Currency and Euro-pound Exchange Rate

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25.3.44. When Honda, a Japanese auto maker, built a factory in Ohio, A. It was engaged in foreign direct investment
B. It was engaged in portfolio investment
C. It was engaged in a cross-border acquisition
D. None of the above.

26.3.45. Government controlled investment funds, known as sovereign wealth funds, A. Are playing a less-important role in international finance following the end of the fixed exchange rate era B. Are mostly domiciled in Asian and Middle Eastern countries. C. Are usually are responsible for converting trade surpluses and oil revenues into foreign exchange reserves. D. None of the above

27.3.46. Foreign direct investment (FDI) occurs
A. when an investor acquires a measure of control of a foreign business B. when there is an acquisition, by a foreign entity in the U.S., of 10 percent or more of the voting sharesof a business C. with sales and purchases of foreign stocks and bonds that do not involve a transfer of control D. a and b

28.5.10. Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €512,100. The U.S. importer will contact his U.S. bank (where of course he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes as €1.0242/$1.00. The importer accepts this price, so his bank will ____________ the importer's account in the amount of ____________. A. Debit, $500,000

B. Credit, €512,100
C. Credit, $500,000
D. Debit, €512,100

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Spot Rate Quotations
29.5.16. Using the table shown, what is the most current spot exchange rate shown for British pounds? Use a direct quote from a U.S. perspective. A. $1.61 = ≤1.00
B. $1.60 = ≤1.00
C. $1.00 = ≤0.625
D. $1.72 = ≤1.00

30.5.17. Suppose that the current exchange rate is €0.80 = $1.00. The direct quote, from the U.S. perspective is A. €1.00 = $1.25
B. €0.80 = $1.00
C. ≤1.00 = $1.80
D. None of the above

31.5.18. Suppose that the current exchange rate is €1.00 = $1.60. The indirect quote, from the U.S. perspective is: A. €1.00 = $1.60
B. €0.6250 = $1.00
C. €1.60 = $1.00
D. None of the above

32.5.19. Suppose that the current exchange rate is ≤1.00 = $2.00. The indirect quote, from the U.S. perspective is: A. ≤1.00 = $2.00
B. ≤1.00 = $0.50
C. ≤0.50 = $1.00
D. None of the above

33.5.20. Indirect exchange rate quotations from the U.S. perspective are A. The price of one unit of the foreign currency in terms of the U.S. dollar. B. The price of one U.S. dollar in the foreign currency.

34.5.24. Suppose the spot ask exchange rate, Sa($|≤), is $1.90 = ≤1.00 and the spot bid exchange rate, Sb($|≤), is $1.89 = ≤1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minutes later, how much of your $10,000,000 would be "eaten" by the bid-ask spread? A. $1,000,000

B. $52,910.05
C. $100,000
D. $52,631.58

35.5.25. If the $/€ bid and ask prices are $1.50/€ and $1.51/€, respectively, the corresponding €/$ bid and ask prices are: A. €0.6667 and €0.6623
B. $1.51 and $1.50
C. €0.6623 and €0.6667
D. cannot be determined with the information given

36.5.26. In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/≤ bid-ask quote of $1.9072-$1.9077. The "big figure", assumed to be known to all traders is: A. 1.9077

B. 1
C. 1.90
D. 77

37.5.27. In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/≤ bid-ask quote of $1.9072-$1.9077. The currency dealer would likely quote that as: A. 72-77

B. 77-72
C. 5 points
D. None of the above

38.5.28. In the Interbank market, the standard size of a trade among large banks in the major currencies is: A. For the U.S.-dollar equivalent of $10,000,000,000.
B. For the U.S.-dollar equivalent of $10,000,000.
C. For the U.S.-dollar equivalent of $100,000.
D. For the U.S.-dollar equivalent of...
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