = C + I + G + X + Mb)GNP = Y = C + I + G + X – Mc)GNP = I = C + Y + G + X – Md)GNP = Y = C + I + X + M – GAnswer: b)34Which of the following is a true statement?a)BCA ≡ X – Mb)BKA ≡ X – Mc)BKA –BCA ≡ X – Md)BKA ≡ X – MAnswer a)35There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for government expenditures. Thisrelationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, which of thefollowing is a true statement?a)If (S –I) < 0, it implies that a country’s domestic savings is insufficient tofinance domestic investment.b)If (T –G) < 0, it implies that a country’s tax reven ue is insufficient to financegovernment spendingc)both a) and b) are trued)none of the aboveAnswer c)36There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for government expenditures. Thisrelationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, which of thefollowing is a true statement?a)If (S –I) < 0, it implies that a country’s domestic savings is insufficient tofinance domestic investment.b)If (T – G) < 0, it implies that a country’s tax revenue is insufficient to financegovernment spendingc)when BCA is negative, it implies that government budget deficits an/or part ofdomestic investment are being finance with foreign-controlled capitald)all of the above are trueAnswer d)37There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays for government expenditures. Thisrelationship is given by BCA ≡ X –M ≡ (S – I) + (T – G). Given this, in order for acountry to reduce a BCA deficit, which of the following must occur?a)For a given level of S and I, the government budget deficit (T – G) must bereducedb)For a given level of I and (T – G), S must be increasedc)For a given level of S and (T – G), I must falld)All of the above would work to reduce a BCA deficitAnswer d)Explain how each of the following transactions will be classified and recorded in the debit and credit of the U.S. balance of payments:(1) A Japanese insurance company purchases U.S. Treasury bonds and pays out of itsbank account kept in New York City.(2) A U.S. citizen consumes a meal at a restaurant in Paris and pays with her AmericanExpress card.(3) A Indian immigrant living in Los Angeles sends a check drawn on his L.A. bankaccount as a gift to his parents living in Bombay.(4) A U.S. computer programmer is hired by a British company for consultingand gets paid from the U.S. bank account maintained by the British company.In contrast to the U.S., Japan has realized continuous current account surpluses. Whatcould be the main causes for these surpluses? Is it desirable to have continuous current account surpluses?。

Multiple-choice test(only one is correct):1. Gresham’s Law states thata)Bad money drives good money out of circulation.b)Good money drives bad money out of circulationc)If a country bases its currency on both gold and silver, at an official exchange rate, it will be themore valuable of the two metals that circulate.d)None of the above.2. Balance of paymentsa)is defined as the statistical record of a country’s international transactions over a certain period oftime presented in the form of a double-entry bookkeepingb)provides detailed information concerning the demand and supply of a country’s currencyc)can be used to evaluate the performance of a country in international economic competitiond)all of the above3. If the United States imports more than it exports, thena)The supply of dollars is likely to exceed the demand in the foreign exchange market, ceterisparibus.b)One can infer that the U.S. dollar would be under pressure to depreciate against other currenciesc)a) and b)d)None of the above4. The current spot exchange rate is $1.55/£ and the three-month forward rate is $1.50/£. You enter into a short position on £1,000. At maturity, the spot exchange rate is $1.60/£. How much have you made or lost?a)Lost $100b)Made £100c)Lost $50d)Made $1505. The sensitivity of “realized” domestic currency values of the firm’s contractual cash flows denominated in foreign currency to unexpected changes in the exchange rate is:a)Transaction exposureb)Translation exposurec)Economic exposured)None of the above6. Three days ago, you ente red into a futures contract to sell €62,500 at $1.20 per €. Over the past three days the contract has settled at $1.20, $1.22, and $1.24. How much have you made or lost?a)Lost $0.04 per € or $2,500b)Made $0.04 per € or $2,500c)Lost $0.06 per € or $3,750d)None of the above7. A swap banka)Can act as a broker, bringing together counterparties to a swapb)Can act as a dealer, standing ready to buy and sell swapsc)Both a) and b)d)Only sometimes a) but never ever b)8. Suppose that the one-year interest rate is 5.0 percent in the United States, the spot exchange rate is$1.20/€, and the one-year forward exchange rate is $1.16/€. What must one-year interest rate be in the euro zone?a) 5.0%b) 1.09%c)8.62%d)None of the above.9. Suppose the spot ask exchange rate, S a($|£), is $1.90 = £1.00 and the spot bid exchange rate, S b($|£), is $1.89 = £1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be “eaten” by the bid-ask spread?a)$1,000,000b)$52,910.05c)$100,000d)$52,631.5810. Under the gold standard, international imbalances of payment will be corrected automatically under thea)Gresham Exchange Rate regimeb)European Monetary Systemc)Price-specie-flow mechanismd)Bretton Woods Accord11. With any hedgea)Your losses on one side should about equal your gains on the other sideb)You should try to make money on both sides of the transaction: that way you make