IBUS 401 exam 3 with accurate detailed answers ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
When conducting valuation analysis on MNC's, all the firm's cash flows need to be
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
converted into the domestic currency of the company. ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
True
False - correct answer✔✔True
||\\|//|| ||\\|//|| ||\\|//||
Your predicted value for the USD/BRL was 6.04 however the actual value was 7.21. What
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
was your absolute forecast error in percentage form?
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
4.87
16.23
-16.23
-4.87 - correct answer✔✔16.23%
||\\|//|| ||\\|//|| ||\\|//||
The 5-year forward premium is 2.50% for the USD/BRL. The USD/BRL current spot rate is
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
5.58 BRL.
||\\|//||
Using market-based analysis, what is the closest estimate for the USD/BRL spot rate in 5-
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
years?
6.40
5.48
5.72 - correct answer✔✔5.72
||\\|//|| ||\\|//|| ||\\|//||
,Brazil is expected to have higher inflation rates than the United States over the next five
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
years. Based on relative economic strength, which currency would you expect to
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
appreciate?
USD
BRL - correct answer✔✔USD ||\\|//|| ||\\|//|| ||\\|//||
Using the PPP model, if the U.S. inflation is expected to be 5% and the Brazilian inflation is
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
expected to be 13%, what will the estimated USD/BRL spot rate approximately be in 1-year
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
if today it is 5.58 BRL?
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
5.13
6.03 - correct answer✔✔6.03 ||\\|//|| ||\\|//|| ||\\|//||
When conducting valuation analysis that requires currency conversion, it is always best to
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
use a point estimate as opposed to range of forecasted exchange rate values.
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
True
False - correct answer✔✔False ||\\|//|| ||\\|//|| ||\\|//||
Which type of analysis relies on recognizing patterns and trends in forex data to predict
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
exchange rates? ||\\|//||
Market based analysis ||\\|//|| ||\\|//||
technical analysis ||\\|//||
fundamental analysis - correct answer✔✔technical analysis ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
, If you believe that exchange rates price in all publicly known and relevant information but
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
do not price in all private information. You believe the market is at most _______ form-
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
efficient
strong ||\\|//||
weak ||\\|//||
semi-strong - correct answer✔✔semi-strong ||\\|//|| ||\\|//|| ||\\|//||
Inflation would be an example of the type of indicator used in market-based analysis. - ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
correct answer✔✔False ||\\|//||
〖% Δ Spot Rate〗t =0.05+ 0.5〖Inflation Diff_t- 0.4〖Income Growth Diff_t - 0.50〖GDP
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
Growth Diff〗t ||\\|//||
According to the regression results above, for each 1% change in _______ the spot rate is ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
expected to appreciate by .50% ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
GDP
Inflation
Income - correct answer✔✔Inflation ||\\|//|| ||\\|//|| ||\\|//||
Using instantaneous factors in regression analysis will always increase the accuracy of
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
forecasts compared to using lagged factors ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
True
False - correct answer✔✔False ||\\|//|| ||\\|//|| ||\\|//||
You conduct a regression analysis where the actual spot is the dependent variable and the
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
predicted spot rate is the independent variable. Your resulting Beta coefficient is 1.5, which ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
When conducting valuation analysis on MNC's, all the firm's cash flows need to be
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
converted into the domestic currency of the company. ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
True
False - correct answer✔✔True
||\\|//|| ||\\|//|| ||\\|//||
Your predicted value for the USD/BRL was 6.04 however the actual value was 7.21. What
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
was your absolute forecast error in percentage form?
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
4.87
16.23
-16.23
-4.87 - correct answer✔✔16.23%
||\\|//|| ||\\|//|| ||\\|//||
The 5-year forward premium is 2.50% for the USD/BRL. The USD/BRL current spot rate is
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
5.58 BRL.
||\\|//||
Using market-based analysis, what is the closest estimate for the USD/BRL spot rate in 5-
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
years?
6.40
5.48
5.72 - correct answer✔✔5.72
||\\|//|| ||\\|//|| ||\\|//||
,Brazil is expected to have higher inflation rates than the United States over the next five
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
years. Based on relative economic strength, which currency would you expect to
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
appreciate?
USD
BRL - correct answer✔✔USD ||\\|//|| ||\\|//|| ||\\|//||
Using the PPP model, if the U.S. inflation is expected to be 5% and the Brazilian inflation is
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
expected to be 13%, what will the estimated USD/BRL spot rate approximately be in 1-year
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
if today it is 5.58 BRL?
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
5.13
6.03 - correct answer✔✔6.03 ||\\|//|| ||\\|//|| ||\\|//||
When conducting valuation analysis that requires currency conversion, it is always best to
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
use a point estimate as opposed to range of forecasted exchange rate values.
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
True
False - correct answer✔✔False ||\\|//|| ||\\|//|| ||\\|//||
Which type of analysis relies on recognizing patterns and trends in forex data to predict
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
exchange rates? ||\\|//||
Market based analysis ||\\|//|| ||\\|//||
technical analysis ||\\|//||
fundamental analysis - correct answer✔✔technical analysis ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
, If you believe that exchange rates price in all publicly known and relevant information but
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
do not price in all private information. You believe the market is at most _______ form-
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
efficient
strong ||\\|//||
weak ||\\|//||
semi-strong - correct answer✔✔semi-strong ||\\|//|| ||\\|//|| ||\\|//||
Inflation would be an example of the type of indicator used in market-based analysis. - ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
correct answer✔✔False ||\\|//||
〖% Δ Spot Rate〗t =0.05+ 0.5〖Inflation Diff_t- 0.4〖Income Growth Diff_t - 0.50〖GDP
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
Growth Diff〗t ||\\|//||
According to the regression results above, for each 1% change in _______ the spot rate is ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
expected to appreciate by .50% ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
GDP
Inflation
Income - correct answer✔✔Inflation ||\\|//|| ||\\|//|| ||\\|//||
Using instantaneous factors in regression analysis will always increase the accuracy of
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
forecasts compared to using lagged factors ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
True
False - correct answer✔✔False ||\\|//|| ||\\|//|| ||\\|//||
You conduct a regression analysis where the actual spot is the dependent variable and the
||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
predicted spot rate is the independent variable. Your resulting Beta coefficient is 1.5, which ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//|| ||\\|//||
