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Finance 534 week 11 quiz 10
Question
1
Suppose
DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese
customer at a price of 143.5 million yen, when the exchange rate was 140 yen
per dollar. In order to close the sale,
DeGraw agreed to make the bill payable in yen, thus agreeing to take some
exchange rate risk for the transaction.
The terms were net 6 months. If
the yen fell against the dollar such that one dollar would buy 154.4 yen when
the invoice was paid, what dollar amount would DeGraw actually receive after it
exchanged yen for U.S. dollars?
Question 2
Suppose
144 yen could be purchased in the foreign exchange market for one U.S. dollar
today. If the yen depreciates by 8.0%
tomorrow, how many yen could one U.S. dollar buy tomorrow?
Question 3
Suppose
one British pound can purchase 1.82 U.S. dollars today in the foreign exchange
market, and currency forecasters predict that the U.S. dollar will depreciate
by 12.0% against the pound over the next 30 days. How many dollars will a pound
buy in 30 days?
Answer
Question 4
Suppose
6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of
$9,708.74, with a maturity value of $10,000.
The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is
1.324 Swiss francs per dollar. What is
the annualized rate of return to the Swiss investor?
•
Question 5
A
box of candy costs 28.80 Swiss francs in Switzerland and $20 in the United
States. Assuming that purchasing power
parity (PPP) holds, what is the current exchange rate?
•
Question 6
Suppose
one year ago, Hein Company had inventory in Britain valued at 240,000
pounds. The exchange rate for dollars to
pounds was 1£ = 2 U.S. dollars. This
year the exchange rate is 1£ = 1.82 U.S. dollars. The inventory in Britain is still valued at
240,000 pounds. What is the gain or loss
in inventory value in U.S. dollars as a result of the change in exchange rates?
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Question 7
Which
of the following is NOT a reason why companies move into international
operations?
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Question 8
If
one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you
purchase for one Canadian dollar?
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Question 9
If
the inflation rate in the United States is greater than the inflation rate in
Britain, other things held constant, the British pound will
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Question 10
In
1985, a given Japanese imported automobile sold for 1,476,000 yen, or
$8,200. If the car still sold for the
same amount of yen today but the current exchange rate is 144 yen per dollar,
what would the car be selling for today in U.S. dollars?
•
Question 11
Suppose
the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and
the exchange rate between the U.S. dollar and the euro is $1.00 = 1.64
euros. What is the cross-rate of Swiss
francs to euros?
•
Question 12
Suppose
hockey skates sell in Canada for 105 Canadian dollars, and 1 Canadian dollar
equals 0.71 U.S. dollars. If purchasing
power parity (PPP) holds, what is the price of hockey skates in the United
States?
•
Question 13
If
one Swiss franc can purchase $0.71 U.S. dollars, how many Swiss francs can one
U.S. dollar buy?
•
Question 14
2 out of 2 points
Suppose
90-day investments in Britain have a 6% annualized return and a 1.5% quarterly
(90-day) return. In the U.S., 90-day
investments of similar risk have a 4% annualized return and a 1% quarterly
(90-day) return. In the 90-day forward
market, 1 British pound equals $1.65. If
interest rate parity holds, what is the spot exchange rate?
•
Question 15
Which
of the following statements is NOT CORRECT?
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