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Multiple Choice: 1.D 2.A 3.C 4.B 5.B 6.B 7.B 8.D 9.A 10.C

This document is an exam answer key for an international economics course. It provides the answers to 10 multiple choice questions and works through two word problems. The first problem calculates the returns from investing $100,000 at home versus abroad due to currency appreciation. The second problem determines the optimal exchange path between US dollars, Deutsche Marks, and Irish pounds to minimize exchange losses.

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17 views1 page

Multiple Choice: 1.D 2.A 3.C 4.B 5.B 6.B 7.B 8.D 9.A 10.C

This document is an exam answer key for an international economics course. It provides the answers to 10 multiple choice questions and works through two word problems. The first problem calculates the returns from investing $100,000 at home versus abroad due to currency appreciation. The second problem determines the optimal exchange path between US dollars, Deutsche Marks, and Irish pounds to minimize exchange losses.

Uploaded by

Toàn Phạm
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Econ 380: International Economics

Exam #2
Answer Key

Multiple Choice
1.D
2.A
3.C
4.B
5.B
6.B
7.B
8.D
9.A
10.C
Problem #1
a. She would have $106,000 if she invested at home. If she invested abroad, the
$100,000 would be 150,000DM, and at 4% interest rate, that would be 156,000DM at the
end of the year. When she reconverts this to dollars, this would become $107,586, or
$1586 more than if she invested at home. The reason for this is that the DM appreciated
over this time, allowing her to buy more US$ at the end of the year as compared to the
beginning of the year.
b. At the exchange rates given, you would lose 3,254.48 IR, or $3578.95, by first
converting to DM and then to IR. She should convert directly from US$ to IR.

Problem #2
a. 20,000
b. 16,000
c. TD=0, TC=400,000
d. 4.8b

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