1) political instability and currency conversion are reasons why ________ is more
complicated for foreign subsidiaries than domestic ones.
a.currency lagging
b.capital budgeting
c.patterning cash flows
d.forward financing
2) which of the following would not be considered a source of systematic risk?
a.a hostile takeover of a firm
b.a rise in inflation
c.a fall in gdp
d.a panic on wall street
3) the ________ represents all the points where money supplied is equal to money
demanded.
a.is curve
b.lm curve
c.bp curve
d.none of the above
4) the equivalence of the exchange rate to the ratio of price levels between two
countries is referred to as the:
a.absolute ppp
b.relative ppp
c.interest rate parity
d.none of the above
5) with floating exchange rates, a country can use _______ to alter domestic income.
a.fiscal policy
b.monetary policy
c.currency devaluations
d.currency appreciation
6) assume there is a reduction in u.s. output. then under maer there will be a(n):
a.increase in domestic money supply
b.decrease in domestic money supply
c.increase in the exchange rate (dollar/foreign currency)
d.decrease in the exchange rate (dollar/foreign currency)
7) the six-month interest rate in the united states is 10 percent; in mexico it is 16
percent. the current spot rate (dollars per peso) is $0.20. the annualized six-month
forward rate equal to ______ and peso is selling at a forward _______.
a.0.188, discount
b.0.212, premium
c.0.194, discount
d.0.206, premium
8) if a country was host to several eurobanks, then it may be reasonable to find:
a.strict quota enforcement on all capital leaving for the eurozone
b.one set of rules for banking in domestic currency and a different one for foreign
currency
c.interest rate controls on deposits, but not loans
d.standards on required reserves for all banks in the country
9) in 2010, which currency dominated the eurocurrency market?
a.eurodollar
b.euroeuro
c.euroyen
d.eurosterling
10) assume that you are considering a portfolio of two assets, a and b, with 40%
invested in asset a and invested 60% in asset b. assume also that the assets have the
following statistics:
a.variance = 0.0480
b.variance = 0.0632
c.variance = 0.0656
d.variance = 0.0728
11) a change in the riskiness of countrys assets shifts the:
a.is curve
b.lm curve
c.bp curve
d.none of the above