国际金融学习题

End of Chapter QuestionsChapter 1ing the following data (billions of dollars) for a given year, calculate thebalance on merchandise trade; balance on goods, services, and income; and the current account balance. Indicate whether these balances are deficits or surpluses.Exports of goods 719 Imports of goods 1,145Exports of services 279 Imports of services 210Net unilateral transfers -49 Income receipts 284Income payments 269 Statistical discrepancy 112.Write out a positive and negative aspect of a nation being a net debtor. Do thesame thing for a nation that is a net creditor.3.Explain why a nation might desire to receive both portfolio investment and directinvestment from abroad.4.Write out a single equation showing the relationship between the currentaccount and net capital inflows, including changes in official reserves and other government assets, as they relate to investment spending and domestic saving.5.Suppose a nation spends 10 percent of its income on investment and the privatesector saves 5 percent. Further, suppose the national government runs a deficit of 1 percent. Explain what the above conditions mean for the nation’s capital account and current account. How might the imbalance be corrected?Chapter 26.Suppose the U.S.-dollar-per-currency exchange rate of the euro was 1.2201 onThursday and 1.2168 on Friday. Did the euro appreciate or depreciate relative to the U.S. dollar? How much was the appreciation/depreciation (in percenta ge change terms)?7.8.rates: 1.234$/€, and $/£=1.702. In London, the euro equivalent rate of the pound is1.425€/£. Is there an arbitrage opportunity? Why or why not? Calculate the profitto be made on $1,000,000.9.Suppose we observe the following information for the euro area, Canada, and thethe U.S. dollar using 2003 as the base year. Do the values you calculated indicate an appreciation or depreciation of the U.S. dollar? What is the rate of appreciation or depreciation?10.In January 2000, the spot exchange rate for the euro was 1.05$/€. In May 2004,the rate was 1.19$/€. In January 2000, the euro-area CPI was 107.5 and the U.S.CPI was 112.7. In May 2004, the euro-area CPI was 116.4 and the U.S. CPI was 122.2. Based on this information, in nominal terms did the euro appreciate or depreciate against the dollar? What was the rate of appreciation or depreciation?Chapter311.List all of the various types of exchange-rate arrangements. Order the list ofexchange-rate arrangements from fi xed to most flexible.12.Describe two primary functions of the International Monetary Fund.13.Suppose the value of the U.S. dollar is pegged to gold at a rate of $50 per ounce.Next suppose that the value of the British pound is pegged to the U.S. dollar at a rate of $1.50 per pound, and the value of the Canadian dollar is pegged to the U.S.dollar at a rate of $1.38 Canadian dollars per U.S. dollars. Calculate the value of the Canadian dollar and the British pound relative to gold.ing the information in Problem 3, calculate the exchange rate between theCanadian dollar and the British pound.15.Suppose Argentina decides to peg the value of its currency, the peso, to a basketconsisting of 0.50 U.S. dollars and 0.50 euros. Further suppose the exchange rate between the U.S. dollar and the euro is 1.10$/€. If the basket constitutes one peso, what is the appropriate exchange value between the peso and the dollar, and between the peso and the euro?16.Based on the information in Problem 5, what is the weight assigned to the U.S.dollar in the currency basket? What is the weigh assigned to the euro?17.What is the principle responsibility of a currency board? What three mainrestrictions on a currency board make it different from a typical central bank? 18.What factors do you think should be considered when determining the rate ofcrawl for a crawling-peg exchange-rate system?19.What, in your opinion, is the chief difference between a currency- board systemand dollarization?Chapter420.Suppose the following situation prevails in the foreign exchange andEurocurrency markets for the euro(€) and the British pound (£).One-year Eurocurrency rates:Euro 3.125%British pound 4.250%Exchange rates:Spot 1.5245€/£One-year forward 1.4575€/£Explain how an individual would profit from financial arbitrage in this situation.Calculate the percentage return the individual would earn from undertaking arbitrage activity. Keep all of your calculations to four decimal points for accuracy.21.Suppose the spot exchange rate between the dollar and the euro is 1.08$/€. Thedollar can be borrowed for one year at 1.75 percent and the euro can be lent for one year 3.25 percent. What should be the forward premium or discount? What should be the one-year forward rate?22.Suppose the short-term U.S. interest rate is 1.24 percent and the Canadian rate is2.15 percent, while forecasted inflation is 2.1 percent and 2.6 percent, respectively.Calculate the real interest rate for each country. Does real interest parity hold? 23.Characterize each of the following financial instruments as either a global equity,global bond, Eurocurrency, Euronote, Eurobond, or Eurocommercial paper.a. A