Foreign Exchange Rate Determination And Intervention

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Questions Bank

Multinational Financial Management: Opportunities and Challenges
The International Monetary System
The Balance of Payments
Financial Goals and Corporate Governance
The Foreign Exchange Market
International Parity Conditions
Foreign Currency Derivatives: Futures and Options
Interest Risk and Swaps
Foreign Exchange Rate Determination and Intervention
Transaction Exposure
Translation Exposure
Operating Exposure
Global Cost and Availability of Capital
Funding the Multinational Firm
Multinational Tax Management
International Trade Finance
Foreign Direct Investment and Political Risk
Multinational Capital Budgeting and Cross-Border Acquisitions

All Questions

Question 1

Free

Multiple Choice

An important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are theories rather than theories.

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competing; complementary

competing; contemporary

complementary; contiguous

complementary; competing

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Question 2

Free

Multiple Choice

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

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infrastructure weaknesses

speculation on the part of market participants

the sharp reduction of cross-border foreign direct investment

All of the above contributed to the emerging markets exchange rate collapse of the 1990s.

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Question 3

Free

Multiple Choice

The ________ provides a means to account for international cash flows in a standardized and systematic manner.

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parity conditions

asset approach

balance of payments

International Fisher Effect

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Question 4

Free

Multiple Choice

The ________ approach argues that equilibrium exchange rates are achieved when the net inflow of foreign exchange arising from current account activities is equal to the net outflow of foreign exchange arising from financial account activities.

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balance of payments

monetary

asset market

law of one price

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Question 5

Free

Multiple Choice

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.

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balance of payments

monetary

asset market

law of one price

Check answer

Question 6

Multiple Choice

The ________ approach argues that exchange rates are determined by the supply and demand for a wide variety of financial assets

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balance of payments

monetary

asset market

law of one price

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Question 7

Multiple Choice

The ________ approach to the determination of spot exchange rates hypothesizes that the most important factors are the relative real interest rate and a country's outlook for economic growth and profitability.

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balance of payments

parity conditions

managed float

asset market

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Question 8

Multiple Choice

The asset market approach to forecasting assumes that whether foreigners are willing to hold claims in monetary form depends on an extensive set of investment considerations. These include all but which of the following choices?

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relative real interest rates

capital market liquidity

political safety

All of the above are considered by investors in their decision process.

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Question 9

Multiple Choice

________ is defined as the spread of a crisis in one country to its neighboring countries and other countries with similar characteristics.

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Speculation

Contagion

Capital market liquidity

Political science

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Question 10

Multiple Choice

Critics of the balance of payments approach to exchange rate determination point to the emphasis on of currency and capital rather than of money or financial assets.

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flows; stocks

stocks; flows

import; export

export; import

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Question 11

Multiple Choice

Which of the following versions of PPP is thought to be the most relevant to possibly explaining what drives exchange rate values?

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The Law of One Price

Absolute Purchasing Power Parity

Relative Purchasing Power Parity

The International Fisher Effect

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Question 12

True/False

The balance of payments approach of exchange rate theory is largely dismissed by the academic community today, while the practitioner public still rely on different variations of the theory for their decision making.

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True

False

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Question 13

True/False

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

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True

False

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Question 14

True/False

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

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True

False

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Question 15

True/False

The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.

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True

False

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Question 16

True/False

The asset market approach to forecasting is not applicable to emerging markets.

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True

False

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Question 17

True/False

Most theories of technical analysis differentiate fair value from market value.

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True

False

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Question 18

Essay

Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?

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Question 19

Multiple Choice

________ is the active buying and selling of the domestic currency against foreign currencies.

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Indirect Intervention

Direct Intervention

Foreign Direct Investment

Federal Funding

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Question 20

Multiple Choice

________ is the alteration of economic or financial fundamentals that are thought to be drivers of capital to flow in and out of specific currencies.

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Indirect Intervention

Direct Intervention

Foreign Direct Investment

Capital Controls

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Foreign Exchange Rate Determination And Intervention

An important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are ________ theories rather than ________ theories.

Which of the following did NOT contribute to the exchange rate collapse in emerging markets in the 1990s?

The ________ provides a means to account for international cash flows in a standardized and systematic manner.

The ________ approach argues that equilibrium exchange rates are achieved when the net inflow of foreign exchange arising from current account activities is equal to the net outflow of foreign exchange arising from financial account activities.

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.

The ________ approach argues that exchange rates are determined by the supply and demand for a wide variety of financial assets

The ________ approach to the determination of spot exchange rates hypothesizes that the most important factors are the relative real interest rate and a country's outlook for economic growth and profitability.

The asset market approach to forecasting assumes that whether foreigners are willing to hold claims in monetary form depends on an extensive set of investment considerations. These include all but which of the following choices?

________ is defined as the spread of a crisis in one country to its neighboring countries and other countries with similar characteristics.

Critics of the balance of payments approach to exchange rate determination point to the emphasis on ________ of currency and capital rather than ________ of money or financial assets.

Which of the following versions of PPP is thought to be the most relevant to possibly explaining what drives exchange rate values?

The balance of payments approach of exchange rate theory is largely dismissed by the academic community today, while the practitioner public still rely on different variations of the theory for their decision making.

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

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

The authors claim that random events, institutional frictions, and technical factors may cause currency values to deviate significantly from their long-term fundamental path.

The asset market approach to forecasting is not applicable to emerging markets.

Most theories of technical analysis differentiate fair value from market value.

Describe the asset market approach to exchange rate determination. How is this consistent with economic theory of (say, security) prices in general?

________ is the active buying and selling of the domestic currency against foreign currencies.

________ is the alteration of economic or financial fundamentals that are thought to be drivers of capital to flow in and out of specific currencies.

An important thing to remember about foreign exchange rate determination is that parity conditions, asset approach, and balance of payments approaches are theories rather than theories.

Critics of the balance of payments approach to exchange rate determination point to the emphasis on of currency and capital rather than of money or financial assets.