moneycoming and goingc)You should spend at least as much time working the hedge as working the underlying deal itselfd)You should agree to anything your banker puts in front of your face12. Comparing “forward” and “futures” exchange contracts, we can say that:a)They are both “marked-to-market” daily.b)Their major difference is in the way the underlying asset is priced for future purchase or sale:futures settle daily and forwards settle at maturity.c) A futures contract is negotiated by open outcry between floor brokers or traders and is traded onorganized exchanges, while forward contract is tailor-made by an international bank for its clients and is traded OTC.d)b) and c)13. An “option” isa) a contract giving the seller (writer) the right, but not the obligation, to buy or sell a given quantityof an asset at a specified price at some time in the futureb) a contract giving the owner (buyer) the right, but not the obligation, to buy or sell a givenquantity of an asset at a specified price at some time in the futurec)not a derivative, nor a contingent claim, securityd)unlike a futures or forward contract14. Economic exposure refers toa)the sensitivity of realized domestic currency values of the firm’s contractual cash flowsdenominated in foreign currencies to unexpected exchange rate changesb)the extent to which the value of the firm would be affected by unanticipated changes in exchangeratec)the potential that the firm’s consolidated financial statement can be affected by changes inexchange ratesd)ex post and ex ante currency exposures15. Under a purely flexible exchange rate systema) Supply and demand set the exchange ratesb) Governments can set the exchange rate by buying or selling reservesc) Governments can set exchange rates with fiscal policyb) and c) are correct.。

The Answers of Chapter 71. The difference between direct and indirect financing has to do with whether theborrower and lender seek each other out or whether an intermediary matchesborrowers and lenders. Direct financing requires no intermediary to matchsavers and borrowers. An economy will benefit from having both direct andindirect financing because both are appropriate ways to save and invest underdifferent circumstances. As discussed in the text, financial intermediaries absorba fraction of each saver's dollar that is borrowed. Thus, the intermediary takessome of the funds that otherwise would have gone to a borrower. However, the financial intermediary provides an important service by reducing informationasymmetries, allowing savers to pool risk, and matching risk and return.Therefore, when an individual cannot research these issues on his/her own, the intermediary is necessary to help the financial markets operate. However, astrong bond market, in which borrowers and savers can directly interact, allows for informed parties to save the funds that otherwise would go to an intermediary.This, in turn, uses the savings more efficiently.2. Portfolio flows are relatively short term in nature (have a shorter term to maturity),involve lower borrowing costs, and can generate near-term income. They also do not require a firm to give up control to a foreign investor. Consequently, they may help to improve capital allocation within an economy and help the economy's financial sector develop. These are all potential benefits of portfolio investments.By the same token, however, they are also relatively easy to reverse in direction, which is a potential disadvantage of portfolio investment.On the other hand, foreign direct investment (FDI) involve some degree ofownership and control of a foreign firm, are typically long term in nature, and help provide a stabilizing influence on a nation's economy. As such, FDI is typically more difficult to arrange.It is not advantageous to rely on either type of investment exclusively, in so far as each type accomplishes different goals for an economy. Both near-andlong-term capital are important for an economy's growth.3. As either portfolio investment of FDI increase, the demand for the local currencyrises (e.g., there is a shift from D0 to D1), which puts upward pressure on the value of the currency, from S0 to S1. If the central bank expects to hold the value of the currency constant at S0, it will have to increase the quantity of the domesticcurrency supplied (e.g., accommodate the excess quantity demanded at the initial spot rate S0) to maintain the peg. The opposite would hold for capital outflows.4. Suppose that a multinational bank (MNB) headquartered in a developed economyenters a developing economy. The MNB has gained considerable expertise in working as a financial intermediary, and likely has achieved economies of scale in doing so. By entering a foreign market, it helps to allocate the savings more efficiently through its intermediation services; which in turn will lead to additional economic development. Specifically, it should help to make sure that the best investment projects are funded. Moreover, the competition it introduces into the capital market helps to improve the quality of the indigenous financialintermediaries. This, in turn, should also add to financial stability.5. Savers and borrowers can also benefit from the regulation of financialintermediaries when portfolio capital flows dominate a country's capital inflows.It can be argued that regulation to limit short-term inflows can stabilize theeconomy and that these regulations can be gradually lifted as the economybecomes more stable (financial