# FIN 534 Homework Chapter 17 ( FIN534 Chapter 17 MCQ ) FIN/534 Chapter 17 - 19107

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FIN 534 Homework Chapter 17  [[[***** Correct Answers Of All 15 Questions *****]]]

1.  If one Swiss franc can purchase \$0.71 U.S. dollars, how many Swiss francs can one U.S. dollar buy?

0.50

0.71

1.00

1.41

2.81

2 points

Question 2

If one U.S. dollar buys 1.64 Canadian dollars, how many U.S. dollars can you purchase for one Canadian dollar?

0.37

0.61

1.00

1.64

3.28

2 points

Question 3

Suppose 90-day investments in Britain have a 6% annualized return and a 1.5% quarterly (90-day) return.  In the U.S., 90-day investments of similar risk have a 4% annualized return and a 1% quarterly (90-day) return.  In the 90-day forward market, 1 British pound equals \$1.65.  If interest rate parity holds, what is the spot exchange rate?

1 pound = \$1.8000

1 pound = \$1.6582

1 pound = \$1.0000

1 pound = \$0.8500

1 pound = \$0.6031

2 points

Question 4

A box of candy costs 28.80 Swiss francs in Switzerland and \$20 in the United States.  Assuming that purchasing power parity (PPP) holds, what is the current exchange rate?

1 U.S. dollar equals 0.69 Swiss francs

1 U.S. dollar equals 0.85 Swiss francs

1 U.S. dollar equals 1.21 Swiss francs

1 U.S. dollar equals 1.29 Swiss francs

1 U.S. dollar equals 1.44 Swiss francs

2 points

Question 5

Suppose 6 months ago a Swiss investor bought a 6-month U.S. Treasury bill at a price of \$9,708.74, with a maturity value of \$10,000.  The exchange rate at that time was 1.420 Swiss francs per dollar.  Today, at maturity, the exchange rate is 1.324 Swiss francs per dollar.  What is the annualized rate of return to the Swiss investor?

-7.92%

-4.13%

6.00%

8.25%

12.00%

2 points

Question 6

Which of the following statements is NOT CORRECT?

Any bond sold outside the country of the borrower is called an international bond.

Foreign bonds and Eurobonds are two important types of international bonds.

Foreign bonds are bonds sold by a foreign borrower but denominated in the currency of the country in which the issue is sold.

The term Eurobond applies only to foreign bonds denominated in U.S. currency.

A foreign bond might pay a higher nominal interest rate than a U.S. bond.

2 points

Question 7

Suppose a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in an equivalent-risk domestic bond in a country with a 28% withholding tax on interest paid to foreigners.  If 9% after-tax is the investor's required return, what before-tax rate would the domestic bond need to pay to provide the required after-tax return?

9.00%

10.20%

11.28%

12.50%

13.57%

2 points

Question 8

Suppose hockey skates sell in Canada for 105 Canadian dollars, and 1 Canadian dollar equals 0.71 U.S. dollars.  If purchasing power parity (PPP) holds, what is the price of hockey skates in the United States?

\$14.79

\$63.00

\$74.55

\$85.88

\$147.88

2 points

Question 9

Suppose one year ago, Hein Company had inventory in Britain valued at 240,000 pounds.  The exchange rate for dollars to pounds was 1£ = 2 U.S. dollars.  This year the exchange rate is 1£ = 1.82 U.S. dollars.  The inventory in Britain is still valued at 240,000 pounds.  What is the gain or loss in inventory value in U.S. dollars as a result of the change in exchange rates?

-\$240,000

-\$43,200

\$0

\$43,200

\$47,473

2 points

Question 10

Which of the following is NOT a reason why companies move into international operations?

To take advantage of lower production costs in regions where labor costs are relatively low.

To develop new markets for the firm’s products.

To better serve their primary customers.

Because important raw materials are located abroad.

To increase their inventory levels.

2 points

Question 11

Suppose one British pound can purchase 1.82 U.S. dollars today in the foreign exchange market, and currency forecasters predict that the U.S. dollar will depreciate by 12.0% against the pound over the next 30 days. How many dollars will a pound buy in 30 days?

1.12

1.63

1.82

2.04

3.64

2 points

Question 12

Suppose DeGraw Corporation, a U.S. exporter, sold a solar heating station to a Japanese customer at a price of 143.5 million yen, when the exchange rate was 140 yen per dollar.  In order to close the sale, DeGraw agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction.  The terms were net 6 months.  If the yen fell against the dollar such that one dollar would buy 154.4 yen when the invoice was paid, what dollar amount would DeGraw actually receive after it exchanged yen for U.S. dollars?

\$1,075,958

\$1,025,000

\$1,000,000

\$975,610

\$929,404

2 points

Question 13

If the inflation rate in the United States is greater than the inflation rate in Britain, other things held constant, the British pound will

Appreciate against the U.S. dollar.

Depreciate against the U.S. dollar.

Remain unchanged against the U.S. dollar.

Appreciate against other major currencies.

Appreciate against the dollar and other major currencies.

2 points

Question 14

Suppose that currently, 1 British pound equals 1.62 U.S. dollars and 1 U.S. dollar equals 1.62 Swiss francs.  What is the cross exchange rate between the pound and the franc?

1 British pound equals 3.2400 Swiss francs

1 British pound equals 2.6244 Swiss francs

1 British pound equals 1.8588 Swiss francs

1 British pound equals 1.0000 Swiss francs

1 British pound equals 0.3810 Swiss francs

2 points

Question 15

In 1985, a given Japanese imported automobile sold for 1,476,000 yen, or \$8,200.  If the car still sold for the same amount of yen today but the current exchange rate is 144 yen per dollar, what would the car be selling for today in U.S. dollars?

\$5.964

\$8,200

\$10,250

\$12,628

\$13,525

FIN 534 Quiz 10 Chapter 17

FIN 534 Chapter 17

FIN534 Chapter 17

FIN 534 Quiz 10 Chapter 17

FIN 534 Chapter 17

FIN534 Chapter 17

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