Assignment 10 (Chapter 11)
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1. Which of the following tends to cause the U.S. dollar to appreciate in value?
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2. An appreciation in the value of the U.S. dollar against the British pound would tend to:
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3. If you have a commitment to pay a friend in Britain 1,000 pounds in 30 days, you could remove the risk of loss due to the appreciation of the pound by:
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4. A U.S. export company scheduled to receive 1 million pounds six months from today can hedge its foreign exchange risk by:
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5. Over time, a depreciation in the value of a nation's currency in the foreign exchange market will result in:
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6. Suppose that a Swiss watch that costs 400 francs in Switzerland costs $200 in the United States. The exchange rate between the franc and the dollar is:
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7. Under a system of floating exchange rates, the Swiss franc would depreciate in value if which of the following occurs?
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8. Which financial instrument provides a buyer the right to purchase or sell a fixed amount of currency at a prearranged price, within a few days to a couple of years?
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9. Given the foreign currency market for the Swiss franc, the supply of francs slopes upward because as the dollar price of the franc rises:
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10. Suppose there occurs an increase in the Canadian demand for Japanese computers. This results in a(n):
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| 11. Table 11.1 gives the exchange-rate quotations for the U.S. dollar and the British pound. Answer the question(s) on the basis of this information.
Table 11.1. Foreign Exchange Quotations
Consider Table 11.1. If one were to buy pounds for immediate delivery, on Tuesday the dollar cost of each pound would be:
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| 12. Table 11.1 gives the exchange-rate quotations for the U.S. dollar and the British pound. Answer the question(s) on the basis of this information.
Table 11.1. Foreign Exchange Quotations
Consider Table 11.1. Comparing Tuesday to the previous Monday, by Tuesday the dollar had:
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| 13. Table 11.1 gives the exchange-rate quotations for the U.S. dollar and the British pound. Answer the question(s) on the basis of this information.
Table 11.1. Foreign Exchange Quotations
Consider Table 11.1. Concerning the Tuesday quotations: compared to the cost of buying 100 pounds on the spot market, if 100 pounds were bought for future delivery in 180 days, the dollar cost of the pounds would be:
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14. In the interbank market for foreign exchange, the ____ refers to the price that a bank is willing to pay for a unit of foreign currency.
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15. In the interbank market for foreign exchange, the ____ refers to the price for which a bank is willing to sell a unit of foreign currency.
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| 16. Interest Rates Assume the following: (1) the interest rate on 6-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50 while the 6-month forward price of the pound is $1.485. Consider Interest Rates. If U.S. investors cover their exchange-rate risk, the extra return for the 6 months on the U.K. treasury bills is:
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| 17. Figure 11.1 illustrates the supply and demand schedules for the Swiss franc. Assume that exchange rates are flexible. Refer to this figure when answering the question(s).
Figure 11.1. Supply and Demand Schedules of Francs 
Refer to Figure 11.1. Suppose the exchange rate is $.30 per franc. At this exchange rate there is an ____ of francs that leads to a ____ in the dollar price of the franc, a(n) ____ in the quantity of francs supplied, and a(n) ____ in the quantity of francs demanded.
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| 18. Figure 11.1 illustrates the supply and demand schedules for the Swiss franc. Assume that exchange rates are flexible. Refer to this figure when answering the question(s).
Figure 11.1. Supply and Demand Schedules of Francs
Refer to Figure 11.1. Suppose the exchange rate is $.70 per franc. Free-market forces would lead to a(n) ____ of the dollar against the franc and a(n) ____ in U.S. international competitiveness.
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| 19. Answer the question(s) on the basis of the data shown in Table 11.2.
Table 11.2. Supply and Demand of British Pounds
Refer to Table 11.2. The equilibrium exchange rate equals:
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| 20. Answer the question(s) on the basis of the data shown in Table 11.3.
Table 11.3. Key Currency Cross Rates
Refer to Table 11.3. The yen cost of purchasing 100 British pounds is roughly:
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| 21. Answer the question(s) on the basis of the data shown in Table 11.4.
Table 11.4. Forward Exchange Rates
Refer to Table 11.4. Comparing the franc's forward rates against the franc's spot rate, the exchange market's consensus is that over the period of a forward contract the franc's spot rate will:
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22. The offer rate:
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23. The "spread" is a bank's profit margin on foreign exchange trading and equals the difference between the bid rate and the offer rate.
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24. As the dollar's exchange value appreciates against the pound, U.S. residents tend to import more British goods and thus demand more pounds.
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25. If the exchange rate is $0.01 per yen in New York and $0.015 per yen in Tokyo, an arbitrager could profit by buying yen in Tokyo and simultaneously sell them in New York.
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by the Contributing Authors.
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admin. (2009, January 27). Assignment 10 (Chapter 11). Retrieved November 23, 2009, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/international-economics/Assignment10.htm.
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