markets develop) and resilient to external shocks.These regulations do impose costs in that they require resources to enforce, and may inhibit otherwise helpful capital inflows which may aid economicdevelopment. However, these costs must be considered against the potential losses that may be incurred if the absence of capital controls would lead to more volatile and capital markets (which may deter the inflow of foreign capital).6. Policymakers should undertake actions that attract both portfolio capital flows andFDI flows. Actions that improve transparency in both the private a public sector reduces information asymmetries and their associate problems thereby making portfolio flows more stable, in other words, reducing the risk of massive capital outflows. Policymakers may also undertake actions that promote education,improve the tax structure and tax collection, and improve the countriesinfrastructure. These actions may, in turn, attract FDI.7. In the following two examples it is assumed that the policymaker maintains apegged-exchange rate regime and does not opt for a floating-rate regime. Hence, the policymaker may either intervene and maintain the peg or change the value of the peg. In both cases there is pressure for the domestic currency to appreciate visa vis the foreign currency.a. If the exchange rate pressure is only temporary in nature, then the policymakermay intervene by accommodating the excess quantity demanded, as explained in question 3 above.b. Because the exchange rate pressure is longer-term in nature, the policymakerwould be well advised to revalue the domestic currency.8. The World Bank was initially established to help countries rebuild after WWIIand in the 1960s expanded to also make long term loans to developing nations in order to help reduce poverty and improve living standards. Recently, some of the World Bank's activities have begun to overlap the IMF's activities to finance long-term structural adjustments and provide refinancing for some heavilyindebted countries. Critics may argue that the tasks that are duplicated by the IMF and the World Bank create conflicting goals for the World Bank. Thus, the two organizations may each benefit by focusing on different aims. For instance, the IMF may return to financing shorter-term objectives and leave the World Bank to worry about longer-term projects.Another conflicting line of reasoning involves donors' expectation that the World Bank maintain a revenue stream form its projects. This can be argues asunrealistic, however, in that the poorest countries are less likely to yield a payoff for the needed projects; and these are precisely the countries that the World Bank is designed and intended to help. On the other hand, the less risky projects,which could provide a positive revenue stream are likely to attract private capital.9. The first cause of a crisis could be an imbalance in the economy. In other words,an incongruity in economic fundamentals could cause a crisis. Possibleindicators include theoretical divergences between various economic variables such as the exchange rate and interest rates, income, and money supply. In terms of evaluation, if fundamental economic variables seem to be out of line, there may be an impending crisis.A second cause is that of self-fulfilling expectations and contagion effects. Inthis case, mere expectations of a potential inability to maintain a specifiedexchange rate or a slight incongruity between economic conditions and the market exchange rate may cause a cascade of speculation that leads to a crisis. Since this is based on perception, it is difficult to find an indicator. One possibleindicator would be trading volumes of currency for countries that may be at risk from the viewpoint of economic fundamentals. If trading volumes grew quickly,a crisis may be on the horizon.Finally, the structural moral hazard problem may indicate a crisis. In this case, a credit rating bureau, such as Moody's may provide the data needed to indicate a potential crisis. The quality of the credit rating would be relatively easilyinterpreted to indicate a potential crisis.10.Answers will vary. A potential strength of this proposal would be the centralized,and assumedly unified, efforts to stabilize the global economic environment. If it works, the global economy would be more stable. A potential weakness involves the question of how practical this proposal would be, and how easy it would be to match individual countries' domestic policy goals with the organization's global goals and economic interventions. A potential of conflict between theorganization's interventions and national interests could be a significant weakness.11. It can be argued that such below market interest rate loans are critical for adeveloping nation's economy in order for the economy to grow unburdened by high interest payments when it is trying to funnel profits back into the economy and sustain growth. Conversely, providing these non-market rate loans can also be argued to distort the market for loanable funds and attract inefficientinvestment. Students' perspectives will vary as to which argument is the best.。