Brazilian firm offers a ten-year debt instrument for sale to internationalsavers.b.The government of Mexico offers a three-year debt instrument, denominatedin the U.S. dollar, for sale on the London market.c.Citibank of New York borrows a pound-denominated deposit from RoyalBank of Canada.d. A Brazilian firm offers shares of its stock for sale to international savers.Chapter524.The formula for the price of a perpetual, nonmaturing bond with an annual couponreturn of C is C/R. Note that the discounted present value of C dollars received each year forever is equal to the infinite sum,P B=C/(1+R)+ C/(1+R)2+ C/(1+R)3 +C/(1+R)4+…The amount P B should be the price that the bearer of the consol would be willing to pay to hold this instrument. And so P BShould equal C/R.Prove that this is true. [Hint:Try multiplying the equation above by the factor 1/(1+R).Then subtract the resulting equation from the equation above. Then solve for P B.]25.Suppose that traders currently anticipate that during the next year the dollar willdepreciate by 3.5 percent relative to the euro. At present, the market interest rate on a U.S. Treasury security is 5 percent, and the market interest rate on a German government bond with the same risk characteristics and the same maturity is 3 percent. Is there an excess return available from holding the German government bond? If so, what is the amount of the excess return?26.In what ways does a currency futures contract differ from a forward currencycontract?27.Why is a currency futures option a “derivative of a derivative”? Explain briefly.ing the following table, consider an American-style call option on the euro. Thecurrent euro spot exchange rate is $0.9657, and each option contract is for €62,500.Calls PutsVol. Last Vol. Last960 Jun …… 5 0.0161980 Jun 14 0.0188 ……1000 Jun 1 0.0117 ……1020 Jun 1 0.0600 …0.0100a.Is the 980 call option currently in the money, at the money, or out of themoney?b.Suppose that your corporate economist believes the euro may appreciateagainst the dollar to an exchange value as high as $1.02 or depreciate to an exchange value as low as $0.96.She therefore purchases eight call contracts to partially hedge an underlying short exposure of $750,000. Draw a diagram illustrating the potential loss or gain on eight call contracts.c.Indicate the amount of loss or profit at $0.96, $1.02, and the current spotrate. (Keep all calculations to two decimal places.)d.Indicate the break-even rate.e.Add to your diagram a line indicating the gain and loss on the underlyingexposure as the spot deviates form the current level. Indicate the gain or loss at $0.96 and $1.02.Chapter629.Suppose that a Japanese bank has total assets of ￥1,000 million. Of these assets,80 percent are loans to businesses, and the remainder are holdings of cash assetsand government securities. The bank engages in derivatives trading that Japanese regulators assign a credit equivalence exposure value of ￥400 million. The bank’s equity capital amounts to ￥100 million, and the bank has no subordinated debt. Does this bank meet current capital requirements?30.In what ways do the current functions and objectives of the InternationalMonetary Fund and the World Bank overlap? In what ways do they have different functions and pursue different goals?Chapter731.Explain the difference between direct and indirect financing. Next explain why anation might desire a strong and stable system of financial intermediaries and a robust bond market.32.List three benefits of portfolio capital and three benefits of foreign directinvestment. Give one negative aspect of each. Explain why it is undesirable to rely on portfolio capital only. Explain why it is undesirable to rely on FDI o nly.33.Suppose you are a policymaker in an emerging economy. Explain what types ofcapital flow you would try to encourage. What policy actions might you take to encourage these types of flows?34.Some observers have responded to harsh criticisms of World Bank policies byarguing that the World Bank’s members have saddled it with conflicting goals. Do you agree that the World Bank confronts conflicting objectives? If not, why not?If so, which of the allegedly conflicting goals do you think should takeprecedence?35.Construct a table with three columns that lists each of the views on the causes ofinternational financial crises in the left-hand column. In the second column of the table, list at least one possible financial crisis indicator corresponding to each view that might be tracked in an IMF early warning system for predicting financial crises. In the third column, propose how to evaluate whether each potential indicator you have proposed actually helps predict a crisis. Does this exercise help explain why economists have a hard time constructing reliable early warning systems?Chapter836.Slovakia is an international supplier of hockey pucks. Suppose that Slovakiaprices and sells its hockey pucks on the international market in the U.S. dollar.What happens to Slovakia’s exports when the currency of a major consumer of hockey pucks, Canada, depreciates 5 percent against the U.S. dollar? Suppose Slovakia hockey