Why would a central bank buy or sell foreign currency? What will be an ideal response? ANSWER Answer: When a central bank buys (sells) foreign currency, its international reserves increase (decrease), and the money supply increases (decreases) simultaneously.
Date: September 19th, 2020
What is the cost of marginal investment in accounts receivable under the proposed plan? (See Table 14.7) A) $313,460 B) $276,500 C) $246,875 D) $368,314 ANSWER C
Date: September 19th, 2020
Describe the Bretton Woods currency system? What will be an ideal response? ANSWER Answer: In the Bretton Woods System, in place between 1944 and 1973, the participating countries agreed to an exchange rate regime that linked their exchange rates to the dollar. They could fluctuate in a 1% band around a fixed parity. […]
Date: September 19th, 2020
In fixed exchange rate systems, the tendency is for the domestic currency to be ________. A) undervalued B) at parity C) overvalued D) unchanged relative to the rest of the world’s currencies ANSWER Answer: C
Date: September 19th, 2020
If you were attempting to characterize the currency in a floating rate system, the most important factor to analyze is the ________ of the future exchange rate changes. A) conditional distribution B) histogram C) sample mean D) sample variance ANSWER Answer: A
Date: September 19th, 2020
In which one of the following systems would it be least difficult to quantify the currency risk? A) floating exchange system B) target zone system C) pegged exchange rate system D) currency board ANSWER Answer: A
Date: September 19th, 2020
What are the savings of marginal bad debts under the proposed plan? (See Table 14.7) A) $500,000 B) $50,000 C) $10,000 D) $5,000 ANSWER B
Date: September 19th, 2020
What is the cost of the marginal cash discount? (See Table 14.7) A) $768,750 B) $300,000 C) $307,500 D) $230,625 ANSWER D
Date: September 19th, 2020
What is the net result of increasing the cash discount? (See Table 14.7) A) +$33,750 B) -$33,750 C) +$128,750 D) -$58,750 ANSWER C
Date: September 19th, 2020
When countries have pegged exchange rate systems, they often set up ________ to improve the credibility of the system in the eyes of the global traders. A) target zone systems B) futures markets for currencies C) currency board systems D) sterilized interventions ANSWER Answer: C
Date: September 19th, 2020