Part Ⅰ.Decide whether each of the following statements is true or false (10%)每题1分，答错不扣分分，答错不扣分1. 1. If If If perfect perfect perfect markets markets markets existed, existed, existed, resources resources resources would would would be be be more more more mobile mobile mobile and and and could could could therefore therefore therefore be transferred be transferred to to those those countries more willing to pay a high price for them. ( T ) 2. The forward contract can h edge hedge hedge future receivables future receivables or or payables payables payables in in in foreign currencies to foreign currencies to i nsulate insulate insulate the the the firm firm against exchange rate risk. ( T ) 3. The primary objective of the multinational corporation is still the same primary objective of any firm, i.e., to maximize shareholder wealth. ( T ) 4. A low inflation rate tends to increase imports and decrease exports, thereby decreasing the current account deficit, other things equal. ( F ) 5. A capital account deficit reflects a net sale of the home currency in exchange for other currencies. This places up ward pressure on that home currency’s value. ( F ) 6. The theory of comparative advantage implies that countries should specialize in production, thereby relying on other countries for some products. ( T ) 7. 7. Covered Covered Covered interest interest interest arbitrage arbitrage arbitrage is is is plausible plausible plausible when when when the the the forward forward forward premium premium premium reflect reflect reflect the the the interest interest interest rate rate rate differential differential between two countries specified by the interest rate parity formula. ( F ) 8． The total impact of transaction exposure is on the overall value of the firm. ( F ) 9. A put option is an option to sell-by the buyer of the option-a stated number of units of the underlying instrument at a specified price per unit during a specified period. ( T ) 10. Futures must be marked-to-market. Options are not. ( T ) Part Ⅱ:Cloze (20%)每题2分，答错不扣分分，答错不扣分1. If inflation in a foreign country differs from inflation in the home country, the exchange rate will adjust to maintain equal( purchasing power ）2. Speculators who expect a currency to ( appreciate ) could purchase currency futures contracts for that currency. 3. 3. Covered Covered Covered interest interest interest arbitrage arbitrage arbitrage involves involves involves the short-term the short-term investment investment in in in a a a foreign foreign foreign currency currency currency that that that is covered is covered by by a a ( forward contract ) to sell that currency when the investment matures. 4. （ Appreciation/ Revalue ）of RMB reduces inflows since the foreign demand for our goods is reduced and foreign competition is increased. 5. ( PPP ) suggests a relationship between the inflation differential of two countries and the percentage change in the spot exchange rate over time. 6. 6. IFE IFE IFE is is is based based based on on on nominal nominal nominal interest interest interest rate rate rate ( ( differentials ), ), which which which are are are influenced influenced influenced by by by expected expected inflation. 7. Transaction exposure is a subset of economic exposure. Economic exposure includes any form by which the firm’s ( ( value ) will be affected. 8. 8. The The The option option option writer writer writer is is is obligated obligated obligated to to to buy buy buy the the the underlying underlying underlying commodity commodity commodity at at at a a a stated stated stated price price price if if if a a a ( ( put option ) is exercised 9. There are three types of long-term international bonds. They are Global bonds , ( eurobonds ) and ( foreign bonds ). 10. 10. Any Any Any good good good secondary secondary secondary market market market for for for finance finance finance instruments instruments instruments must must must have have have an an an efficient efficient efficient clearing clearing clearing system. system. system. Most Most Eurobonds are cleared through either ( Euroclear ) or Cedel. Part Ⅲ :Questions and Calculations (60%)过程正确结果计算错误扣2分1. Assume the following information: A Bank B Bank Bid price of Canadian dollar $0.802 $0.796 Ask price of Canadian dollar $0.808 $0.800 Given Given this this this information, information, information, is is is locational locational locational arbitrage arbitrage arbitrage possible? possible? If If so, so, so, explain explain explain the the the steps steps steps involved involved involved in in in locational locational arbitrage, and compute the profit from this arbitrage if you had $1,000,000 to use. (5%) ANSWER: Y es! One could purchase New Zealand dollars at Y Bank for $.80 and sell them to X Bank for $.802. With $1 million available, 1.25 million New Zealand dollars could be purchased at Y Bank. These New Zealand dollars could then be sold to X Bank for $1,002,500, thereby generating a profit of $2,500. 2. Assume that the spot exchange rate of the British pound is $1.90. How will this spot rate adjust in two years if if the the the United United United Kingdom Kingdom Kingdom experiences experiences experiences an an an inflation inflation inflation rate rate rate of of of 7 7 7 percent percent percent per per per year year year while while while the the the United United United States States experiences an inflation rate of 2 percent per year?(10%) ANSWER: According to PPP , forward rate/spot=indexdom/indexfor the exchange rate of the pound will depreciate by 4.7 percent. Therefore, the spot rate would adjust to $1.90 × [1 + (–.047)] = $1.8107 3. 