15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review School of Banking & Finance UNSW Business School Site Home Student Help Staff Help 4 FINS3616-International Business Finance Term 3 2021 Dashboard My courses FINS3616-5219_00223 Past Exam Papers + Extra Practice Problems Practice Quiz: 2020 T1 Midterm Started on Thursday, 14 October 2021, 8:17 AM State Finished Completed on Thursday, 14 October 2021, 9:32 AM Time taken 1 hour 15 mins Grade 23.00 out of 25.00 (92%) Question 1 Correct Mark 1.00 out of 1.00 The multinational financial system does NOT enable companies to Select one: a. avoid currency controls. b. reduce taxes. c. access lower cost financing sources. d. avoid exchange rate risk. e. seek lower cost production. The correct answer is: avoid exchange rate risk. Question 2 Correct Mark 1.00 out of 1.00 A gold standard ensures a long-run tendency toward price stability because Select one: a. gold is desirable. b. gold is durable and storable. c. the cost of producing an ounce of gold stays relatively constant overtime. d. gold supply is directly related to consumer satisfaction. e. gold is portable. The correct answer is: the cost of producing an ounce of gold stays relatively constant overtime. https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 1/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 3 Incorrect Mark 0.00 out of 1.00 Which of the following statements about central bank intervention in the foreign exchange markets are true? I. If a central bank wished to increase the value of their domestic currency on the foreign exchange markets without affecting domestic interest rates, they would spend foreign exchange reserves to buy their domestic currency as well as sell domestic government treasury securities. II. If a central bank wished to decrease the value of their domestic currency on the foreign exchange markets via a non-sterilized intervention, they would accumulate foreign exchange reserves by selling their domestic currency while taking no action in the domestic government treasury security markets. III. If a central bank wished to increase the value of their domestic currency on the foreign exchange markets without affecting domestic interest rates, they would spend foreign exchange reserves to buy their domestic currency as well as purchase domestic government treasury securities. IV. If a central bank wished to decrease the value of their domestic currency on the foreign exchange markets without affecting domestic interest rates, they would accumulate foreign exchange reserves by selling their domestic currency as well as sell domestic government treasury securities. Select one: a. I and III b. III and IV c. I, II, and III d. I, III, and IV e. II, III, and IV The correct answer is: II, III, and IV Question 4 Correct Mark 1.00 out of 1.00 Which of the following is NOT TRUE regarding the euro? Select one: a. It is now used by participating countries. b. It enables participating countries to engage in cross-border trade and capital flows throughout the euro-zone. c. Each participating country continues to use its own national currency along with the euro. d. It prevents any individual European country from solving local economic problems with its own unique monetary policy. The correct answer is: Each participating country continues to use its own national currency along with the euro. https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 2/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 5 Correct Mark 1.00 out of 1.00 The currency of the country Oman is pegged to the U.S. dollar. The Australian dollar is freely floating. Which of the following is probably not true? Select one: a. A depreciation of the U.S. dollar would result in a depreciation of the Omanian currency. b. A depreciation of the U.S. dollar would result in a depreciation of the Australian dollar. c. A depreciation of the Australian dollar with respect to the U.S. dollar causes an increase in Australia’s exports to both the U.S. and Oman. d. A depreciation of the Australian dollar with respect to the U.S. dollar causes reduced trade between the U.S. and Oman. The correct answer is: A depreciation of the U.S. dollar would result in a depreciation of the Australian dollar. Question 6 Correct Mark 1.00 out of 1.00 What is the name of the rate currency traders quote in the interbank market to sell foreign currencies? Select one: a. Bid-ask spread b. Bid rate c. Cross rate d. Ask rate e. Forward rate The correct answer is: Ask rate