FM4001 國際財務管理 期中考試
4/15/2004
Multiple Choice Questions (6% each)
1. According the concept of the “Impossible Trinity” , if a country chooses to have a pure float
exchange rate regime, which two goals is a country most able to achieve?
a. Monetary independence and exchange rate stability.
b. Exchange rate stability and full financial integration.
c. Full financial integration and monetary independence.
d. A country cannot attain any of the exchange rate goals with a pure float exchange rate
regime.
2.
Under the gold standard of currency exchange that existed from 1879 to 1914, an ounce of
gold cost $20.67 in U.S. dollars and £4.2474 in British pounds. Therefore, the exchange
rate of pounds per dollar under this fixed exchange regime was
a. £4.8665/$.
b. £0.2055/$.
c. always changing because the price of gold was always changing.
d. unknown because there is not enough information to answer this question.
3.
Under a fixed exchange rate regime, the government can prevent its currency from
revaluation by
a. buying foreign exchange in the market.
b. expanding its money supply.
c. restricting capital inflows.
d. all of the above.
e. none of the above.
4.
Which of the following could potentially result in a current account deficit?
a. Low level of savings
b. Strong economic growth
c. Persistent government budget deficit.
d. National spending exceeds national income
e. all of the above
5.
Suppose Patagonia has a government surplus of $10 billion. At the same time, private
investment in Patagonia exceeds private savings by $15 billion. Patagonia has a
currency-account
a. surplus of $25 billion
b. surplus of $5 billion
c. deficit of $25 billion
d. deficit of $5 billion
6.
One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that
time the rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the
theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars
should be approximately
a. $.96/C$
b. $1/C$1
c. $1.04/C$1
d. Relative PPP provides no guide for this type of question
7.
If we set the real effective exchange rate index between Canada and the United States equal
to 100 in 1998, and find that the U.S. dollar has risen to a value of 112.6, then from a
competitive perspective the U.S. dollar is)
a. overvalued.
b. undervalued.
c. very competitive.
d. There is not enough information to answer this question.
8.
Sony of Japan produces DVD players and exports them to the United States. Last year the
exchange rate was 130¥/$ and Sony charged $150 per DVD player. Currently the spot
exchange rate is 110¥/$ and Sony is charging $170 per DVD player. What is the degree of
pass through by Sony of Japan on their DVD players?
a. 95.9%
b. 86.7%
c. 73.2%
d. 4.1%
9.
According to the international Fisher Effect, if an investor purchases a five-year U.S. bond
that has an annual interest rate of 5% rather than a comparable British bond that has an
annual interest rate of 6%, then the investor must be expecting
a. the U.S. dollar to appreciate approximately 1% per year over the next 5 years.
b. the forward British pound has a premium of approximately 1% per year.
c. the U.S. inflation rate exceeds British inflation rate by approximately 1% per year over
the next 5 years.
d. All of the above
e. None of the above.
10. The current U.S. dollar-yen spot rate is 125¥/$. If the 90-day forward exchange rate is 127
¥/$ then the yen is selling at a per annum _________ of ___________.
a. premium; 1.57%
b. premium; 6.30%
c. discount; 1.57%
d. discount; 6.30%
e. none of the above
11. A major U.S. multinational firm has forecast the Euro/dollar rate to be 1.10/$ one year
hence, and an exchange rate of $1.40 for the British pound (£) in the same time period.
What does this imply the companies expected rate for the Euro per pound to be in one year?
a. 1.40Euro/£
b. 1.40£/Euro
c. 1.54£/Euro
d. 1.54Euro/£
e. none of the above
12. Which of the following is not identified as a root of the Asian currency crisis?
a. the collapse of some Asian currencies
b. the rapid economic growth in the United States
c. corporate socialism
d. banking stability and management
Essay Questions (14% each)
13. Assume you are a trader with Deutsche Bank. From the quote screen on your computer
terminal, you notice that Dresdner Bank is quoting €1.6230/$ and Credit Suisse is offering
SF1.4260/$. You learn that UBS is making a direct market between the Swiss franc and
the mark, with a current €/SF quote of 1.1250. Assume that you have $5,000,000 with which
to conduct the arbitrage. Can you make money by triangular arbitrage？If so, explain the
steps and compute your profit.
14. Currently, the spot exchange rate is $1.50/£ and the three-month forward exchange rate is
$1.52/£. The three-month interest rate is 8.0% per annum in the U.S. and 5.8% per annum in
the U.K. Assume that you can borrow as much as $1,500,000 or £1,000,000.
How would you carry out covered interest arbitrage? Show all the steps and determine the
arbitrage profit.
FM4001
Name:
Class:
Midterm Exam (4/15/ 2004)
Answer sheet
I.D.:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.


Answers:
c
a
b d e d c
c a d d b
13. Solution: To make a triangular arbitrage profit the Deutsche Bank trader would sell
$5,000,000 to Dresdner Bank at €1.6230/$1.00. This trade would yield €8,115,000 =
$5,000,000 x 1.6230. The Deutsche Bank trader would then sell the deutsche marks for
Swiss francs to Union Bank of Switzerland at a price of €1.1250/SF1.00, yielding
SF7,213,333 = €8,115,000/1.1250. The Dresdner trader will resell the Swiss francs to
Credit Suisse for $5,058,438 =SF7, 213,333/1.4260, yielding a triangular arbitrage profit of
$58,438.
14. (1+I$) = 1.02
(1+I£)(F/S) = (1.0145)(1.52/1.50) = 1.0280
Thus, IRP is not holding exactly.
(1) Borrow $1,500,000; repayment will be $1,530,000.
(2) Buy £1,000,000 spot using $1,500,000.
(3) Invest £1,000,000 at the pound interest rate of 1.45%; maturity value will be £1,014,500.
(4) Sell £1,014,500 forward for $1,542,040; Arbitrage profit will be $12,040
平均
100 分
90-99
80-89
70-79
60-69
50-59
40-49
30-39
75
3
11
28
25
10
10
3
2