3. Assume Assume Assume that that that the spot the spot exchange exchange rate rate rate of the of the Singapore Singapore dollar dollar dollar is is is $0.70. $0.70. The The one-year one-year one-year interest interest interest rate rate rate is is is 11 11 percent in the United States and 7 percent in Singapore. What will the spot rate be in one year according to the IFE? (5%) (5%) ANSWER: according to the IFE,St+1/St=(1+Rh)/(1+Rf) $.70 × (1 + .04) = $0.728 4. Assume that XYZ Co. has net receivables of 100,000 Singapore dollars in 90 days. The spot rate of the S$ is $0.50, and the Singapore interest rate is 2% over 90 days. Suggest how the U.S. firm could implement a money market hedge. Be precise . (10%) ANSWER: The firm could borrow the amount of Singapore dollars so that the 100,000 Singapore dollars to be be received received received could could could be be be used used used to to to pay pay pay off off off the the the loan. loan. This This amounts amounts amounts to to to (100,000/1.02) (100,000/1.02) (100,000/1.02) = = = about about about S$98,039, which S$98,039, which could could be be be converted converted converted to to to about about about $49,020 $49,020 $49,020 and and and invested. invested. The The borrowing borrowing borrowing of of of Singapore Singapore Singapore dollars dollars dollars has has has offset offset offset the the transaction exposure due to the future receivables in Singapore dollars. 5. 5. A A U.S. company ordered ordered a a a Jaguar Jaguar Jaguar sedan. In sedan. In 6 6 months , months , it will pay pay ££30,000 30,000 for for for the the the car. car. car. It It worried worried that that pound ster1ing might rise sharply from the current rate($1.90). So, the company bought a 6 month pound call (supposed contract size = £35,000) with a strike price of $1.90 for a premium of 2.3 cents/£. (1)Is hedging in the options market better if the £ rose to $1.92 in 6 months? (2)what did the exchange rate have to be for the company to break even?（15%）Solution: (1)If the £ rose to $1.92 in 6 months, the U.S. company would rose to $1.92 in 6 months, the U.S. company would exercise the pound call option. The sum of the strike price and premium is $1.90 + $0.023 = $1.9230/£This is bigger than $1.92. So hedging in the options market is not better. (2) when we say the company can break even, we mean that hedging or not hedging doesn’t matter. And only when (strike price + premium )= the exchange rate , hedging or not doesn’t matter. So, the exchange rate =$1.923/£. 6. Discuss the advantages and disadvantages of fixed exchange rate system.(15%) textbook page50 答案以教材第50 页为准页为准P AR T Ⅳ: Diagram(10%) The strike price for a call is $1.67/£. The premium quoted at the Exchange is $0.0222 per British pound. Diagram the profit and loss potential, and the break-even price for this call option Solution: Following diagram shows the profit and loss potential, and the break-even price of this put option: P AR T Ⅴ:Additional Question Suppose Suppose that that that you you you are are are expecting expecting expecting revenues revenues revenues of of of Y Y 100,000 100,000 from from from Japan Japan Japan in in in one one one month. month. Currently, Currently, 1 1 1 month month forward contracts are trading at $1 = $105 Y en. Y ou have the following estimate of the Y en/$ exchange rate in one month. Price Probability 90 Y en/$ 4% 95 Y en/$ 25% 100 Y/$ 45% 105 Y en/$ 20% 110 Y en/$ 6% a) What position in forward contracts would you take to hedge your exchange risk? b) Calculate the expected value of the hedge. c) How could you replicate this hedge in the money market? Y ou are expecting revenues of Y100,000 in one month that you will need to covert to dollars. Y ou could hedge this in forward markets by taking long positions in US dollars (short positions in Japanese Y en). By locking in your price at $1 = Y105, your dollar revenues are guaranteed to be Y100,000/ 105 = $952 On the other hand, you can wait and use the spot markets. Exchange Rate Probability Revenue w/Hedge Revenue w/out Hedge V alue of Hedge 90 Y/$ 4% $1,111 $952 -$159 95 Y/$ 25% $1,052 $952 -$100 100 Y/$ 45% $1,000 $952 -$48 105 Y/$ 20% $952 $952 $0 110 Y/$ 6% $909 $952 $43 Expected V alue = (.02)(-159) + (.25)(-100) + (.45)(-48) + (.20)(0) + (.08)(43) = -$24 Y ou could replicate this hedge by using the following: a) Borrow in Japan b) Convert the Y en to dollars c) Invest the dollars in the US d) Pay back the loan when you receive the Y100,000 。

INTERNATIONAL FINANCEAssignment Problems (7) Name: Student#:I. Choose the correct answer for the following questions (only correct answer) (4 credits for each question, total credits 3 x 21 = 63)1. __________ are domestic currencies of one country on deposit in other countries.A. LIBORsB. EurobondsC. EurocurrenciesD. Euronotes2. Eurocredits are __________.A. bank loans to MNCs or others denominated in a currency other than that of a country where the bank is locatedB. typically variable rates which are tied to the LIBORC. usually for maturities of six months or lessD. all of the above are true3. A Japanese firm had chosen to deposit money in a German bank and have it denominated in Japanese yen, this is an example of a __________ deposit.A. EurobondB. EuronoteC. EuroyenD. foreign yen4. If a bond is issued by a domestic borrower, denominated by domestic currency, marketed and regulated by domestic monetary authorities, this is a __________.A. foreign bondB. EurobondC. domestic bondD. global bond5. A bond that trades in the Eurobond market as well as in one or more national bond markets is a __________.A. EurobondB. global bondC. foreign bondD. domestic bond6. __________ are issued in a domestic market by a