IBUS 401 FINAL EXAM USC 2026 QUESTIONS
WITH ANSWERS GUARANTEED SUCCESS
◉ Assume that the forward rate is used to forecast the spot rate. The
forward rate of the Canadian dollar contains a 6 percent discount.
Today's spot rate of the Canadian dollar is $.80. The spot rate
forecasted for one year ahead is: Answer: $.80(1+(-6%))=$.752
◉ Which of the following forecasting techniques would be most
likely to use today's forward exchange rate to forecast the future
exchange rate? Answer: market-based forecasting
◉ Which of the following forecasting techniques would be most
likely to use relationships between economic factors and exchange
rate movements to forecast the future exchange rate? Answer:
fundamental forecasting
◉ Which of the following forecasting techniques would be most
likely to use the historical exchange rate data for the euro to predict
the euro's future exchange rate? Answer: technical forecasting
◉ Factors such as economic growth, inflation, and interest rates are
an integral part of ____ forecasting. Answer: fundamental
,◉ If an MNC invests excess cash in a foreign county, it would like the
foreign currency to ____; if an MNC issues bonds denominated in a
foreign currency, it would like the foreign currency to ____. Answer:
appreciate; depreciate
◉ If the one-year forward rate for the euro is $1.07, while the
current spot rate is $1.05, the expected percentage change in the
euro is ____ percent. Answer: 1.07/1.05 - 1 = 1.90%
◉ Purchasing power parity is used in: Answer: fundamental
forecasting
◉ Silicon Co. has forecasted the Canadian dollar for the most recent
period to be $0.73. The realized value of the Canadian dollar in the
most recent period was $0.80. Thus, the absolute forecast error as a
percentage of the realized value was ____ percent. Answer: |(.73-
.80)|/(.80)=8.8% (Take absolute value of the numerator here)
◉ Sulsa Inc. uses fundamental forecasting. Using regression analysis,
it has determined the following equation for the euro:
eurot
= b0 + b1INFt − 1 + b2INCt − 1
= .005 + .9INFt − 1 + 1.1INCt − 1
, The most recent quarterly percentage change in the inflation
differential between the United States and Europe was 2 percent,
while the most recent quarterly percentage change in the income
growth differential between the United States and Europe was −1
percent. Based on this information, the forecast for the euro is a(n)
____ of ____ percent. Answer: eurot = .005 + .9(.02) + 1.1(−.01) = 1.2%
appreciate; 1.2
◉ The following regression model was estimated to forecast the
percentage change in the Australian dollar (AUD):
AUDt = a0 + a1INTt + a2INFt − 1 + μt,
where AUD is the quarterly change in the Australian dollar, INT is
the real interest rate differential in period t between the United
States and Australia, and INF is the inflation rate differential
between the United States and Australia in the previous period.
Regression results indicate coefficients of a0 = .001; a1 = −.8; and a2
= .5. Assume that INFt − 1 = 4%. However, the interest rate
differential is not known at the beginning of period t and must be
estimated. You have developed the following probability
distribution:
WITH ANSWERS GUARANTEED SUCCESS
◉ Assume that the forward rate is used to forecast the spot rate. The
forward rate of the Canadian dollar contains a 6 percent discount.
Today's spot rate of the Canadian dollar is $.80. The spot rate
forecasted for one year ahead is: Answer: $.80(1+(-6%))=$.752
◉ Which of the following forecasting techniques would be most
likely to use today's forward exchange rate to forecast the future
exchange rate? Answer: market-based forecasting
◉ Which of the following forecasting techniques would be most
likely to use relationships between economic factors and exchange
rate movements to forecast the future exchange rate? Answer:
fundamental forecasting
◉ Which of the following forecasting techniques would be most
likely to use the historical exchange rate data for the euro to predict
the euro's future exchange rate? Answer: technical forecasting
◉ Factors such as economic growth, inflation, and interest rates are
an integral part of ____ forecasting. Answer: fundamental
,◉ If an MNC invests excess cash in a foreign county, it would like the
foreign currency to ____; if an MNC issues bonds denominated in a
foreign currency, it would like the foreign currency to ____. Answer:
appreciate; depreciate
◉ If the one-year forward rate for the euro is $1.07, while the
current spot rate is $1.05, the expected percentage change in the
euro is ____ percent. Answer: 1.07/1.05 - 1 = 1.90%
◉ Purchasing power parity is used in: Answer: fundamental
forecasting
◉ Silicon Co. has forecasted the Canadian dollar for the most recent
period to be $0.73. The realized value of the Canadian dollar in the
most recent period was $0.80. Thus, the absolute forecast error as a
percentage of the realized value was ____ percent. Answer: |(.73-
.80)|/(.80)=8.8% (Take absolute value of the numerator here)
◉ Sulsa Inc. uses fundamental forecasting. Using regression analysis,
it has determined the following equation for the euro:
eurot
= b0 + b1INFt − 1 + b2INCt − 1
= .005 + .9INFt − 1 + 1.1INCt − 1
, The most recent quarterly percentage change in the inflation
differential between the United States and Europe was 2 percent,
while the most recent quarterly percentage change in the income
growth differential between the United States and Europe was −1
percent. Based on this information, the forecast for the euro is a(n)
____ of ____ percent. Answer: eurot = .005 + .9(.02) + 1.1(−.01) = 1.2%
appreciate; 1.2
◉ The following regression model was estimated to forecast the
percentage change in the Australian dollar (AUD):
AUDt = a0 + a1INTt + a2INFt − 1 + μt,
where AUD is the quarterly change in the Australian dollar, INT is
the real interest rate differential in period t between the United
States and Australia, and INF is the inflation rate differential
between the United States and Australia in the previous period.
Regression results indicate coefficients of a0 = .001; a1 = −.8; and a2
= .5. Assume that INFt − 1 = 4%. However, the interest rate
differential is not known at the beginning of period t and must be
estimated. You have developed the following probability
distribution:
