Exam 13: Introduction to Exchange Rates and the Foreign Exchange Market

If 1 euro is priced at $1.25 and if 1 euro will also buy 88 Japanese yen (€1 = ¥88), in equilibrium, with no arbitrage opportunities, how much is the cross rate between the yen and the dollar (yen-dollar rate)?

In general, the percentage of appreciation of one nation's currency is equal to:

If the dollar falls by 20% against the euro and rises by 10% against the yen, which of the following values for European and Japanese trade with the United States are consistent with a 10% increase in the effective exchange rate of the United States?

When interpreting the meaning of an exchange rate, the first step is to always:

A large and sudden currency depreciation is widely known as:

If the U.S. interest rate is 4% per year and the U.K. interest rate is 9% per year, then:

To calculate the multilateral effective exchange rate for a nation for each trading partner:

In equilibrium, the interest parity condition requires that:

In which of the following categories would the sale of foreign currency with a forward repurchase agreement be included?

What is a currency band?

Suppose 80% of U.S. trade is with England and the rest is with Japan. If the dollar rises by 10% against the pound and rises by 20% against the yen, what is the percentage change in the effective exchange rate of the United States?

Which European nation has kept its own currency and maintains a fixed value against the euro?

Assume your company has a contract to purchase 100,000 computers from a Korean company. The payment is due on receipt of the shipment and must be delivered in Korea on December 31, 2015. In July 2015, when you are arranging the contract, the computers are priced at 500,000 won each. The spot rate in July 2015 is $1 in exchange for 1,250 won. I. Calculate the U.S. dollar price (in July 2015) of one unit of Korean currency. II. What is the total price of the computers in dollars? III. What is the total price of the computers in won? IV. What would you advise your firm to do to avoid a loss on the deal if the Korean won costs 10% more compared with the U.S. dollar when payment is due in December?

Why does a government impose controls or restrictions on converting domestic currency to foreign currency (capital controls)?

Dollarization refers to:

The difference between the spot contract and a forward contract is that:

Some nations such as Ecuador chose dollarization because:

When a government sets limits or puts any restrictions on the international flow of currency or payments, these measures are called:

(Table: Exchange Rates Across Currencies) Based on the information provided, one Canadian dollar is equal to _____ Mexican pesos and _____ Indian rupees.

In equilibrium, if both uncovered and covered interest parity hold, what condition should exist?