What is the impact of an appreciation in the value of a country’s currency?(1) Exports will be given a stimulus(2) The rate of domestic inflation will rise
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1 .In evaluating the impact of relative inflation rates on the demand for a foreign currency,which of the following is true?
A Inflation is irrelevant to currency demand. B As inflation associated with a foreign economy increases in relation to a domesticeconomy, demand for the foreign currency falls. C As inflation associated with a foreign economy increases in relation to a domesticeconomy, demand for the foreign curren...
2 .A company has several long-term floating rate bonds outstanding and is considering hedging interest rate risk.Which of the following derivative instruments is recommended for this purpose?
A Money market hedge B Forward currency contract C Fixed rate bank loans D Interest rate swap
3 .Which of the following statements about the term structure of interest rates is/are true?(1) An “inverted” yield curve is where long-term interest rates are higher than shortterm interest rates.(2) A rising yield curve is caused when investors prefer to buy for long-dated bonds
A 1 only B 2 only C Both 1 and 2 D Neither 1 nor 2
4 .In relation to hedging currency risk, which of the following statements is correct?
A The flexible nature of currency futures means that they can always be matched witha specific currency exposure B Currency options carry an obligation to the holder to exercise the option at maturity C Forward contracts require the payment of a premium D A money market hedge should give approximate...
5 .
A 91·36 rupees per ￡ B 86·46 rupees per ￡ C 70·05 rupees per ￡ D 76·96 rupees per ￡
7 .“There is a risk that the value of our export earnings will fall over the next few years due to an appreciating domestic currency.”To which risk does the above statement refer?
A Translation risk B Economic risk C Transaction risk D Financial risk
8 .In relation to the term structure of interest rates what is a “normal” yield curve?
A Upward sloping B Downward sloping C U-shaped D Horizontal
9 .evaluate its economic exposure to long-term exchange rate trends.Which of the following statements is correct?
A Burger Queen will suffer an economic loss if it has to make payments in a foreigncurrency and its domestic currency appreciates B Burger Queen will enjoy an economic gain if it has to make payments in a foreigncurrency and the foreign currency appreciates C Burger Queen will suffer an economic los...
10 .Universal Exports Co limits its operations to exporting overseas.Which ONE of the following statements concerning Universal’s exposures to exchange rate risk is correct?
A Universal is subject to transaction, economic and translation exposure B Universal is subject to transaction and economic exposure C Universal is only subject to transaction exposure D Universal is not
