Finance Review
Mid-term I Review Questions
1. 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.
2. Many people were surprised when Vietnam became the second largest coffee producing country in the world in recent years, second only to Brazil. The Vietnamese dong, VND or d, is managed against the U.S. dollar but is not widely traded. If you were a traveling coffee buyer for the wholesale market (a "coyote" by industry terminology), which of the following currency rates and exchange commission fees would be in your best interest if traveling to Vietnam on a buying trip with an initial $10,000 for exchange?
Currency Exchange
Vietnamese bank rate
Saigon Airport exchange bureau rate
Hotel exchange bureau rate
Rate d19,800 d19,500 d19,400 Commission
2.50%
2.00%
1.50%
3. Under the gold standard, the price of an ounce of gold in U.S. dollars was $20.67, while the price of that same ounce in British pounds was £3.7683. What would the exchange rate between the dollar and the pound be? What if the U.S. dollar price had been $42.00 per ounce?
4. Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, currencies that are predominantly market-driven are considered to be:
A) soft pegs.
B) hard pegs.
C) floating arrangements.
D) a residual agreement.
5. When categorizing investments for the financial account component of the balance of payments the ________ is an investment where the investor has no control whereas the ________ is an investment where the investor has control over the asset.
A) direct investment; portfolio investment
B) direct investment; indirect investment
C) portfolio investment; indirect investment
D) portfolio investment; direct investment
6. Assume
1. 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.
2. Many people were surprised when Vietnam became the second largest coffee producing country in the world in recent years, second only to Brazil. The Vietnamese dong, VND or d, is managed against the U.S. dollar but is not widely traded. If you were a traveling coffee buyer for the wholesale market (a "coyote" by industry terminology), which of the following currency rates and exchange commission fees would be in your best interest if traveling to Vietnam on a buying trip with an initial $10,000 for exchange?
Currency Exchange
Vietnamese bank rate
Saigon Airport exchange bureau rate
Hotel exchange bureau rate
Rate d19,800 d19,500 d19,400 Commission
2.50%
2.00%
1.50%
3. Under the gold standard, the price of an ounce of gold in U.S. dollars was $20.67, while the price of that same ounce in British pounds was £3.7683. What would the exchange rate between the dollar and the pound be? What if the U.S. dollar price had been $42.00 per ounce?
4. Since 2009 the IMF's exchange rate regime classification system uses a "de facto classification" methodology. Under this system, currencies that are predominantly market-driven are considered to be:
A) soft pegs.
B) hard pegs.
C) floating arrangements.
D) a residual agreement.
5. When categorizing investments for the financial account component of the balance of payments the ________ is an investment where the investor has no control whereas the ________ is an investment where the investor has control over the asset.
A) direct investment; portfolio investment
B) direct investment; indirect investment
C) portfolio investment; indirect investment
D) portfolio investment; direct investment
6. Assume