Question 1

The Russian Ruble crisis of 1998 was a complex combination of speculative pressures best explained by ________ to exchange rate determination.

Accepted Answer

A)  parity conditions approach 
B)  asset approach 
C)  balance of payments approach 
D)  PPP approach 
A)  parity conditions approach 
B)  asset approach 
C)  balance of payments approach 
D)  PPP approach B

Question 2

During the 1990s Argentina's exports became some of the least expensive in all of South America thanks in part to the pegging of the Argentine peso to the U.S. dollar.

Accepted Answer

A) True 
 B)False  False

Question 3

Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?

Accepted Answer

The asset market approach to exchange rate determination looks at relative interest rates and prospects for economic growth and profitability. This is consistent with the pricing of equity securities in that the price of a share of stock should reflect expectations about the timing, magnitude, and risk of future cash flows. In other words, expectations about what is to come is more important to the price of an asset, including currency prices, than what has occurred in the past.

Question 4

The Asian Currency crisis appeared to begin in

Accepted Answer

A)  South Korea. 
B)  Taiwan. 
C)  Thailand. 
D)  Japan. 
A)  South Korea. 
B)  Taiwan. 
C)  Thailand. 
D)  Japan.

Question 5

The authors refer to the practice of many Asian firms being largely controlled by families of groups related to the governing body of the country as

Accepted Answer

A)  illegal. 
B)  insider trading. 
C)  cronyism. 
D)  not in my backyard. 
A)  illegal. 
B)  insider trading. 
C)  cronyism. 
D)  not in my backyard.

Question 6

The Asian economic Crisis was

Accepted Answer

A)  direct result of hedge fund speculators. 
B)  routed in structural deficiencies of the fast growing Asian economies. 
C)  began when Thai government imposed capital controls. 
D)  typical for transitions of net importer to net exporter countries. 
A)  direct result of hedge fund speculators. 
B)  routed in structural deficiencies of the fast growing Asian economies. 
C)  began when Thai government imposed capital controls. 
D)  typical for transitions of net importer to net exporter countries.

Question 7

The authors did not identify which of the following as a root of the Asian currency crisis?

Accepted Answer

A)  the collapse of some Asian currencies. 
B)  the rate of inflation in the United States. 
C)  corporate socialism. 
D)  banking stability and management. 
A)  the collapse of some Asian currencies. 
B)  the rate of inflation in the United States. 
C)  corporate socialism. 
D)  banking stability and management.

Question 8

The important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are ________ theories rather than ________ theories.

Accepted Answer

A)  competing; complementary 
B)  competing; contemporary 
C)  complementary; contiguous 
D)  complementary; competing 
A)  competing; complementary 
B)  competing; contemporary 
C)  complementary; contiguous 
D)  complementary; competing

Question 9

The more efficient the foreign exchange market is, the more likely it is that exchange rate movements are random walks.

Accepted Answer

A) True 
 B)False

Question 10

Corporate socialism in the Asian markets could be contributed in part

Accepted Answer

A)  to the relatively short and stable post-WWII history of capitalism in their markets. 
B)  a belief by the owners of Asian companies that their governments would not allow them to fail. 
C)  the practice of lifetime employment at many corporations. 
D)  all of the above. 
A)  to the relatively short and stable post-WWII history of capitalism in their markets. 
B)  a belief by the owners of Asian companies that their governments would not allow them to fail. 
C)  the practice of lifetime employment at many corporations. 
D)  all of the above.

Question 11

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

Accepted Answer

A)  the Asian Crisis 
B)  the Russian Crisis 
C)  the Argentine Crisis 
D)  All of the above were currency crises in the 1990s and 2000s. 
A)  the Asian Crisis 
B)  the Russian Crisis 
C)  the Argentine Crisis 
D)  All of the above were currency crises in the 1990s and 2000s.

Question 12

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate. i.e., they are linked AND mutually determined.

Accepted Answer

A) True 
 B)False

Question 13

When the Russian Ruble reached the limits of the bands about its managed float targets (Ru5.70/$ to Ru6.35/$) in 1997, the Russian government would intervene in the markets to stabilize the Ruble. If the exchange rate approached Ru5.70/$ the government would ________ Rubles using foreign exchange and gold, or if the exchange rate approached Ru6.35/$ they would ________ Rubles.

Accepted Answer

A)  buy; sell 
B)  sell; buy 
C)  buy; buy 
D)  sell; sell 
A)  buy; sell 
B)  sell; buy 
C)  buy; buy 
D)  sell; sell

Question 14

The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.

Accepted Answer

A) True 
 B)False

Question 15

The Central Bank practice of the active buying and selling of the domestic currency against foreign currencies is the process of

Accepted Answer

A)  direct intervention. 
B)  indirect intervention. 
C)  coordinated intervention. 
D)  capital controls. 
A)  direct intervention. 
B)  indirect intervention. 
C)  coordinated intervention. 
D)  capital controls.

