单选测试689合题剖析.docx
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单选测试689合题剖析
Chapter6,8,9
1.Ifanidenticalproductcanbesoldintwodifferentmarkets,andnorestrictionsexistonthesaleortransportationcosts,theproduct'spriceshouldbethesameinbothmarkets.Thisisknowas_________
A)relativepurchasingpowerparity.
B)interestrateparity.
C)thelawofoneprice.
D)equilibrium.
2.________statesthatthespotexchangerateisdeterminedbytherelativepricesofsimilarbasketsofgoods.
A)Absolutepurchasingpowerparity
B)Relativepurchasingpowerparity
C)Interestrateparity
D)TheFisherEffect
3.TheEconomistpublishesannuallythe"BigMacIndex"bywhichtheycomparethepricesoftheMcDonald'sCorporation'sBigMachamburgeraroundtheworld.Theindexestimatestheexchangeratesforcurrenciesbasedontheassumptionthattheburgersinquestionarethesameacrosstheworldandtherefore,thepriceshouldbethesame.IfaBigMaccosts$2.54intheUnitedStatesand294yeninJapan,whatistheestimatedexchangerateofyenperdollarashypothesizedbytheHamburgerindex?
A)$0.0086/¥
B)124¥/$
C)$0.0081/¥
D)115.75¥/$
4.Ifthecurrentexchangerateis113JapaneseyenperU.S.dollar,thepriceofaBigMachamburgerintheUnitedStatesis$3.41,andthepriceofaBigMachamburgerinJapanis280yen,thenotherthingsequal,theBigMachamburgerinJapanis________.
A)correctlypriced
B)underpriced
C)overpriced
D)notenoughinformationtodetermineifthepriceisappropriateornot
5.ThepriceofaBigMacintheU.S.is$3.41andthepriceinMexicoisPeso29.0.WhatistheimpliedPPPofthePesoperdollar?
A)Peso8.50/$1
B)Peso10.8/$1
C)Peso11.76/$1
D)Noneoftheabove
6.TheimpliedPPPrateofexchangeofMexicanPesosperU.S.Dollaris8.50accordingtotheBigMacIndex.ThecurrentexchangerateisPeso10.8/$1.Thus,accordingtoPPPandtheLawofOnePrice,atthecurrentexchangeratethepesois________.
A)overvalued
B)undervalued
C)correctlyvalued
D)notenoughinformationtoanswerthisquestion
7.Ifaccordingtothelawofonepricethecurrentexchangerateof
dollarsperBritishpoundis$1.75/£,thenatanexchangerateof$1.85/£,thedollaris________.
A)overvalued
B)undervalued
C)correctlyvalued
D)unknownrelativevaluation
8.TrueorFalse
TheassumptionsforrelativePPParemorerigidthantheassumptionsforabsolutePPP.
9.OneyearagothespotrateofU.S.dollarsforCanadiandollarswas$1/C$1.SincethattimetherateofinflationintheU.S.hasbeen4%greaterthanthatinCanada.BasedonthetheoryofRelativePPP,thecurrentspotexchangerateofU.S.dollarsforCanadiandollarsshouldbeapproximately________.
A)$0.96/C$
B)$1/C$1
C)$1.04/C$1
D)relativePPPprovidesnoguideforthistypeofquestion
10.TrueorFalse
EmpiricaltestsprovethatPPPisanaccuratepredictoroffutureexchangerates.
11.Twogeneralconclusionscanbemadefromtheempiricaltestsofpurchasingpowerparity(PPP):
A)PPPholdsupwellovertheshortrunbutpoorlyforthelongrunandthetheoryholdsbetterforcountrieswithrelativelylowratesofinflation.
B)PPPholdsupwellovertheshortrunbutpoorlyforthelongrunandthetheoryholdsbetterforcountrieswithrelativelyhighratesofinflation.
C)PPPholdsupwelloverthelongrunbutpoorlyfortheshortrunandthetheoryholdsbetterforcountrieswithrelativelylowratesofinflation.
D)PPPholdsupwelloverthelongrunbutpoorlyfortheshortrunandthetheoryholdsbetterforcountrieswithrelativelyhighratesofinflation.
12.Ifacountry'srealeffectiveexchangerateindexweretobelessthan100,thiswouldsuggestan________currency.
A)overvalued
B)overcompensating
C)undervalued
D)undercompensating
13.IfwesettherealeffectiveexchangerateindexbetweenCanadaandtheUnitedStatesequalto100in1998,andfindthattheU.S.dollarhasrisentoavalueof112.6,thenfromacompetitiveperspectivetheU.S.dollaris
A)overvalued.
B)undervalued.
C)verycompetitive.
D)Thereisnotenoughinformationtoanswerthisquestion.
14.IfwesettherealeffectiveexchangerateindexbetweentheUnitedKingdomandtheUnitedStatesequalto100in2005,andfindthattheU.S.dollarhaschangedtoavalueof91.4,thenfromacompetitiveperspectivetheU.S.dollaris________.
A)overvalued
B)undervalued
C)equallyvalued
D)Thereisnotenoughinformationtoanswerthisquestion.
15.Exchangeratepass-throughmaybedefinedas________
A)thebid/askspreadoncurrencyexchangeratetransactions.
B)thedegreetowhichthepricesofimportedandexportedgoodschangeasaresultofexchangeratechanges.
C)thePPPoflesser-developedcountries.
