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FIN 534 Week 11 Quiz 10 Question 1 1.? In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or $8,200. If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars? Answer $5.964 $8,200 $10,250 $12,628 $13,525 2 points Question 2 1.? Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 143.5 million yen, when the exchange rate was 140 yen per dollar. In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction. The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars? Answer $1,075,958 $1,025,000 $1,000,000 $975,610 $929,404 2 points Question 3 1.? Suppose in the spot market 1 U.S. dollar equals 1.60 Canadian dollars. 6-month Canadian securities have an annualized return of 6% (and thus a 6-month periodic return of 3%). 6-month U.S. securities have an annualized return of 6.5% and a periodic return of 3.25%. If interest rate parity holds, what is the U.S. dollar-Canadian dollar exchange rate in the 180-day forward market? Answer 1 U.S. Canadian dollars 1 U.S. Canadian dollars 1 U.S. Canadian dollars 1 U.S. Canadian dollars 1 U.S. Canadian dollars 2 points Question 4 1.? Suppose one British pound can purchase 1.82 U.S. dollars today in the foreign exchange market, and currency forecasters predict that the U.S. dollar will depreciate by 12.0% against the pound over the next 30 days. How many dollars will a pound buy in 30 days? Answer 1.12 1.63 1.82 2.04 3.64 2 points Question 5 1.? Suppose the exchange rate between U.S. dollars and Swiss francs is SF 1.41 = $1.00, and the exchange rate between the U.S. dollar and the euro is $ euros. What is the cross-rate of Swiss francs to euros? Answer 0.43 0.86 1.41 1.64 2.27 2 points Question 6 1.? In Japan, 90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return. In the United States, 90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%. All securities are of equal risk, and Japanese securities are denominated in terms of the Japanese yen. Assuming that interest rate parity holds in all markets, which of the following statements is most CORRECT? Answer The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market. The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 180-day forward market. The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market. The spot rate equals the 90-day forward rate. The spot rate equals the 180-day forward rate. 2 points Question 7 1.? Suppose one year ago, Hein Company had inventory in Britain valued at 240,000 pounds. The exchange rate for dollars to pounds was 1? = 2 U.S. dollars. This year the exchange rate is 1? = 1.82 U.S. dollars. The inventory in Britain is still valued at 240,000 pounds. What is the gain or loss in inventory value in U.S. dollars as a result of the change in exchange rates? Answer -$240,000 -$43,200 $0 $43,200 $47,473 2 points Question 8 1.? If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar? Answer 0.37 0.61 1.00 1.64 3.28 2 points Question 9 1.? Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of $9,708.74, with a maturity value of $10,000. The exchange rate at that time was 1.420 Swiss francs per dollar. Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar. What is the annualized rate of return to the Swiss investor? Answer -7.92% -4.13% 6.00% 8.25% 12.00% 2 points Question 10 1.? Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 28% withholding tax on interest paid to foreigners. If 9% after-tax is the investor's required return, what before-tax rate would the domestic bond need to pay to provide the required after-tax return? Answer 9.00% 10.20% 11.28% 12.50% 13.57% 2 points Question 11 1.? Suppose 144 yen could be purchased in the foreign exchange market for one U.S. dollar today. If the yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar buy tomorrow? Answer 155.5 yen 144.0 yen 133.5 yen 78.0 yen 72.0 yen 2 points Question 12 1.? If the inflation rate in the United States is greater than the inflation rate in Britain, other things held constant, the British pound will Answer Appreciate against the U.S. dollar. Depreciate against the U.S. dollar. Remain unchanged against the U.S. dollar. Appreciate against other major currencies. Appreciate against the dollar and other major currencies. 2 points Question 13 1.? Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return. In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return. In the 90-day forward market, 1 British pound equals $1.65. If interest rate parity holds, what is the spot exchange rate? Answer 1 pound = $1.8000 1 pound = $1.6582 1 pound = $1.0000 1 pound = $0.8500 1 pound = $0.6031 2 points Question 14 1.? Suppose hockey skates sell in Canada for 105 Canadian dollars, and 1 Canadian dollar equals 0.71 U.S. dollars. If purchasing power parity (PPP) holds, what is the price of hockey skates in the United States? Answer $14.79 $63.00 $74.55 $85.88 $147.88 2 points Question 15 1.? A box of candy costs 28.80 Swiss francs in Switzerland and $20 in the United States. Assuming that purchasing power parity (PPP) holds, what is the current exchange rate? Answer 1 U.S. dollar equals 0.69 Swiss francs 1 U.S. dollar equals 0.85 Swiss francs 1 U.S. dollar equals 1.21 Swiss francs 1 U.S. dollar equals 1.29 Swiss francs 1 U.S. dollar equals 1.44 Swiss francs ...
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Cusomer_ID_203332 Category: Homework      On: April24th 2012Reply

John Ray

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