IBUS 401 Exam 2 Questions And
Answers
/. If the Fed desires to weaken the dollar without affecting the dollar money supply, it
should: - Answer-exchange dollars for foreign currencies, and sell some of its existing
Treasury security holding for dollars
/.It has been argued that the exchange rate can be used as a policy tool. Assume that
the US government would like to reduce unemployment. which of the following is an
appropriate action given this scenario? - Answer-weaken the dollar
/.which of the following is true regarding the euro? - Answer-a.exchange rate risk
between participating european currencies is compltely eliminated, encouraging more
trade and capital flows across european borders
b. it allows for more consistent economic conditions across countries
c. it prevents each country from conducting its own monetary policy
d. all the above
D
/.Due to_____, market forces should realign the relationship between the interest rate
differential of two currencies and the forward premium (or discount) on the forward
exchange rate between the two currencies. - Answer-covered interest arbitrage
/.In which case will the locational arbitrage most likely be feasible? - Answer-one bank's
bid price for a currency is greater than another bank's ask price for the currency
/.which of the following forecasting techniques would best represent use of relationships
between economic factors and exchange rate movements to forecast the future
exchange rate? - Answer-fundamental forecasting
/.which of the following forecasting techniques would best represent the sole use of the
pattern of historical currency values of the euro to predict the euro's future currency
value? - Answer-technical forecasting
/.Diz Co. is a US based MNC with net clash flows of swiss francs. these two currencies
are highly correlated in their movements against the dollar. Yanta Co. is a US based
MNC that has the same level of net cash flows in these currencies as Diz Co. except
that is euros represent net cash outflows. which firm has a higher exposure to exchange
rate risk? - Answer-Diz Co.
/.coinr4 - Answer-c4lk2l
Answers
/. If the Fed desires to weaken the dollar without affecting the dollar money supply, it
should: - Answer-exchange dollars for foreign currencies, and sell some of its existing
Treasury security holding for dollars
/.It has been argued that the exchange rate can be used as a policy tool. Assume that
the US government would like to reduce unemployment. which of the following is an
appropriate action given this scenario? - Answer-weaken the dollar
/.which of the following is true regarding the euro? - Answer-a.exchange rate risk
between participating european currencies is compltely eliminated, encouraging more
trade and capital flows across european borders
b. it allows for more consistent economic conditions across countries
c. it prevents each country from conducting its own monetary policy
d. all the above
D
/.Due to_____, market forces should realign the relationship between the interest rate
differential of two currencies and the forward premium (or discount) on the forward
exchange rate between the two currencies. - Answer-covered interest arbitrage
/.In which case will the locational arbitrage most likely be feasible? - Answer-one bank's
bid price for a currency is greater than another bank's ask price for the currency
/.which of the following forecasting techniques would best represent use of relationships
between economic factors and exchange rate movements to forecast the future
exchange rate? - Answer-fundamental forecasting
/.which of the following forecasting techniques would best represent the sole use of the
pattern of historical currency values of the euro to predict the euro's future currency
value? - Answer-technical forecasting
/.Diz Co. is a US based MNC with net clash flows of swiss francs. these two currencies
are highly correlated in their movements against the dollar. Yanta Co. is a US based
MNC that has the same level of net cash flows in these currencies as Diz Co. except
that is euros represent net cash outflows. which firm has a higher exposure to exchange
rate risk? - Answer-Diz Co.
/.coinr4 - Answer-c4lk2l