https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 3/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 7 Correct Mark 1.00 out of 1.00 Which of the following statements are true? I. A decrease in the real exchange (USD/X) rate will increase the cost of goods from country X to international consumers. II. A decrease in the real exchange (USD/X) rate implies that the nominal exchange rate (USD/X) has increased. III. An increase in the real exchange (USD/X) rate will make country X less competitive in international trade. IV. An increase in the real exchange (USD/X) rate will increase imports into country X. Select one: a. I and III b. II and IV c. III and IV d. I, III, and IV e. II, III, and IV The correct answer is: III and IV Question 8 Correct Mark 1.00 out of 1.00 Which of the following is true about forwards and futures: Select one: a. Futures are more customizable than are forwards b. Futures ensure a more perfectly matched hedge than do forwards c. Futures are more liquid than are forwards d. Forwards and futures give holders the right but not the obligation to buy the underlying currency e. Futures have more default risk on average Your answer is correct. The correct answer is: Futures are more liquid than are forwards https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 4/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 9 Correct Mark 1.00 out of 1.00 You can speculate on a depreciation of the Australian dollar relative to the US dollar if you Buy a Australian dollar put option and Sell a Australian dollar call option. (Please drag the words below into appropriate place) Buy Sell Your answer is correct. The correct answer is: You can speculate on a depreciation of the Australian dollar relative to the US dollar if you [Buy] a Australian dollar put option and [Sell] a Australian dollar call option. (Please drag the words below into appropriate place) Question 10 Correct Mark 1.00 out of 1.00 Suppose the spot direct quotes for the pound sterling and the euro are $1.3981-89 and $1.2300-33, respectively. What is the direct quote for the pound in France? Select one: a. €1.1336-73/£ b. €0.8793-0.8819/£ c. £0.0808-12/€ d. £0.0976-87/€ e. none of these options. The correct answer is: €1.1336-73/£ Question 11 Correct Mark 1.00 out of 1.00 If the Australian dollar depreciates against the New Zealand dollar by 5.1%, then the New Zealand dollar will appreciate against the Australian dollar by: Select one: a. 5.37% b. 4.85% c. 5.10% d. 4.63% e. 5.68% The correct answer is: 5.37% https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 5/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 12 Correct Mark 1.00 out of 1.00 Suppose it is January 1980 and the USD/Deutsche Mark (DM) exchange rate is DM1 = 0.95 and the DM/French Franc (FF) exchange rate is FF1 = 0.93.Assuming that no arbitrage opportunities exist, which of the following is closest to the FF/USD exchange rate? Select one: a. 1.1319 French francs per USD b. 0.8835 French francs per USD c. 1.0215 French francs per USD d. 0.9789 French francs per USD e. 1.0753 French francs per USD The correct answer is: 1.1319 French francs per USD Question 13 Correct Mark 1.00 out of 1.00 The spot and 30-day forward rates for the euro in terms of the dollar are $1.4757 and $1.48, respectively. The euro is said to be selling at a forward Select one: a. premium of 1.2%. b. premium of 3.5%. c. discount of 3.5%. d. discount of 1.2%. e. none of these options. The correct answer is: premium of 3.5%. Question 14 Correct Mark 1.00 out of 1.00 Suppose that the quote for Australian dollar is USD1.0633-81/AUD.If you want to buy USD913, which of the following is closest to that amount of Australian dollars that you will need to pay? Select one: a. AUD858.65 b. AUD854.79 c. AUD970.79 d. AUD975.18 e. AUD972.98 The correct answer is: AUD858.65 https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 6/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 15 Correct Mark 1.00 out of 1.00 The Danish krone changes from A$0.7877 each at the start of 2020 to A$0.8027 each at the end of 2020. Over that same year, inflation in the prices of all goods and services in Denmark is 7.3%, whereas in Australia it is 3.9%. What is the amount of real decrease (-) or real increase (+) that the Danish krone experiences against the Australian dollar during 2020? Select one: a. +5.2% b. -1.3% c. +11.5% d. -11.5% e. -5.0% The correct answer is: +5.2% Question 16 Not answered Marked out of 1.00 The American Consumer Price Index (CPI) is currently 259.5 and the