Currency Exchange Rates Paper 2

1

Francine is the CFO for a mid-sized corporation based in the USA. Her corporation needs to pay a German company 0,000 Euros in 30 days for materials Francine’s corporation is importing to the USA. Today’s spot rate for the exchange rate between the US Dollar and Euro is 1.2534. The 30 day forward rate is 1.2313. Ignoring interest rates,






2

Exchange rates are determined by






3

If consumers in Japan decide they would like to increase their purchases of consumer products made in the United States, in foreign currency markets there will be a tendency for






4

If the exchange rate has changed from 1 U.S. dollar to 5 foreign currency units (FCUs) to a rate of 1 U.S. dollar to 5.5 FCUs,






5

The spot rate for one Australian dollar is US $0.92685 and the 60-day forward rate is US $0.93005. Which one of the following statements is consistent with these facts?






6

If the dollar price of the euro rises, which of the following will occur?






7

What is the effect on prices of U.S. imports and exports when the dollar depreciates?






8

What is the effect when a foreign competitor’s currency becomes weaker compared to the U.S. dollar?






9

The U.S. dollar has a free-floating exchange rate. When the dollar has fallen considerably in relation to other currencies, the






10

If the U.S. dollar declines in value relative to the currencies of many of the U.S. trading partners, the likely result is that






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