国际金融英文版试题chapter4.doc

INTERNATIONAL FINANCEAssignment Problems (4) Name: Student#: I. Choose the correct answer for the following questions (only correct answer) (3.5 credits for each question, total credits 3.5 x 20 = 70)1. The exchange rate system refers to _.A. a countrys internal economic policies such as employment, inflation and interest rate levelsB. a countrys monetary policiesC. a countrys fiscal policesD. a countrys choice as to which exchange rate regime such as fixed or floating or between to follow2. The international monetary system is broadly defined as _.A. the set of conventions, rules, procedures and institutions that govern the conduct of financial relations between nationsB. the set of rules to manage every countrys central banksC. the set of rules to solve trade disputes between countriesD. the set of rules to develop world economy3. Under the gold standard, the exchange rate was fixed because _.A. each currency unit could be converted to a weight of goldB. the gold could be exported and imported with no restrictionsC. gold coins could be freely mintedD. all of the above4. When the gold standard prevailed, the United States fixed the price of gold at $20.646 per ounce and the Britain fixed the price at 4.252 per ounce. Now suppose the fees for transporting one ounce of gold were approximately $0.03 per sterling of gold. Then the exchange rate of dollar versus sterling would fluctuate between _.A. $4.8856/ and $4.8256/B. $4.9042/ and $4.8070/C. $4.9770/ and $4.7463/D. We dont know, because it depends on the supply and demand forces in the foreign exchange market5. Under the gold standard, the par value of the exchange rate was determined by _ .A. gold parity of the relative currenciesB. interest rate of the relative currenciesC. demand and supply forces in the foreign exchange marketD. inflation rate of the relative currencies6. Which of the following is true regarding the collapse of the gold standard system?A. The World War I had many European countries suspend convertibility of their currencies into gold.B. The political costs of maintaining the overvalued pound were so great in the United Kingdom.C. Nations facing 1929 1933 worldwide recession decided to pursue objectives such as higher employment rates and real growth rates, rather than to maintain the exchange value of their currencies.D. All of the above are the reasons that the gold standard finally collapsed.7. The U.S. dollar was designated as the international currency in international settlements under the Bretton Woods system. The dollar was accepted by the rest of the world because _.A. it could be used to purchase U.S. goods and servicesB. it could be converted to gold at a price of $35/ounceC. the U.S. was the only super power at that timeD. the IMF forced the rest of the world to use dollar to settle international debts8. The principal function of the International Monetary Fund (IMF) was originally to _.A. act as a supranational regulatory agency for all countries central banksB. lend to member nations experiencing a shortage of foreign exchange reservesC. finance postwar reconstruction, particularly in Europe and JapanD. reduce trade barriers and settle disputes among countries relating to currency negotiations9. Before 1971 the exchange rates were pretty stable because of the Bretton Woods Agreement. So if the par value of the Japanese Yen and U.S. dollar was set by ¥100/$, the upper limit and lower limit that this exchange rate was allowed to fluctuate freely would be _ .A. ¥ 101/$ and ¥ 99/$B. ¥ 102.25/$ and ¥ 97.75/$C. ¥ 105/$ and ¥ 95/$D. ¥ 110/$ and ¥ 90/$10. The increase in value of a currency pegged to gold or another currency is known as _,A. appreciationB. depreciationC. revaluationD. devaluation11. A country that regulates the rate at which its currency is exchanged for all other currencies is considered to have a _ exchange rate system.A. fixed or managedB. floating or flexibleC. currency boardD. dollarization12. Which of the following is true for those who are in favor of floating exchange rate system?A. Floating exchange rates ensure balance-of-payments equilibriumB. Floating exchange rates ensure monetary autonomyC. Floating exchange rates promote economic stabilityD. All of the above are true.13. Since the advent of floating exchange rates in 1973 it has become evident that authorities have not always let their currency float freely but rather they have frequently intervened to influence the exchange rate. This floating exchange rate system is also called _.A. clean floatB. managed floatC. dirty floatD. Both B and C are correct14. One of the benefits of the creation of euro is that it _.A. promotes trades and investments in those euro-zone countriesB. makes those euro-zone countries avoid the exchange rate risksC. helps those euro-zone countries restrain inflationD. All of the above are benefits for euro-zone countries.15. Which of the following correctly identifies exchange rate systems from less fixed to more fixed?A. independent floating, currency board, crawling pegsB. independent floating, crawling pegs, dollarizationC. independent floating, currency board, managed floatingD. dollarization, currency board, crawling pegs16. A currency boards foreign exchange reserves are equal to _ or slightly more of its notes and coins in circulation, as set by law.A. 100%B. 90%C. 75%D. 50%17. Which of the following features are NOT shared by independent floating exchange rate system?A. The exchange rates are determined by the market forces.B. The exchange rates may change minute by minute.C. The central bank has to maintain large quantities of foreign exchange reserves.D. The central bank can pursue desired monetary policy.18. The IMF constitution was amended to allow member nations to determine their own exchange rate arrangements by the _.A. Louvre AccordB. Jamaica AccordC. Smithsonian AgreementD. Plaza Agreement19. The United States adopted a modified gold standard in 1934 when the dollar was devalued to $35 per ounce of gold from the 20.67 per ounce price in effect prior to World War I. The dollars devaluation rate can be calculated as _.A. (20.67 35) /35B. (20.67 35) / 20.67C. (35 20.67) / 35D. (35 20.67) / 20.6720. Which of the following is NOT true regarding the 1976 Jamaica Accord?A. It formally legitimized the floating exchange system.B. It aimed at increasing the importance of SDRs in international reserves.C. It emphasized the importance of gold in international reservesD. All of the above are true.II. QuestionsQuestions 1 through 4 are based on the following information. (2.5 credits for each question, total credits 2.5 x 4 = 10 credits)Assume one Argentina peso is composed of $0.50 and 0.50. Also assume the spot dollar/euro exchange rate is $1.10/.1. The peso/dollar exchange rate should be _.2. The peso/euro exchange rate should be _.3. The weight assigned to the U.S. dollar in one Argentina peso is _.4. The weight assigned to the euro in one Argentina peso is _.Questions 5 through 7 are based on the following information. (10 credits total)Under the gold standard the gold par value was $20.67 per ounce in the United States. The gold par value was 4.2474 per ounce in Britain.5. The par exchange rate (dollars per pound) implied by the gold parities is _. (2 credits)6. How would you arbitrage if the exchange rate quoted in the foreign exchange market were $4.00 per pound instead? (4 credits)7. What pressure is placed on the exchange rate by this arbitrage? (4 credits)8. A European-based manufacturer ships a machine tool to a buyer in Jordan. The purchase price is 375,000. Jordan imposes a 12% import duty on all products purchased from the European Union. The Jordanian importer then re-exports the product to a Saudi Arabian importer, but only after imposing its own resale fee of 22%. Given the following spot exchange rates on May 25, 2004, what is the total cost to the Saudi Arabian importer in Saudi Arabian riyal, and what is the U.S. dollar equivalent of that price? (10 credits)Answers to Assignment Problems (4)Part I.1. D 2. A 3. D 4. A 5. A 6. D 7. B 8. B 9. A 10. C11. A 12.D 13. D 14. D 15. B 16. A 17.C 18. B 19.A 20. CPart II.1. Since 50% ($1) + 50% (1) = Mex$ 1S$/ = 1.10 , S/$ = 1/1.10 = 0.9091So, 50% ($1.10) + 50% ($1) = $1.05/Mex$ 12. 50% (0.9091) + 50% (1) = 0.9545/Mex$ 13. 0.5/1.05 = 0.47624. 0.5/0.9545 = 0.52385. $4.8665/6. buy pound in foreign exchange market, change pound for gold in England, transport gold to U.S., convert gold to dollar. (alternative answer)7. towards to the par rate: $4.8665/, because the supply of dollar and the demand for pound rise. That pushes up the value of the pound.8. 375,000 x 0.87 = 326,250 x (1 + 12%) = JD365,400365,400 x (1 + 22%) = JD445.788445,788/0.7080 = $629,644.07 (U.S. dollar equivalent)629,644.07 x 3.75 = SRI 2,361,165.26 (total cost to the Saudi Arabian importer)