D)thepracticebyGreatBritainofmaintainingtherelativestrengthofthecurrenciesoftheCommonwealthcountriesunderthecurrentfloatingexchangerateregime.
16.PhillipsNVproducesDVDplayersandexportsthemtotheUnitedStates.Lastyeartheexchangeratewas$1.25/euroandPlillipscharged120europerplayerinEurolandand$150perDVDplayerintheUnitedStates.Currentlythespotexchangerateis$1.45/euroandPhillipsis
charging$160perDVDplayer.WhatisthedegreeofpassthroughbyPhillipsNVontheirDVDplayers?
A)92%
B)33.3%
C)41.9%
D)4.1%
17.JaguarhasfullmanufacturingcostsoftheirS-typesedanof£22,803.TheyselltheS-typeintheUKwitha20%marginforapriceof£27,363.TodaythesecarsareavailableintheUSfor$55,000whichistheUKpricemultipliedbythecurrentexchangerateof$2.01/£.JaguarhascommittedtokeepingtheUSpriceat$55,000forthenextsixmonths.IftheUKpoundappreciatesagainsttheUSDtoanexchangerateof$2.15/£,andJaguarhasnothedgedagainstcurrencychanges,whatistheamountthecompanywillreceiveinpoundsatthenewexchangerate?
A)£22,803
B)£25,581
C)£27,363
D)£55,000
18.JaguarhasfullmanufacturingcostsoftheirS-typesedanof£22,803.TheyselltheS-typeintheUKwitha20%marginforapriceof£27,363.TodaythesecarsareavailableintheUSfor$55,000whichistheUKpricemultipliedbythecurrentexchangerateof$2.01/£.JaguarhascommittedtokeepingtheUSpriceat$55,000forthenextsixmonths.IftheUKpoundappreciatesagainsttheUSDtoanexchangerateof$2.15/£,andJaguarhasnothedgedagainstcurrencychanges,whatisthepercentagemarginthecompanywillrealizegiventhenewexchangerate?
A)20.0%
B)15.3%
C)12.2%
D)7.2%
19.Assumeanominalinterestrateonone-yearU.S.TreasuryBillsof4.60%andarealrateofinterestof2.50%.UsingtheFisherEffectEquation,whatistheapproximateexpectedrateofinflationintheU.S.overthenextyear?
A)2.10%
B)2.05%
C)2.00%
D)1.90%
20.Therelationshipbetweenthepercentagechangeinthespotexchangerateovertimeandthedifferentialbetweencomparableinterestratesindifferentnationalcapitalmarketsisknownas________.
A)absolutePPP
B)thelawofoneprice
C)relativePPP
D)theInternationalFisherEffect
21.AccordingtotheinternationalFisherEffect,ifaninvestorpurchases
afive-yearU.S.bondthathasanannualinterestrateof5%ratherthanacomparableBritishbondthathasanannualinterestrateof6%,thentheinvestormustbeexpectingthe________to________atarateofatleast1%peryearoverthenext5years.
A)Britishpound;appreciate
B)Britishpound;revalue
C)U.S.dollar;appreciate
D)U.S.dollar;depreciate
22.AssumethecurrentU.S.dollar-Britishspotrateis0.6993£/$.Ifthe
currentnominalone-yearinterestrateintheU.S.is5%andthecomparablerateinBritainis6%,whatistheapproximateforwardexchangeratefor360days?
A)1.42£/$
B)1.43£/$
C)0.6993£/$
D)0.7060£/$
23.AssumethecurrentU.S.dollar-yenspotrateis125¥/$.Further,the
currentnominal180-dayrateofreturninJapanis3%and4%intheUnitedStates.Whatistheapproximateforwardexchangeratefor180days?
A)123.80¥/$
B)124.00¥/$
C)124.39¥/$
D)124.67¥/$
Chapter8
24.Aforeigncurrency________contractcallsforthefuturedeliveryofastandardamountofforeignexchangeatafixedtime,place,andprice.
A)futures
B)forward
C)option
D)swap
25.Financialderivativesarepowerfultoolsthatcanbeusedbymanagementforpurposesof_______
A)speculation.
B)hedging.
C)humanresourcemanagement.
D)AandBabove.
26.WhichofthefollowingisNOTacontractspecificationforcurrencyfuturestradingonanorganizedexchange?
A)sizeofthecontract
B)maturitydate
C)lasttradingday
D)Alloftheabovearespecified.
27.Aspeculatorthathas________afuturescontracthastakena________position.
A)sold;long
B)purchased;short
C)sold;short
D)purchased;sold
28.PeterSimpsonthinksthattheU.K.poundwillcost$1.43/£insixmonths.A6-monthcurrencyfuturescontractisavailabletodayatarateof$1.44/£.IfPeterwastospeculateinthecurrencyfuturesmarket,andhisexpectationsarecorrect,whichofthefollowingstrategieswouldearnhimaprofit?
A)Sellapoundcurrencyfuturescontract.
B)Buyapoundcurrencyfuturescontract.
C)Sellpoundstoday.
D)Sellpoundsinsixmonths.
29.JackHemmingsboughta3-monthBritishpoundfuturescontractfor
$1.4400/£onlytoseethedollarappreciatetoavalueof$1.4250atwhichtimehesoldthepoundfutures.Ifeachpoundfuturescontractisforanamountof£62,500,howmuchmoneydidJackgainorlosefromhisspeculationwithpoundfutures?
A)$937.50loss
B)$937.50gain
C)£937.50loss
D)£937.50gain
30.Aforeigncurrency________givesthep