John – Quiz Questions Finance – Multinational Corp 1# If U. inflation suddenly increased while European inflation stayed the same, there would be: an

John – Quiz Questions

Finance – Multinational Corp

1# If U.S. inflation suddenly increased while European inflation stayed the same, there would be:

		an increased U.S. demand for euros and an increased supply of euros for sale.
		a decreased U.S. demand for euros and an increased supply of euros for sale.
		a decreased U.S. demand for euros and a decreased supply of euros for sale.
		an increased U.S. demand for euros and a decreased supply of euros for sale.

2# 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 ____.

ncrease; appreciate

increase; depreciate

decrease; depreciate

decrease; appreciate

3# 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.

upward; downward

upward; upward

downward; upward

downward; downward

4#  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.

reduce; increase

increase; reduce

reduce; reduce

increase; increase

5# The forward rate is the exchange rate used for immediate exchange of currencies.

 True

 False

6 # ____ is not a factor that causes currency supply and demand schedules to change.

		Relative inflation rates
		Relative interest rates
		Relative income levels
		Expectations
		All of the above are factors that cause currency supply and demand schedules to c

7# 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.

fewer; depreciate

fewer; appreciate

more; depreciate

more; appreciate

8# ___ is not a factor that affects the bid/ask spread.

		Order costs
		Inventory costs
		Volume
		All of the above factors affect the bid/ask spread

9# Any event that increases the U.S. demand for euros should result in a(n) ____ in the value of the euro with respect to ____, other things being equal.

ncrease; U.S. dollar

increase; nondollar currencies

decrease; nondollar currencies

decrease; U.S. dollar

10# Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual interest rates apply: Currency: Dollars Lending Rate 7.10% Borrowing Rate 7.50%. Currency: New Zealand dollar (NZ$) Lending Rate 6.80% Borrowing Rate 7.25% 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)?

		$521,325.
		$500,520.
		$104,262.
		$413,419.
		$208,044.

 

Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"