foreign borrower, denominated in domestic currency, marketed to domestic residents, and regulated by domestic authorities.A. foreign bondsB. EurobondsC. domestic bondsD. Yankee bonds7. The Federal National Mortgage Association (Fannie Mae) issued a dollar-denominated bond with a 7.25% annual coupon and a maturity date in 2030 to non-U.S. investors in an external market. This bond is typically a __________.A. foreign bondB. EurobondC. domestic bondD. Yankee bond8. A euro-denominated loan is traded in Eurocurrency market. This loan is called __________.A. euro loanB. Euroeuro loanC. foreign euro loanD. none of the above9. Which of the following is true for a Eurocurrency market?A. A Eurocurrency market is not subject to any countries’ interest rate regulations.B. A Eurocurrency market does not need to meet any countries’ reserve requirements.C. A Eurocurrency market enjoys the privilege of free flow of capitalsD. All of the above must be true10. Citigroup in Los Angeles borrows a Canadian dollar-denominated deposit from Union Bank of Switzerland (UBS) in Geneva. This is a __________ deposit.A. EuronoteB. Euro-Swiss francC. Euro-Canadian dollarD. Eurobond11. Which of the following is NOT true about the original Eurodollar?A. The Soviet Union maintained dollar-denominated deposits in U.S. banks in the early 1950s. The Soviet government feared that U.S. might freeze those deposits because of the Cold War.B. The Soviet Union moved those dollars to banks in London.C. Since the dollars were in Europe, they were called “Eurodollars”.D. The Soviet Union worried that the U.S. would not convert the U.S. dollar into the gold as promised.12. There are many ways to classify financial markets. The category of money market and capital market is made according to __________.A. whether or not they are regulated by a single countryB. whether or not a financial intermediary stands between borrowers and saversC. the maturity of the financial assets and liabilitiesD. the participants of the markets13. A __________ is an agreement in which a borrower sells his T-bills to a bank and promises to buy them back later at an agreed price.A. commercial paperB. repoC. banker’s acceptanceD. negotiable certificate of deposit14. Accepted drafts refer to those time drafts issued by __________ and promised to pay by __________ at maturity.A. an investor; a bankB. a firm; a bankC. a bank; a firmD. a bank; an investor15. Which of the following did NOT contribute to the prosperity of the Eurodollar market?A. increased regulation of banking activities prevailed in 1960s in U.S.B. easy access to U.S. capital market by foreign investorsC. huge dollar income of OPEC countries in 1970sD. tremendous growth of international trade and investment16. The most frequent quoted rate on Eurocurrency market is the __________.A. U.S. T-bill rateB. Bank of England’s rateC. LIBORD. Federal funds’ rate17. Which of the following is NOT a feature of the Eurobond?A. Eurobonds are usually issued in bearer form.B. Eurobonds are “straight” bonds.C. Eurobonds usually have longer maturities than those on domestic markets.D. Eurobonds do not have withholding taxes.18. A Samurai bond is __________.A. a yen bond issued in the United States by an institution residing in JapanB. a yen bond issued in Japan by an institution residing outside of JapanC. a non-yen bond issued in Japan by an institution residing outside JapanD. none of the above are Samurai bond19. If IBM issues registered bond in New York Stock Exchange, the __________ needs to keep the records of the owners of its bonds.A. IBMB. New York Stock ExchangeC. IRS (Internal Revenue Service)D. U.S. Treasury Department20. If the interest rates decline, one can expect that __________.A. prices of the bonds will usually be upB. prices of the bonds will usually be down.C. prices of the bonds will usually remain the same.D. prices of the bonds may be up or may be down, because the price of bond has no relation with the interest rate.21. Eurobanks are __________.A. banks where Eurocurrencies are depositedB. major world banks that conduct a Eurocurrency business in addition to normal banking activitiesC. financial intermediaries that simultaneously bid for time deposits in and make loans in a currency other than that of the currency of where it is locatedD. all of the above are descriptions of a Eurobank.II. Problems (17 Credits)1. Which of the following are Eurodollars and which are not? (1 credit for each question, total credits 1 x 10 = 10)a. A U.S. dollar deposit owned by a German corporation and held in Barclay’s Bank in London.b. A U.S. dollar deposit owned by German corporation and held in Bank of America’s office in London.c. A U.S. dollar deposit owned by German corporation and held in Sumitomo Bank in Tokyo.d. A U.S. dollar deposit owned by German corporation and held in Citibank in New York.e. A U.S. dollar deposit owned by German corporation and held in the New York branch of Deutsche Bank.f. A U.S. dollar deposit owned by a U.S. resident and held in Overseas Banking Corporation in Singaporeg. A U.S. dollar deposit owned by German corporation and held in the Berlin branch of Deutsche Bank.h. A deposit of euros in Paribas Bank in Paris.i. A deposit of euros in Citibank in New York.j. A deposit of Australian dollars in Paribas Bank in Paris.2. AireAsia, headquartered in Kunming, China, needs US$5,000,000 for one year to finance working capital. The airline has two alternatives for borrowing: (7 credits) a. Borrow US$5,000,000 in