Deck 1: Introductin to International Financial Management and Exchange Rate Determination

Question 1

Which of the following is correct? The rise in U.S. dollar during global financial crisis in 2008 can be attributed to

A) a demand for dollar-denominated assets
B) a large U.S. trade surplus
C) rapid U.S. economic growth
D) higher U.S. economic growth relative to growth overseas

Answer 1

a demand for dollar-denominated assets

Question 2

Which of the following is correct? The most likely explanation for the rise of the U.S. dollar during the early 1980s is that the United States'

A)budget deficit lowered U.S. interest rates
B)trade deficit accelerated U.S. inflation
C)economy slowed dramatically
D)budget deficit raised U.S. interest rates

Answer 2

economy slowed dramatically

Question 3

On Friday, September 13, 1992, the Turkish lira was worth €0.0013. Over the weekend the Turkish lira devalued against the euro to €0.0012. By how much had the Turkish lira devalued against the euro?

A)7.69%
B)8.33%
C)5.21%
D)9.27%

Answer 3

7.69%

Question 4

Which of the following is correct? The euro devalued by 17% against the U.S. dollar. This is equivalent to a revaluation of the U.S. dollar against the euro by:

A) 17%
B) 16.31%
C) 20.48%
D) 17.54%

Question 5

Which of the following is correct? If the Australian dollar devalues against the Japanese yen by 10%, the yen will appreciate by

A)33.32%
B)25.55%
C) 10.11%
D) 11.11%

Question 6

Which of the following is correct? An increase in the supply of euros by the European Central Bank will

A) raise the external value of the euro because it will stimulate economic growth in the Eurozone
B) raise the external value of the euro because it will lead to higher Eurozone interest rates
C) reduce the external value of the euro because of inflation fears in the Eurozone
D) decrease the external value of the euro because it will force other countries to raise their interest rates

Question 7

On July 19, 1985, the Italian lira devalued by 17% against the U.S. dollar. Which of the following is correct? This is equivalent to a revaluation of the U.S. dollar against the lira of

A) 17%
B) 16.31%
C) 20.48%
D) 17.54%

Question 8

During 1995, the yen went from ¥80.00/$ to ¥105/$. By how much did the U.S. dollar appreciate against the yen?

A) 23.81%
B) 31.25%
C) 15.67%
D) 40.78%

Question 9

Which of the following is correct? Given the added risks associated with doing business abroad, companies should

A) limit their foreign sales to less than 40% of total sales
B) limit their foreign assets to less than 30% of total assets
C) avoid foreign markets altogether unless they can earn a return in excess of the return they earn in their domestic market
D) not limit their foreign sales at all