Question 16

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

Accepted Answer

A)  infrastructure weaknesses 
B)  speculation on the part of market participants 
C)  the sharp reduction of cross-border foreign direct investment 
D)  All of the above contributed to the emerging markets exchange rate collapse of the 1990s. 
A)  infrastructure weaknesses 
B)  speculation on the part of market participants 
C)  the sharp reduction of cross-border foreign direct investment 
D)  All of the above contributed to the emerging markets exchange rate collapse of the 1990s.

Question 17

It is safe to say that the Russian transition from a communist economy to a capitalist economy has been smooth for the Russian people.

Accepted Answer

A) True 
 B)False

Question 18

When country Central banks work together to intervene and push a particular currency's value in
a desired direction, this is known as coordinated intervention.

Accepted Answer

A) True 
 B)False

Question 19

The asset market approach to exchange rate determination

Accepted Answer

A)  suggests that investors will hold monetary claims if the rates are low. 
B)  suggests that investors will hold monetary claims if they feel optimistic about country's outlook for growth and profitability. 
C)  states that equilibrium exchange rate is found when the net inflow (outflow) from current account matches the net outflow (inflow) from financial account. 
D)  discards the importance of corporate governance to cross-border portfolio investors. 
A)  suggests that investors will hold monetary claims if the rates are low. 
B)  suggests that investors will hold monetary claims if they feel optimistic about country's outlook for growth and profitability. 
C)  states that equilibrium exchange rate is found when the net inflow (outflow) from current account matches the net outflow (inflow) from financial account. 
D)  discards the importance of corporate governance to cross-border portfolio investors.

Question 20

The authors compromise as to the key factors for exchange rate determination. They conclude that ________ are important in the short run, but that ________ determines long run exchange rates.

Accepted Answer

A)  Fisher effect; PPP 
B)  asset markets, interest rates, and expectations; PPP 
C)  PPP; Fisher effect 
D)  Fisher effect; asset prices, interest rates, and expectations 
A)  Fisher effect; PPP 
B)  asset markets, interest rates, and expectations; PPP 
C)  PPP; Fisher effect 
D)  Fisher effect; asset prices, interest rates, and expectations

The Russian Ruble crisis of 1998 was a complex combination of speculative pressures best explained by ________ to exchange rate determination.

During the 1990s Argentina's exports became some of the least expensive in all of South America thanks in part to the pegging of the Argentine peso to the U.S. dollar.

Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?

The Asian Currency crisis appeared to begin in

The authors refer to the practice of many Asian firms being largely controlled by families of groups related to the governing body of the country as

The Asian economic Crisis was

The authors did not identify which of the following as a root of the Asian currency crisis?

The important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are theories rather than theories.

The more efficient the foreign exchange market is, the more likely it is that exchange rate movements are random walks.

Corporate socialism in the Asian markets could be contributed in part

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate. i.e., they are linked AND mutually determined.

The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.

The Central Bank practice of the active buying and selling of the domestic currency against foreign currencies is the process of

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

It is safe to say that the Russian transition from a communist economy to a capitalist economy has been smooth for the Russian people.

When country Central banks work together to intervene and push a particular currency's value in a desired direction, this is known as coordinated intervention.

The asset market approach to exchange rate determination

The authors compromise as to the key factors for exchange rate determination. They conclude that are important in the short run, but that determines long run exchange rates.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 8: Foreign Exchange Rate Determination

The Russian Ruble crisis of 1998 was a complex combination of speculative pressures best explained by ________ to exchange rate determination.

During the 1990s Argentina's exports became some of the least expensive in all of South America thanks in part to the pegging of the Argentine peso to the U.S. dollar.

Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?

The Asian Currency crisis appeared to begin in

The authors refer to the practice of many Asian firms being largely controlled by families of groups related to the governing body of the country as

The Asian economic Crisis was

The authors did not identify which of the following as a root of the Asian currency crisis?

The important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are ________ theories rather than ________ theories.

The more efficient the foreign exchange market is, the more likely it is that exchange rate movements are random walks.

Corporate socialism in the Asian markets could be contributed in part

Which of the following was NOT an international currency crisis in the 1990s and early 2000s?

It is safe to say that most determinants of the spot exchange rate are also affected by changes in the spot rate. i.e., they are linked AND mutually determined.

The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.

The Central Bank practice of the active buying and selling of the domestic currency against foreign currencies is the process of

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

It is safe to say that the Russian transition from a communist economy to a capitalist economy has been smooth for the Russian people.

When country Central banks work together to intervene and push a particular currency's value in a desired direction, this is known as coordinated intervention.

The asset market approach to exchange rate determination

The authors compromise as to the key factors for exchange rate determination. They conclude that ________ are important in the short run, but that ________ determines long run exchange rates.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

The important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are theories rather than theories.

The authors compromise as to the key factors for exchange rate determination. They conclude that are important in the short run, but that determines long run exchange rates.