Question 1

The ________ approach states that the exchange rate is determined by the supply and demand for national currency stocks, as well as the expected future levels and rates of growth of monetary stock

Accepted Answer

A)  balance of payments 
B)  monetary 
C)  asset market 
D)  law of one price

Question 2

Technical analysis of exchange rates was developed in part due to the forecasting inadequacies of fundamental exchange rate theories.

Accepted Answer

A) True 
 B)False

Question 3

A country's Central Bank may have the policy to

Accepted Answer

A)  fight inflation. 
B)  fight slow economic growth. 
C)  either A or B 
D)  none of the above

Question 4

The authors claim that theoretical and empirical studies appear to show that fundamentals do apply to the long-term for foreign exchange.

Accepted Answer

A) True 
 B)False

Question 5

Short-term forecasts are typically motivated by a desire to hedge a receivable, payable, or dividend for perhaps a period of three months.

Accepted Answer

A) True 
 B)False

Question 6

Describe the Russian ruble collapse through August of 1998.

Accepted Answer

The answer of Describe the Russian ruble collapse through August...

Question 7

A major U.S. multinational firm has forecast the euro/dollar rate to be euro1.10/$ one year hence, and an exchange rate of $1.40 for the British pound (£) in the same time period. What does this imply the company's expected rate for the euro per pound to be in one year?

Accepted Answer

A)  euro 1.40/£ 
B)  £1.40/euro 
C)  £1.54/euro 
D)  euro 1.54/£

Question 8

The Russian crisis of 1998

Accepted Answer

A)  occurred because of the inability of the Russian Government to lower the taxes. 
B)  ended when President Yeltsin announced there will be no devaluation. 
C)  was a culmination of continuing deterioration of economic conditions. 
D)  was a result of a sharp price increase of Russian export commodities.

Question 9

In 1991 the Argentine peso was fixed to the value of the U.S. dollar on a one-to-one basis.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a driver in the determination of foreign exchange rates under the Asset Market Approach to forecasting?

Accepted Answer

A)  relative inflation rates 
B)  relative real interest rates 
C)  forward exchange rates 
D)  the current account balance

Question 11

The ________ is the Argentine currency unit.

Accepted Answer

A)  peso 
B)  dollar 
C)  real 
D)  peseta

Question 12

Short-term foreign exchange forecasts are often motivated by such activities as ________ whereas long-term forecasts are more likely motivated by ________.

Accepted Answer

A)  long-term investment; long-term capital appreciation 
B)  long-term capital appreciation; desire to hedge a receivable 
C)  the desire to hedge a payable; the desire for long-term investment 
D)  the desire for long-term investment; the desire to hedge a payable

Question 13

The authors claim that the theories of international currency values hold better for less liquid and poorly capitalized markets.

Accepted Answer

A) True 
 B)False

Question 14

Argentina's economic performance in the 1990s while their peso was pegged to the U.S. dollar can be characterized as ________ rates of inflation and ________ rates of unemployment.

Accepted Answer

A)  high; high 
B)  low; low 
C)  low; high 
D)  high; low

Question 15

The stability of the Russian Ruble in the 1990s (until the Russian debt crisis) was considered an observable success of the Yeltsin administration.

Accepted Answer

A) True 
 B)False

Question 16

The Asian currency crisis was primarily a

Accepted Answer

A)  parity conditions problem. 
B)  an asset markets problem. 
C)  balance of payments problem. 
D)  PPP problem.

Question 17

________, traditionally referred to as chartists, focus on price and volume data to determine past trends that are expected to continue into the future.

Accepted Answer

A)  Mappists 
B)  Trappist Monks 
C)  Filibusters 
D)  Technical analysts

Question 18

The fall in the value of the domestic currency will sharply reduce the purchasing power of its people.

Accepted Answer

A) True 
 B)False

Question 19

The more INEFFICIENT the market is, the more likely it is that exchange rates are "random walks," with past price behavior providing no clues to the future.

Accepted Answer

A) True 
 B)False

Question 20

Prior to July 2, 1997, the Thai government

Accepted Answer

A)  allowed the Thai Bhat to float against major currencies. 
B)  fixed the Bhat's value against the Korean won only. 
C)  fixed the Bhat's value against major currencies especially the U.S. dollar. 
D)  None of the above.

Exam 8: Foreign Exchange Rate Determination

The ________ approach states that the exchange rate is determined by the supply and demand for national currency stocks, as well as the expected future levels and rates of growth of monetary stock

Technical analysis of exchange rates was developed in part due to the forecasting inadequacies of fundamental exchange rate theories.

A country's Central Bank may have the policy to

The authors claim that theoretical and empirical studies appear to show that fundamentals do apply to the long-term for foreign exchange.

Short-term forecasts are typically motivated by a desire to hedge a receivable, payable, or dividend for perhaps a period of three months.

Describe the Russian ruble collapse through August of 1998.

A major U.S. multinational firm has forecast the euro/dollar rate to be euro1.10/$ one year hence, and an exchange rate of $1.40 for the British pound (£) in the same time period. What does this imply the company's expected rate for the euro per pound to be in one year?

The Russian crisis of 1998

In 1991 the Argentine peso was fixed to the value of the U.S. dollar on a one-to-one basis.

Which of the following is a driver in the determination of foreign exchange rates under the Asset Market Approach to forecasting?

The ________ is the Argentine currency unit.

Short-term foreign exchange forecasts are often motivated by such activities as whereas long-term forecasts are more likely motivated by .

The authors claim that the theories of international currency values hold better for less liquid and poorly capitalized markets.

Argentina's economic performance in the 1990s while their peso was pegged to the U.S. dollar can be characterized as rates of inflation and rates of unemployment.

The stability of the Russian Ruble in the 1990s (until the Russian debt crisis) was considered an observable success of the Yeltsin administration.

The Asian currency crisis was primarily a

________, traditionally referred to as chartists, focus on price and volume data to determine past trends that are expected to continue into the future.

The fall in the value of the domestic currency will sharply reduce the purchasing power of its people.

The more INEFFICIENT the market is, the more likely it is that exchange rates are "random walks," with past price behavior providing no clues to the future.

Prior to July 2, 1997, the Thai government