Indian CPI is currently 268.9. Economists expect that in one year the American CPI will be 279.7 and the Indian CPI will be 285.4. The current spot exchange rate between the two countries is INR0.8904/USD. If relative purchasing power parity holds, what is the expected spot exchange rate in one year? Select one: a. INR0.8768/USD b. INR0.9042/USD c. INR0.8726/USD d. INR0.8593/USD e. INR0.9415/USD The correct answer is: INR0.8768/USD https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 7/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 17 Correct Mark 1.00 out of 1.00 If annualized interest rates on January 1, 1985 in the U.S. and France were 9% and 13%, respectively, and the spot value of the franc was $0.1109, then at what 180-day forward rate would interest rate parity hold? Select one: a. $0.1070 b. $0.1150 c. $0.1088 d. $0.1130 e. none of these options. The correct answer is: $0.1088 Question 18 Correct Mark 1.00 out of 1.00 Assume that the Euro (EUR) futures price for September is $1.36. Given that 150,000 units are in a Euro futures contract, the seller of Euro futures will receive which of the following? Select one: a. $237,500 b. $204,000 c. $125,500 d. $218,500 e. $110,294 Your answer is correct. The correct answer is: $204,000 https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 8/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 19 Correct Mark 1.00 out of 1.00 A put option is available for USD with a strike price of AUD0.7138 and a premium of AUD0.0211. Assume that there are no brokerage fees. Which of the following is correct about the break even price(s) (or "BEPs") for this option? Select one: a. The BEP for the buyer is 0.6927 and for the seller is 0.7349 b. The BEP for the seller is 0.6927 and for the buyer is 0.7349 c. The BEP for both the seller an the buyer is 0.6927 d. The BEP for both the seller an the buyer is 0.7349 e. None of these. Your answer is correct. The correct answer is: The BEP for both the seller an the buyer is 0.6927 Question 20 Correct Mark 2.00 out of 2.00 Australia and Italy have 140 and 150 total resources, respectively. Each country produces only two goods, toilet paper and hand sanitizer. Australia can produce each roll of toilet paper for 14 resources and each bottle of hand sanitizer for 19 resources. Italy can produce each roll of toilet paper for 6 resources and each bottle of hand sanitizer for 38 resources. Assume each country would prefer to consume more toilet paper and hand sanitizer than it currently can in an autarky. Also assume that each country can produce fractional units of each good. Between which range of prices of hand sanitizer (in terms of rolls of toilet paper) will there be gains from trade? Select one: a. Between 1.36 and 6.33 b. Between 0.16 and 0.74 c. Between 0.43 and 2.00 d. Between 0.50 and 2.33 e. Between 0.93 and 1.07 The correct answer is: Between 1.36 and 6.33 https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 9/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review Question 21 Correct Mark 2.00 out of 2.00 You have the following spot bid and ask rates between the Chinese yuan (CNY), the British pound (GBP), and the Vietnamese dong (VND): BID ASK VND 4,007.2/CNY VND 4,047.4/CNY VND 33,130/GBP VND 33,462/GBP GBP 0.1148/CNY GBP 0.1160/CNY Which of the following is the closest to the arbitrage profit that is possible at these rates? Select one: a. 3.24% b. 2.25% c. 3.13% d. 3.59% e. There is no arbitrage possible at these rates. Your answer is correct. The correct answer is: 3.24% Question 22 Correct Mark 2.00 out of 2.00 A bank quotes the following spot and interest rates quotes: Bid Ask Spot Exchange Rate USD 0.7947/AUD USD 0.7995/AUD Interest Rate for USD 1.10% 1.70% Interest Rate for AUD 4.30% 4.70% ABC Corp, a US firm, expects an AUD receivable in one year's time. They want to hedge the exchange rate risk arising from having to convert AUD to USD. If ABC Corp wants to use a combination of spot contracts and money market investments to hedge this risk, what is the effective one-year forward bid price that it can obtain for converting the AUD receivable to USD? Assume CIRP holds. Select one: a. USD 0.7674/AUD b. USD 0.7796/AUD c. USD 1.2827/AUD d. USD 1.3031/AUD e. None of these options. Your answer is correct. The correct answer is: USD 0.7674/AUD https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 10/11 15/10/2021, 16:31 Practice Quiz: 2020 T1 Midterm: Attempt review https://moodle.telt.unsw.edu.au/mod/quiz/review.php?attempt=10427322&cmid=3973098 11/11