Scribd
Upload
62 views4 pages

Past Exams Sample

The document provides a sample exam for an international finance course. It includes multiple choice questions, short answer questions, and problems covering topics like exchange rates, purchasing power parity, foreign exchange exposure, and currency crises. The questions test understanding of concepts like forward contracts, options pricing, balance of payments, the law of one price, exchange rate regimes, and hedging currency risk.

Uploaded by

Albert Parengkuan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
62 views4 pages

Past Exams Sample

The document provides a sample exam for an international finance course. It includes multiple choice questions, short answer questions, and problems covering topics like exchange rates, purchasing power parity, foreign exchange exposure, and currency crises. The questions test understanding of concepts like forward contracts, options pricing, balance of payments, the law of one price, exchange rate regimes, and hedging currency risk.

Uploaded by

Albert Parengkuan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

1 hedge transactionexposure forwards moneymarket uncoveredpos

Important put
Nick

Important:
This a sample only and is published to make you familiar with
the style and format of the final exam. It does not cover all
examinable materials and it is your responsibility to study all
taught topics(excluding Cryptocurrencies) and tutorial
materials to be ready for the final exam!

Part A MCQ 2047 Xp t


Question
A speculator in the futures market wishing to lock in a price at which they could ________ a
foreign currency will ________ a futures contract.
A) buy; sell
B) sell; buy
C) buy; buy
D) none of the above

Question
The maximum gain for the writer of a call option contract is ________ while the maximum loss
is ________.
A) unlimited; the premium earned.
B) the premium earned; unlimited.
C) unlimited; unlimited.
D) unlimited; the value of the underlying asset.

Question
The travel services provided to international travellers by Qantas would be recorded in the
current account subcategory of:
A) services trade.
B) income.
C) goods trade.
D) current transfers.

Question
________ states that nominal interest rates in each country are equal to the required real rate
of return plus compensation for expected inflation.
A) Absolute PPP
B) Relative PPP
C) The Law of One Price
D) The Fisher Effect

Question
A forward contract to deliver British pounds for US dollars could be described either as
________ or ________.

BXXXXXX Title and Name Page 1 of 4


A) buying dollars forward; buying pounds forward
B) selling pounds forward; selling dollars forward
C) selling pounds forward; buying dollars forward
D) selling dollars forward; buying pounds forward

Question
Which of the following is NOT a part of the Current Account of BOP?
A) net export/import of goods
B) balance of trade
C) net portfolio investment
D) net export/import of services

Question
If an identical product can be sold in two different markets, and no restrictions exist on the
sale or transportation costs, the product's price should be the same in both markets. This is
known as:
A) relative purchasing power parity.
B) interest rate parity.
C) the law of one price.
D) equilibrium.

Question
If a country chooses to have a pure float exchange rate regime, which two of the three
attributes of an ideal currency is the 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.

Question
Which one of the following management techniques is likely to best offset the risk of long-
run exposure to receivables denominated in a particular foreign currency?
A) Borrow money in the foreign currency in question.
B) Lend money in the foreign currency in question.
C) Increase sales to that country.
D) Increase sales in this country.

Question
Mel Speckle works for the currency trading unit of ING Bank in London. She speculates that
in the coming months the dollar will rise sharply relative to the British pound. What should
Mel do to act on his speculation?
A) Buy a call on the pound.
B) Sell a call on the pound.
C) Buy a put on the pound.
D) Sell a put on the pound.
Part C-Sort answers

Question (Short answers)


Except when used for hedging purposes foreign currency borrowing should always be
avoided irrespective of the exchange rate system Do you agree Discuss using examples

Question (Short answers)


In September 2011 the Swiss central bank decided to cap (or peg) the value of the Swiss franc
against the euro at 1.20 francs to the euro. In January 2015 the Swiss central bank announced
that they were ceasing to peg the franc against the euro; the exchange rate would revert to
floating.
Why did the Swiss central bank peg to the euro in September 2011? Explain.

Question (Short answers)


You have just been appointed treasurer of a medium-sized Slovenian instrument-making
company. Its manufacturing facilities are in Slovenia (which is part of the Eurozone) and all
its raw materials and parts come from within the Eurozone. Exports to countries outside the
Eurozone account for 60 percent of the company s sales and most of its export sales are to
the US As the market for the company s products is international, it faces the same
competitors in each market. Its major competitor is a US company, and another substantial
competitor is based in Japan.
What are the channels through which the company s foreign exchange exposure
arises? Explain.

Question (Short answers)

Suppose that prices in Brazil are rising faster than US prices, and the US is a very important
trading partner of Brazil. (Brazil s currency is called the real.)

Suppose the dollar/real rate is floating. What does relative purchasing power parity (RPPP)
say should happen to the value of the real relative to the US dollar? Explain. (In your answer,
make sure you define RPPP.)
Part C-Problems
Problem
The current Venezuelan political and economic crisis deepened in late 2015. On September
30th Venezuela s currency the Bolivar was trading at S(Bolivar/Dollar) = 800; one
month earlier it was S(Bolivar/Dollar) = 684. Many currency forecasters were predicting that
the Bolivar would fall an additional 70% from its September 30th value by the end of 2015.

What was the percentage change in the value of the Bolivar relative to the US dollar
during September 2015? (2 marks)

What was the forecast Bs/$ exchange rate for end 2015? (2 marks)

Problem

In December 1994 the government of Mexico officially changed the value of the
Mexican peso from 3.2 pesos per dollar to 5.5 pesos per dollar. What was the
percentage change in its value? Was this a depreciation, devaluation, appreciation, or
revaluation? Explain.

Calculation of Percentage Change in Value Values

Initial exchange rate (peso/$) 3.20


New exchange rate (peso/$) 5.50

Percentage change in peso value

You might also like