Exam 22: Exchange Rates and Financial Links Between Countries

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.Figure 22.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Refer to Figure 22.1. Assume that the initial equilibrium exchange rate is 8 Mexican pesos per Brazilian real and 150 brazilian reals are traded in the market. Suppose, there is an increase in the Brazilian demand for Mexican exports. Other things remaining equal, which of the following can be concluded?

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -An Australian investor buys a U.S. Treasury bond that has a price of $10,000, pays 5 percent interest, and matures in a year. Between the purchase date and the maturity date, the exchange rate changes from $1 = AUD 5.0 to $1= AUD 5.2. What will be the Australian investor's rate of return from the U.S. bond?

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -A country on a gold standard was able to maintain people's confidence in the value of its currency by:

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.Figure 22.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Refer to Figure 22.1. If the initial equilibrium exchange rate is 6 pesos per real, then other things equal, a decrease in the number of Brazilian tourists to Mexico would:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Assume that a one-year Malaysian bond yields 10 percent interest and that the dollar return on maturity is 5 percent. If the exchange rate at maturity is $1 = MYR 4.00 (Malaysian ringgit), what was the exchange rate at the time the bond was purchased?

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Appreciation of the dollar means that now it takes more dollars to buy one unit of foreign currency.

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Suppose you are a U.S. exporter expecting to receive a payment of NZD1,000 (New Zealand dollars) in 12 months. The annual interest rate on NZD deposits is 5 percent, and the annual interest rate on dollar deposits is 9 percent. If the present exchange rate is $0.50 per NZD and interest rate parity holds, how many dollars do you expect to receive at the maturity date of the export contract?

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -The World Bank obtains the funds it lends by:

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.Figure 22.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Carlos Silva, a Colombian singer, goes on tour to the United States for one month, following high American demand for his live shows. Assuming that all the show's expenses are paid by the U.S. promoters, other things equal, the U.S. tour will bring about:

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.Figure 22.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Refer to Figure 22.1. Assume that the initial equilibrium exchange rate is 6 pesos per real. Other things remaining equal, an increase in the number of Brazilian tourists to Mexico is most likely to:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Suppose a Canadian investor buys a one-year U.S. government bond that pays 7 percent interest. If the U.S. dollar appreciates 4 percent against the Canadian dollar during the year, what must be the yield on a comparable Canadian government bond for interest rate parity to hold?

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -The Bretton Woods System of exchange rates was established:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -If the euro per dollar exchange rate changes from $1 = 0.8 euros to $1 = 0.7 euros, it implies that the euro has depreciated against the dollar.

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -An appreciation of the Norwegian kroner in relation to the U.S. dollar is most likely to cause:

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -Foreign exchange market intervention is most effective when:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -A downward-sloping demand curve for Korean won in terms of Canadian dollars indicates that the higher the dollar price of Korean won, the more won will be demanded.

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime.Figure 22.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -In 1991, the French mineral water Perrier was temporarily taken off the market in the United States because of suspected impurities. Other things equal, this action brought about:

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.Figure 21.4 -If $1 was equivalent to 120 Japanese yen in 2008 and 125 Japanese yen in 2010, it implies in 2010, there was:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Assume an Australian importer expects to pay 16,000 Australian dollars (AUD) for $8,000 worth of U.S. goods, but on the shipment date 30 days later, the same volume of U.S. goods costs the Australian importer only 10,000 Australian dollars. This means that between the contract date and the payment date, the exchange rate has changed:

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2 -Suppose a U.S. citizen purchases a one-year Norwegian bond that yields 10 percent interest. Between the purchase date and the maturity date, the exchange rate changes from to How much was initially invested in the bond if the dollar value of the proceeds at maturity is $3,500? (roundoff up to the nearest whole number)