1) assume that citibank quotes you a buy rate of $1.95 per pound and a sell rate of $1.98
per pound. how much will you pay in dollars, if you buy 1,000 pound from citibank?
a.$505.05
b.$512.82
c.$1,950
d.$1,980
2) an american firm has just bought merchandise from a british firm for £50,000 on
terms of 90-day payment. this firm has purchased a 3-month call option on 50,000
pounds at a strike price of $1.7 per pound and a premium cost of $0.02 per pound. on
the day the option matures, the spot exchange rate is $1.8 per pound. what will be the
value of the pound payable in u.s. dollars, if the u.s. firm exercises the option?
a.$91,000
b.$86,000
c.$85,000
d.$81,000
3) assume that the u.s. demand for imports is perfectly inelastic. if the dollar is devalued
then the total import value (in dollars) will:
a.increase
b.decrease
c.stay the same
d.uncertain
4) both ________ have included anticorruption policies as part of their lending process
to countries.
a.nato and the un
b.the un and the world bank
c.the imf and the world bank
d.the imf and unesco
5) investors would be willing to hold foreign investments even if the foreign
investments yield lower expected returns than the domestic investments, if:
a.there is a negative risk premium on domestic currency
b.the foreign exchange market is efficient
c.the foreign currency carries no risk premium
d.there is a positive risk premium on domestic currency
6) consider the following scenario. the swiss franc is fixed to the u.s. dollar. market
pressures lead to a move away from the peg. which of the following can be used to
restore the previous peg?
a.the swiss central bank can use a commodity (such as gold) to back the previous peg
b.the swiss government can lower domestic prices to offset import pressures
c.allow the exchange by the market and in the long run the peg will be restored
d.the swiss central bank can purchase or sell u.s. dollars
7) which of the following statements is the most accurate?
a.absolute ppp does not imply relative ppp
b.relative ppp implies absolute ppp
c.absolute ppp implies relative ppp
d.there is no relationship between absolute and relative ppp
8) which of the following is not an objective of international cash management by
mncs?
a.to increase the firms liquidity
b.to increase the firms returns on investment
c.to ensure that all subsidiaries have the same pattern of cash flows
d.to reduce foreign exchange risk
9) which of the following factors shifts the lm curve to the left?
a. an increase in money supply
b. an decrease in money supply
c. an increase in government spending
d. a depreciation of domestic currency
10) based on this table of correlation coefficients of real dollar returns of assets in
different countries, which two countries appear to provide the greatest amount of
benefit from diversification?
a.the u.s. and japan
b.china and japan
c.japan and brazil
d.china and brazil