Eurodollars in London at 7.250% per annum.b. Borrow HK$39,000,000 in China Hong Kong at 7.00% per annum, and exchange these Hong Kong dollars at the present exchange rate of HK$7.8/US$ for U.S. dollar. At what ending exchange rate would AireAsia be indifferent between borrowing U.S. dollars and borrowing Hong Kong dollars?III. True or False (2 credits for each question, total credits 2 x 10 = 20)1. Eurocurrency markets are outside the jurisdiction of any single regulatory authority.2. Banker’s acceptance means that the draft issuer promises to pay the draft when it is due.3. Domestic bonds are denominated in domestic currency by any borrower.4. Most Eurobonds are issued in registered form in order to track the holder of the bonds.5. The Eurocurrency market continues to thrive because it is a large international money market relatively free of government regulation and interference.6. One of the attractive features of a bond is that it is free of withholding tax.7. T-bill dealers purchases T-bills from an investor and later sells him at a higher price. This agreement is called a repo.8. Syndicated credit is a loan by several lenders led by a lead manager to provide funds for several borrowers.9. IET requires U.S. residents who hold foreign bonds should pay taxes to the federal government.10. Eurocurrencies are not the same as the euro developed for the common European currency.Answers to Assignment (7)I. Choice questions (63 credits)1. C2. D3. C4.C5. B6. A7. B8. B9. D 10. C 11. D 12. C13. B 14. B 15. B 16. C 17. C 18. B 19. A 20. A 21. DII. Problems (17 credits)1.a. yes b. yes c. yes d. no e. no f. yes g. yes h. no i. no j. no2. If borrowing dollar, obligation: 5,000,000 x (1 + 7.25%) = $5,362,500If borrowing HK dollar, obligation 39,000,000 x (1 + 7%) = HK$41,730,000Ending exchange rate x 5,362,500 = 41,730,000So, 41,730,000 / 5,362,500 = HK$7.7818/$III. True or False (20 credits)1. true2. false3. false4. false5. true6. false7. false8. false10. true9. true。

（完整word版）国际⾦融题库（英⽂版）.doc Multiple-choice test(only one is correct):1.Gresham’ s Law states thata)Bad money drives good money out of circulation.b)Good money drives bad money out of circulationc)If a country bases its currency on both gold and silver, at an official exchange rate, it will be themore valuable of the two metals that circulate.d)None of the above.2.Balance of paymentsa) is defined as the statistical record of a country’ s international transactions over a certain period oftime presented in the form of a double-entry bookkeepingb) provides detailed information concerning the demand and supply of a country’ s currencyc)can be used to evaluate the performance of a country in international economic competitiond)all of the above3.If the United States imports more than it exports, thena)The supply of dollars is likely to exceed the demand in the foreign exchange market, ceteris paribus.b)One can infer that the U.S. dollar would be under pressure to depreciate against other currenciesc)a) and b)d)None of the above4. The current spot exchange rate is $1.55/ and the three-￡month forward rate is $1.50/. You enter into￡ a short position on 1,000￡.At maturity, the spot exchange rate is $1.60/. How much have￡ you made or lost?a) Lost $100b) Made ￡100c) Lost $50d) Made $1505. The sensitivity of“ realized” domestic currency values of the firm denomi’scontractualated cash flowsin foreign currency to unexpected changes in the exchange rate is:a)Transaction exposureb)Translation exposurec)Economic exposured)None of the above6.Three days ago, you ente red into a futures contract to sell ?62,500 at $1.20 per ?. Over the past three days the contract has settled at $1.20, $1.22, and $1.24. How much have you made or lost?a)Lost $0.04 per ? or $2,500b)Made $0.04 per ? or $2,500c)Lost $0.06 per ? or $3,750d)None of the above7.A swap banka)Can act as a broker, bringing together counterparties to a swapb)Can act as a dealer, standing ready to buy and sell swapsc)Both a) and b)d)Only sometimes a) but never ever b)8.Suppose that the one-year interest rate is 5.0 percent in the United States, the spot exchange rate is$1.20/?, and the one -year forward exchange rate is $1.16/?. What must one -year interest rate be in the euro zone?a) 5.0%b) 1.09%c) 8.62%d) None of the above.a b$1.89 =1￡.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be“ eaten-ask”spread?bythe bida)$1,000,000b)$52,910.05c)$100,000d)$52,631.5810.Under the gold standard, international imbalances of payment will be corrected automatically underthea)Gresham Exchange Rate regimeb)European Monetary Systemc)Price-specie-flow mechanismd)Bretton Woods Accord11.With any hedgea)Your losses on one side should about equal your gains on the other sideb)You should try to make money on both sides of the transaction: that way you make money comingand goingc)You should spend at least as much time working the hedge as working the underlying deal itselfd)You should agree to anything your banker puts in front of your face12. Comparing“ forward” and“ futures” exchange contracts, we can say that:a)They are both“ marked-to-market” daily.b)Their major difference is in the way the underlying asset is priced for future purchase or sale:futures settle daily and forwards settle at maturity.c) A futures contract is negotiated by open outcry between floor brokers or traders and is traded on organized exchanges, while forward contract is tailor-made by an international bank for its clients and is traded OTC.d)b) and c)13.An “ option ” isa) a contract giving the seller (writer) the right, but not the obligation, to buy or sell a given quantityof an asset at a specified price at some time in the futureb) a contract giving the owner (buyer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the futurec)not a derivative, nor a contingent claim, securityd)unlike a futures or forward contract14.Economic exposure refers toa)the sensitivity of realized domestic currency values of the firm ’contractuals cash flows denominated in foreign currencies to unexpected exchange rate changesb)the extent to which the value of the firm would be affected by unanticipated changes in exchange ratec) the potential that the firm ’consolidated financial statement can be affected by changes in exchange ratesd)ex post and ex ante currency exposures15.Under a purely flexible exchange rate systema)Supply and demand set the exchange ratesb)Governments can set the exchange rate by buying or selling reservesc)Governments can set exchange rates with fiscal policyb) and c) are correct.。

Chapter 7:International Lending and Financial Crises1.Which of the following is NOT a form of long-term private lending and investing?a.Direct investment.b.Official capital flows.c.Loans.d.Portfolio investment.2.Official lending and investing is done by:a.Multinational enterprises.b.Private individuals when purchasing government bonds.ernments or multilateral institutions.mercial banks.3.Which of the following is a major benefit of international lending?a.It allows intertemporal trade to take place.b.It allows lenders and investors to diversify their investments more broadly.c.It allows countries to reduce taxes in the domestic market.d.Both (a) and (b) are correct.4.If international financial transactions are prohibited:a.Lenders in high-wealth countries will earn high rates of return.b.Borrowers in low-wealth countries will pay low interest rates.c.Lenders in high-wealth countries will earn low rates of return.d.Exchange rates will remain fixed.5.Borrowers in wealthy countries would gain if:a.All restrictions on capital flows between nations were removed.b.Capital flows between nations are prohibited.c.Factor-price-equalization takes place.ernments allowed free markets to determine interest rates.6.If all barriers to international financial transactions are removed, borrowers in__________ countries lose and lenders in __________ countries gain.a.High-wealth; low-wealthb.Low-wealth; high-wealthc.High-wealth; high-wealthd.Low-wealth; low-wealth7.International financial freedom:a.Maximizes world product.b.Hurts poor countries.c.Hurts wealthy countries.d.Helps all residents in both poor and wealthy countries.8.By restricting foreign lending, a country with market power can:a.Increase world production.b.Lower world interest rates.c.Bid up the rate that domestic lenders get after taxes.d.Bid up the rate that foreign borrowers have to pay.9.Which of the following did NOT contribute to the Asian Crisis?ernment supervision and regulation of banks were weak in Thailand andSouth Korea.b.Currencies in many of the affected countries were slightly overvalued.c.The Hong Kong dollar was allowed to depreciate.d.Expectations of declining exports led to large declines in Thai stock prices andreal estate prices.10.Which of the following did not escalate to a “full” crisis because the ban king systemin the country was sound and well regulated?a.The Asian crisis of 1997.b.The Mexican crisis of 1994-1995.c.The Russian crisis of 1998.d.The Brazilian crisis of 1999.11.Which of the following are likely to lead to international financial crises?a.Waves of overlending and overborrowing.b.Exogenous international shocks.c.Exchange rate risk and large international short-term lending.d.All of the above.12.The amount by which debt obligations exceed the present value of the payments thatwill be made to service the debts is called:a.Global contagion.b.Moral hazard.c.Debt overhang.d.Debt restructuring.13.Which of the following exists when a crisis hits one country and then spreads andaffects many other countries?a.Global contagion.b.Moral hazard.c.Debt overhang.d.Debt restructuring.14.Which of the following involves loan commitments to assist a country in gettingthrough a crisis?a.Global contagion.b.Moral hazard.c. A rescue package.d.Debt restructuring.15.Which of the following arises when the knowledge that IMF rescue packages arepossible leads to countries being less careful about their international lendingpractices?a.Global contagion.b.Moral hazard.c.Debt overhang.d.Debt restructuring.16.A moral hazard occurs when:ck of insurance leads the uninsured to be ultra-careful.b.High risk individuals are unable to find insurance.c.Insurers are unable to fully pay legitimate claims.d.Insurance leads the insured to be less careful.17.Which of the following is NOT a change that is part of debt restructuring?a.Debt overhang.b.Debt rescheduling.c.Debt reduction.d.All of the above are part of debt restructuring.18.Most external debt of developing countries is:a.Private debt owed by individual citizens.b.Rescheduled debt.c.Debt overhang.d.Sovereign debt.19.Which is NOT a potential cost faced by nations that choose not to repay their debts?a. A loss of future creditworthiness.b. A loss of foreign assets.c.Domestic inflation.d.Domestic recession.20.The kind of loans that are repaid within 10 years and shift the IMF to a role as adevelopment organization can be viewed as:a.Stand-by arrangements.b.Mission creep.c.Moral hazard.d.Tequila effect.。