puck producers desire to maintain the market share they have in Canada. Thus, they are willing to adjust their price for hockey pucks so that the quantity of hockey pucks demanded remains constant. How much would Slovakia have to reduce the price of hockey pucks to maintain its current level of exports to Canada?37.Suppose that real consumption expenditures in a nation are $10,000, realinvestment expenditures are $8,000, real government expenditures are $5,000, real expenditures on imports are $1,000, and real exports are $500. (a) What are the nation’s levels of real income and absorption? (b) What is its trade balance?38.Explain how a “Buy American” advertising campaign is similar to an expenditureswitching policy. What is the potential impact the campaign might have on the balance of payments in the context of the absorption approach?39.Suppose the U.S economy expands at a faster pace than that of its trading partners.Using the absorption approach, explain why the U.S. dollar might depreciate relative to the currencies of its trading partners. Explain why the U.S. dollar might appreciate relative to the currencies of its trading partners.Chapter940.Write out an equation representing the monetary approach to balance of paymentsand exchange rate determination. Supposethat domestic credit equals $1000 million, foreign exchange reserves equal $80 million, the money multiplier is 2, the fraction of nominal income that individuals desire to hold in money balances is 20 percent, the foreign price level 1.2, and the spot exchange value of the domestic currency is 2. Using its information, what is:a. the money stock In the domestic economy?b. the level of real income of the domestic economy?41.Write out the equation representing the monetary approach to balance of paymentsand exchange rate determination.Suppose the domestic monetary authorities increase domestic credit by $10 million through an open-market purchase of securities.a.Under a fixed exchange-rate regime, what is the effect of thisopen-market transaction on the nation’s balance of payments?b.Under flexible exchange rates, all other things constant, what is the newexchange value of the domestic currency? Is this an appreciation ordepreciation?42.Write out the wealth identity. Using this identity, explain the impact of a centralbank open-market sale of bonds on the exchange value of the domestic currency.Now suppose that the exchange rate is pegged. Using the wealth identity, explain the impact of the open-market operation on the domestic nation’s balance of payments.43.Write out a wealth identity for both the domestic economy and the foreigneconomy. Using this identity, explain the impact of an open-market sale of bonds by the central bank of the foreign economy on the exchange value between the domestic and foreign currencies.Chapter1444.The central bank in a small open economy with perfect capital mobility and afloating exchange rate reduces the nation’s money stock. Explain how the exchange rate must adjust in the long run when relative purchasing power is assumed to hold.45.A nation’s economy becomes more open, and as or consequence, aggregate realoutput becomes less responsive to short-run reasoning provided in the price level.Discuss factors that might help explain why this has occurred.46.Discuss two possible reasons why greater openness of a nation’s economy mightbe associated with lower inflationChapter 1547.A domestic government enacts a significant cut in taxes intended to spur itsdomestic industries. In addition, however, the tax cut gives foreign-owned firms an incentive to relocate their offices and production facilities within domestic borders. The tax cut also has been carefully crafted to avoid spurring increased imports by domestic citizens. Would these effects of this domestic policy action be an example of a positive or negative international policy externality? Explain. 48.Workers who speak a common language and share a common culture arecompletely mobile within a region that encompasses three small economies that engage in large volumes of international trade and have floating exchange rates.Residents in each country must incur sizable costs each time they convert their home currency into a foreign currency, and they face significant foreign exchange risks. Is this region a potential candidate for monetary union? Justify your answer.49.Suppose that a country’s residents speak a language that most others around theworld do not know. There also are legal and natural impediments to movements of factors of production across the nation’s borders. The nation’s central bank maintains a fixed exchange rate. Recently, there has been a worldwide fall in the demand for the nation’s primary products. Could this nation gain from letting its exchange rate float? Explain your reasoning.50.Discuss the potential advantages of coordinating national monetary policies. Ofthese, which do you think is most important? Why?51.Discuss the likely disadvantages of international monetary-policy coordination.Which do you believe to be the greatest disadvantage? Take a stand, and justify your position.。