Exam 11: Foreign Exchange

Table 11.4.Forward Exchange Rates -Refer to Table 11.4.On Wednesday,the 90-day forward franc was selling at a:

A depreciation of the dollar will have its most pronounced impact on imports if the demand for imports is:

Assume that Boeing anticipates receiving 1 billion francs in three months from its exports of jetliners to Switzerland.To avoid the risk of an appreciation of the dollar against the franc,Boeing could contract to sell its expected franc receipts in the forward market at today's forward rate.

The bid rate refers to the price at which a bank is willing to sell a unit of foreign currency; the offer rate is the price at which a bank is willing to buy a unit of foreign currency.

Suppose there occurs an increase in the Canadian demand for Japanese computers.This results in:

The offer rate

An increase in the trade-weighted value of the dollar indicates a dollar appreciation relative to the currencies of its major trading partners and a worsening of U.S.international competitiveness.

Concerning the spot market for foreign exchange transactions

Suppose that a Swiss watch that costs 400 francs in Switzerland costs $200 in the United States.The exchange rate between the franc and the dollar is:

The supply schedule of yen has a positive-sloping region which corresponds to the inelastic region on the Japanese demand schedule for foreign currency.

Table 11.1 gives the exchange rate quotations for the U.S.dollar and the British pound. Table 11.1.Foreign Exchange Quotations -Consider Table 11.1.Concerning the Tuesday quotations: compared to the cost of buying 100 pounds on the spot market,if 100 pounds were bought for future delivery in 180 days the dollar cost of the pounds would be:

If the dollar/franc exchange rate is 1 franc = $1.20 in New York and 1 franc = 1.22 in Zurich,arbitragers would find it profitable to purchase francs in Zurich and immediately resell them in New York.

Table 11.2.Supply and Demand of British Pounds -Refer to Table 11.2.At the exchange rate of $1.80 per pound,there is an ____ for pounds.This imbalance causes ____ in the price of the pound,which leads to ____ in the quantity of pounds supplied and ____ in the quantity of pounds demanded.

-In the table above,the equilibrium exchange rate is shown as

Suppose researchers discover that Swiss beer causes cancer when given in large amounts to British mice.This finding would likely result in a (an):

Futures contracts of the International Monetary Market have no set size,the contracts' dates of delivery are negotiable,and their costs are based on the bid-offer spread.

The major banks that trade foreign exchange generally do not deal directly with one another but instead use the services of foreign exchange brokers.

Figure 11.1 illustrates the supply and demand schedules for the Swiss franc.Assume that exchange rates are flexible. Figure 11.1.Supply and Demand Schedules of Francs -Refer to Figure 11.1.At the equilibrium exchange rate of ____ per franc,____ francs will be purchased at a total dollar cost of ____.

In the interbank market for foreign exchange,the ____ refers to the price that a bank is willing to pay for a unit of foreign currency.

Last month,the exchange rate between the U.S.dollar and the Japanese yen was 100 yen per dollar.The exchange rate is currently at 110 per dollar.We can say that a.the dollar appreciated against the yen and the yen depreciated against the dollar b.the dollar depreciated against the yen and the yen appreciated against the dollar c.the dollar and the yen both appreciated d.the dollar and the yen both depreciated