GBM 381 Week 2 Quiz

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1.  A television costs 600 Canadian dollars (CAD) in Canada and 500 US dollars (USD) in the US.  The exchange rate between the Canadian dollar and the US dollar is:

1. 1.2 CAD per 1 USD

2. 1.2 USD per 1 CAD

3. .833 CAD per 1 USD

4. Cannot determine

 

2. An exchange rate is defined as:

1. the interest rate at which currencies can borrowed2. the domestic currency price of the foreign currency

3. the ratio of export prices to import prices

4. The domestic currency price of a market basket of the most traded currencies in the world

 

 3. If the US dollar price of the Japanese yen changes from $1 per 100 yen to $1.50 per 100 yen, the dollar is said to have _____________ and the yen has ______________.

1. appreciated, depreciated2. depreciated, appreciated

3. appreciated, appreciated

4. depreciated, depreciated

 

4. A foreign currency is said to have appreciated against the dollar when:

1. the dollar price of the currency has increased2. the foreign currency price of the dollar has increased

3. the exchange rate of both currencies with respect to the euro has increased

4. the exchange rate for both currencies with respect to a third currency has decreased

 

 

5. If you have a commitment to pay a friend in Britain 1,000 pounds in 30 days, and you are holding US dollars, you could remove the risk of loss due to the appreciation of the pound by:

1. Buying dollars in the 30-day forward market2. Selling dollars in the 30-day forward market

3. Buying pounds in the 30-day forward market

4. Selling pounds in the 30-day forward market

 

6. Suppose the exchange rate of the British pound is $1.75 per pound while the exchange value of the Swiss franc is $0.667 cents per franc.  The cross exchange rate between the pound and the franc is:

1. .381 franc per pound2. 1.167 francs per pound

3. Cannot determine

4. 2.624 francs per pound

 

7. Which of the following will cause a nation's currency to depreciate?

1. Economic downturns, especially in times of depression2. An increase in its price level (inflation)

3. An increase in the interest rate

4. All of the above

 

8.  Which of the following would occur if the price level in the US increases relative to the UK, and before this increase the dollar was in exchange rate equilibrium with the sterling?

1. The United States will now find imports from the UK cheaper2. The US will now demand fewer pounds

3. UK citizens will supply more pounds to the US

4. All of the above

 

9.  Which of the following would occur if the interest rate in the United States fell relative to that in the UK, and before this change the dollar was in an exchange rate equilibrium with the sterling?

1. The United States will now demand fewer imports2. The United States will now demand fewer pounds

3. The UK will supply fewer pounds to the US

4. None of the above

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