TEST BANK FOR FINA 408 Currency-Fixed-Income-Equity -QUESTIONS WITH VERIFIED ANSWERS

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(ANSWERS PROVIDED AT THE END OF THE DOCUENT) Currencies – Currency Market Mechanics 1. Of the visible countries, which is the fourth biggest exporter and fourth biggest importer? a. Japan b. Ger... many c. US d. China 2. The Mexican peso declined vs the US $ by 37% during the so called tequila crisis. What exacerbating factor did Mexico’s’ Tequila Crisis have in common with the Argentine crisis of 2002 a. Both counties use the same currency: the peso b. Both countries had a large dollar denominated debt c. Both crises occurred in December, a holiday month d. Both crises happened in Latin America 3. How many New Zealand dollars can you buy with the 100 Australian dollar a. 0.92690 b. 1.0789 c. 92.690 d. 107.89 4. Alisson lives in America and retired. Its 2016 and the lady wants to travel the world. She wants to pick the country that had a weaken currency vs the US dollars. Where will she go? a. Norway b. UK c. Japan d. France 5. 4 Currency chart for Barbadian vs Jamaican dollar; Czech vs Polish; Nigerian vs Ghanaian and Hong Kong vs Macanese. Which one is pegged? a. BvJ b. CvP c. NvG d. HKvM 6. Which of the following Is not an example of failed peg? a. UK Sterlings vs Deutchs b. Mexican peso vs US in 1994 c. HK vs US in 1997 d. Argentine peso vs US in 2002 7. How many Danish crowns will buy 100 Japanese yen? a. 0.05360 b. 5.360 c. 18.656 d. 1865.6 Currencies – Currency Valuation 8. According to this Big Mac index screen, which of the following currencies is the most undervalued? a. US b. China c. Brazil d. Thailand 9. What generally happens when a central bank unexpectedly increases interest rate? a. The currency strengthens b. The currency weakens c. Currency strengthens d. Currency weakens, then strengthen 10. Which driver weakened the SF from 1 euro/SF to 0.83 Euro/SF a. A surprise change in inflation expectations b. A surprise change in valuation expections c. A surprise change in interest rate expectation d. A surprise change in trade11. What does the Big Mac index show? a. How the law of one price is true of consumer products b. How currencies may be overvalued or undervalued c. How interest rate and inflation affect trade d. How the Economist magazine estimate inflation 12. What are the 3 main ST drivers of currency valuation? a. Surprise change in interest rate, inflation and gold b. Surprises changes in interest rate, inflation and trade c. Surprise change in unemployment, inflation and trade d. Surprise change in unemployment trade and gold 13. By what mechanism do interest rate affect currency values? a. Global Investors are attracted by higher bond yield in high interest rate countries b. Change in interest rate directly influence the value at which a currency is pegged c. High interest rate increase the value of house prices which make the currency safer d. Low interest rate always make a market more attractive for investors, which lifts the currency 14. Which of theses headlines could move a currency pair? a. US Stock rally on fed surprise reduction of D.R. b. Railroad rate hikes drive Dichotomy of necessary vs excessive c. HK’s Firmly committed to Dollar Peg, John Tsang says d. Grade Inflation: Devaluing B-School’s Currency Currencies – Central Banks and Currencies 15. What is the most common target inflation rate for an advanced economy? a. 1% b. 2% c. 3% d. 0% 16. What was the primary goal of Abenomics? a. To reduce inflation by increasing unemployment b. To help Shinzo Abe win the election of 2012 c. To halt the vicious cycle of deflation d. To Strengthen the yen to foster consumption of luxury goods 17. Vicious Deflationary Cycle. What step connects the lower left grey arrow to the upper right blue arrow? a. Workers expect prices to increase b. Workers demand pay increase c. Employment decrease d. Price declines 18. What was the Great depression in the US linked to inflation or deflation a. Inflation b. Deflation c. Both d. Neither Currencies – Currencies Risk 19. In 2016, the UK voted to leave EU. White line= UK main equity (FTSE 100); Orange Line - # of dollars it takes ot buy one pound sterling. The UK = Net importer. What can be the reasonably surmised from the chart about large UK Corporation? a. Their CEO probably voted to remain in the EU b. CEO probably voted to leave the EU c. They are probably heavy exporters d. They are probably heavy importers 20. Why is there a mirror image between the yen weakness and stock market strength on the chart shown? a. Rising Japanese interest rate both weakens the yen and left the stock market b. A declining yen will left inflation, which sis good for Japanese corporations c. Yen weakness favors the man exporting corporation within the index d. Stock market strength pushes Japanese’s investors to buy safe haven currencies21. IN 2016, Germany Machinery Company has interest from 4 prospective clients from emerging markets: Brazil, Indonesia, Russia and South Africa. They want to to buy 10 machines. The company will bill them in euros but the CFO is worried that the client may cancel the order if the currency declines when the invoice comes. According to historical currency volatility alone, the client form which country would be most likely to pay his invoice. A. Indonesia B. Brazil C. Russia D. South Africa 22. What is the median estimate for the number of U.S. dollars per British sterling for calendar year 2015? a. 1.61 b. 1.63 c. 1.66 d. 1.75 23. What is the median estimate for the number of Japanese yen/euro for the calendar year 2020 a. 126 b. 132 c. 163 d. 115 24. What is the difference between the CItitgroup and JP Morgan Chase estimate for the US dollar/sterling currency pair for the end of Q1 of 2015 a. 0.16 pounds b. 0.16 euros c. 0.16 percent d. 0.16 dollars 25. You are a Dutch diamond dealer who sources diamonds from South Africa. You believe that the African continent is set to boom, and so you believe that the South African rand will strengthen against the world’s major currencies. Therefore, you are worried about your ability to afford South African diamonds in the future. A new mine is being dug in South Africa and you have agreed with the miner to buy 1 million South African rands' worth of diamonds a year from today. Therefore, you will need 1 million rands in cash in one year’s time. Currently, the exchange rate is 17.1261 rands to the euro. You believe that the rand will strengthen to 16 rand to the euro in one year’s time. You speak to some currency dealers and they let you know that they would agree today to convert your euros into rands in one year’s time at the rate of 18.654182. Assume that you converted some of your euros into 1 million rands at today’s prevailing rate and stored the rands in a safe. How many more or fewer euros would you have in one year’s time if you were to agree today to the forward agreement instead of simply purchasing the million rands today? a. EUR 4,783 More b. EUR 4783 less c. EUR 4110 more d. Eur 4110 less [Show More]

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