International Financial Management

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Question 1

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The New York Stock Exchange is one of few markets to have a higher daily volume than the foreign exchange market.

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Question 2

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The direct exchange rate quotes the number of U.S.dollars that can be exchanged for one unit of a foreign currency.

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Question 3

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The number of pesos that can be purchased with one U.S.dollar is referred to as an indirect quote.

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Question 4

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According to interest rate parity,the interest rate differential must be equal to the differential between forward and spot exchange rates.

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Question 5

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The international Fisher effect states that nominal interest rates should be equal in all countries.

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Question 6

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Interest rate parity suggests that it is cheaper to borrow in a currency with a low nominal rate of interest.

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Question 7

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Transaction risk can usually be identified and hedged.

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Question 8

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A U.S.importer of a Japanese product should sell Japanese yen forward to avoid the risk of an appreciation of the yen.

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Question 9

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Interest rate parity tells us that the cost of buying yen forward is exactly the same as the cost of borrowing dollars,buying yen in the spot market,and leaving them on yen deposit.

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Question 10

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Even if a firm neither owes nor is owed foreign currency,it still may be affected by currency fluctuations.

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Question 11

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You can purchase a futures contract on any currency.

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Question 12

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The forward exchange rate is the rate for immediate exchange of two currencies.

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Question 13

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If the yen is trading at a forward discount relative to the dollar,then you'll receive less yen per dollar in the future.

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Question 14

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Futures contracts offer an alternative way to buy foreign currency forward.

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Question 15

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If inflation is expected to be higher in the U.S.than in Mexico,then the peso is forecasted to depreciate against the dollar.

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Question 16

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According to the international Fisher effect,the differences in nominal interest rates across countries reflect the differences in their expected rates of inflation.

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Question 17

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Forward rates are always equal to the actual future exchange rates.

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Question 18

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Forward contracts are standardized contracts sold in organized exchanges.

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Question 19

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The law of one price implies that when converted into the same currency a commodity should sell at the same price in all countries.

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Question 20

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The nominal interest rate is the difference between the real interest rate and inflation.

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