International Finance
FIN 4604 SAMPLE PROBLEMS I
PART A
1. Suppose that the Brazilian real depreciates by 40% against the U.S. dollar. By how much will the dollar appreciate against the real?
a. 67%
b. 40%
c. 32%
d. 28%
e. 75%
2. If the dollar appreciates by 300% against the Turkish Lira, obtain the Lira’s depreciation against the dollar.
a. -67%
b. –40%
c. –32%
d. -28%
e. –75%
3. The asset market view of exchange rate determination says that the spot rate:
a. Should follow a random walk.
b. Is affected primarily by a nation’s long-run economic prospects.
c. Both a and b.
d. Should be strongly affected by a nation’s balance of trade. e. Should be strongly affected by current relative income, relative prices, and relative interest rates.
4. The current international flow model of exchange rate determination says that the spot rate should:
a. Follow a random walk.
b. Be affected primarily by a nation’s long-run economic prospects.
c. Be strongly affected by a nation’s balance of trade.
d. Be strongly affected by current relative incomes, relative prices, and relative interest rates.
e. Both c and d. 5. Governments intervene in the foreign exchange markets for all of the following reasons except to:
a. Earn foreign exchange.
b. Reduce economic uncertainty.
c. Improve the nation’s export competitiveness.
d. Reduce inflation.
e. Boost or lower the value of domestic currency. 6. In order to boost the value of the euro relative to the dollar the FED should:
a. Sell dollars for euros and the European CB should buy euros with Dollars.
b. Sell dollars for euros and the European CB should buy dollars with euros.
c. Sell euros for dollars and the European CB should sell dollars for euros.
d. Sell euros for dollars and the European CB should buy euros with dollars.
e. Sell
PART A
1. Suppose that the Brazilian real depreciates by 40% against the U.S. dollar. By how much will the dollar appreciate against the real?
a. 67%
b. 40%
c. 32%
d. 28%
e. 75%
2. If the dollar appreciates by 300% against the Turkish Lira, obtain the Lira’s depreciation against the dollar.
a. -67%
b. –40%
c. –32%
d. -28%
e. –75%
3. The asset market view of exchange rate determination says that the spot rate:
a. Should follow a random walk.
b. Is affected primarily by a nation’s long-run economic prospects.
c. Both a and b.
d. Should be strongly affected by a nation’s balance of trade. e. Should be strongly affected by current relative income, relative prices, and relative interest rates.
4. The current international flow model of exchange rate determination says that the spot rate should:
a. Follow a random walk.
b. Be affected primarily by a nation’s long-run economic prospects.
c. Be strongly affected by a nation’s balance of trade.
d. Be strongly affected by current relative incomes, relative prices, and relative interest rates.
e. Both c and d. 5. Governments intervene in the foreign exchange markets for all of the following reasons except to:
a. Earn foreign exchange.
b. Reduce economic uncertainty.
c. Improve the nation’s export competitiveness.
d. Reduce inflation.
e. Boost or lower the value of domestic currency. 6. In order to boost the value of the euro relative to the dollar the FED should:
a. Sell dollars for euros and the European CB should buy euros with Dollars.
b. Sell dollars for euros and the European CB should buy dollars with euros.
c. Sell euros for dollars and the European CB should sell dollars for euros.
d. Sell euros for dollars and the European CB should buy euros with dollars.
e. Sell