Midterm Exam
International Finance
April 8, 2002
Answer all questions in examination booklets
1. (10 points) Use the BOP accounts guide on the last page of this exam to indicate where each of the following transactions should be recorded in the U.S. balance of payments (e.g.: “i3”, “e2”, etc.). Bear in mind that each transaction should generate a capital account and a current account entry.
a) The U.S. buys $1m. of lumber from Canada
b) Japan buys $500K of fish from an Alaskan fishing outfit
c) The U.S. contracts a Panamanian flagged vessel for shipping on the Mississippi
d) Mexican migrant workers wire $2m. home for Cinco de Mayo celebrations
e) A Panamanian flagged ship purchases a $100K insurance contract from
a U.S. firm
2. (10 points) The nation of Pecunia had a current account deficit of $2 billion and a nonreserve capital account surplus of $900 million in 1998.
a) What was the “balance of payments” of Pecunia that year? What happened to the country’s net foreign assets?
b) Assume that the foreign central banks neither buy nor sell Pecunian assets. How did the Pecunian central bank’s foreign reserves change in 1998? How would this official intervention show up in the balance of payments accounts of Pecunia?
c) How would your answer to (b) change if you learned that foreign central banks had purchased $1.2 billion of Pecunian assets in 1998? How would these official purchases enter the foreign balance of payments accounts?
3. (15 points) Derive (show your work) the following, and provide a brief explanation:
a) Uncovered interest rate parity
b) Covered interest rate parity
4. (10 points) Define “neutrality of money” and discuss why money is thought to be “neutral” in the long-run.
5. (10) Define “Purchasing Power Parity” and discuss the reasons why it might or might not hold.
6. (15 points) In our formal model of exchange rate determination under “sticky prices”
a) What do the two curves represent?
With differing economies and the growth of specie and paper money, Brands argues that the basis of knowledge about the money system of this time lays a foundation for how Carnegie, Rockefeller, and others were able to manipulate the market and gain wealth. Leading into price manipulation by those in corporate
Mexico was running an increasing current account deficit from US$7.5 billion in 1990 to US$23.4 billion in 1993. This indicates an excess of private investing over private savings. However, the country was able to maintain an improving fiscal account from US$3.6 billion deficit in 1990 to US$0.7 billion surplus in 1993. The deficit in current account was financed through capital funds from abroad resulting the capital account to increase from US$8.4 billion in 1990 to US$33.8 billion in 1993.
Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960. Princeton, 1963
Suppose a transaction changes a bank’s balance sheet as indicated in the T-account, and the required reserve ratio is 10 percent.
Can I please have at least B for GRBA 811 Managerial Finance this semester? I did a terrible job on the final exam. I need to graduate in May, 2017 because I have to start working in May next year.
Topic: Analyze the validity of the objections to free trade and critically discuss the role of international organizations in regulating trade between counties. Does how the control of trades has impacted positively or negativity on a company of your choice.
Deliberate fixing of the exchange rate or preannounced rates of depreciation below the prevailing rates of inflation, have been adopted in various countries to break inflation. The experience has been almost unif...
Part A: What are the objectives of both parties in the exchanges? How would you describe the general "tone" of the exchanges?
1) Japan still has the largest foreign currency reserves in the world even after years
provided by the government. This meant that the new bank debt would be the most senior piece in and would
3. Assuming Noah made 6-month payments on its wood purchases from Indonesia, what is the schedule of foreign currency amounts over
Their current GDP is at 1.144 trillion. They have a large population of 127,385,833. Their gross enrollment ration is at 103.389. The CO2 emissions (metric tons per capital) are at 3.949. The poverty head count ratio is at 53.2. They also have a current life expectancy of 76.722. Also the GNI for each capital is 9,710. The overall level of statistical capacity is at 92.222.
t. The dollar amount for cash & cash equivalents increased between 2011 and 2012, yet the percentage of total assets comprising these assets declined. Explain.
In financial terms, Exchange Rates (ER) refer to the worth of two different currencies in regards to each other (Sullivan & Sheffrin, 2003), whereas the Foreign Direct Investment (FDI) refers to the net inflows of foreign investments. This is so if the investment is to acquire a lasting interest in terms of management where the enterprise that is operating in the specific economy in question is a different entity from the investor (Soltani, 2009).
... overseas securities and written off an amortization of goodwill belong to its subsidiaries. In consequences of plunge in bank equity and rapid growth amount of risk weighted assets, the bank Tier 1 capital ratio fell from 8.11% in end-2006 to barely 6.02% in end-2008. With the new strategy ‘back to track on retail banking’ and the liquidation of bad assets, the bank has met its Tier 1 capital target of 7.76% in end-2010.