ECON 4131, International Finance, Spring 2002, Exam 1


Length: 506 words (1.4 double-spaced pages)
Rating: Excellent
Open Document
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Text Preview

More ↓

Continue reading...

Open Document

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?

How to Cite this Page

MLA Citation:
"ECON 4131, International Finance, Spring 2002, Exam 1." 123HelpMe.com. 22 Oct 2017
    <http://www.123HelpMe.com/view.asp?id=105604>.
Title Length Color Rating  
ECON 4131, International Finance, Spring 2002, Exam 1 Essays - 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....   [tags: UMN Minnesota Business Economics Finance] 506 words
(1.4 pages)
Strong Essays [preview]
ECON 4131, International Finance, Spring 2002, Exam 2 Essays - Midterm Exam International Finance April 7, 2004 Answer all questions in examination booklets 1. (15 points) Define the following a) The “spot” exchange rate b) The “forward” exchange rate c) A capital account “surplus” d) Currency depreciation e) Arbitrage 2. (10 points) Briefly discuss the essential features of forward contracts, currency futures, and currency options. 3. (15 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....   [tags: UMN Minnesota Business Economics Finance] 507 words
(1.4 pages)
Good Essays [preview]
Managing Exam Stress Essays - Define stress: Stress is the body’s natural response to a threatening situation, and stress causes the release of hormones such as adrenaline, that prepare the body for its instinctual response to a threat: flight, fight or freeze. The adrenaline causes processes in your body to change, for example, your breathing and heart rate quicken, your senses sharpen, muscles tighten and your blood pressure is raised. These changes allow your reaction time to increase, which could mean the difference between life and death....   [tags: Coping With Exam Stress]
:: 7 Works Cited
1248 words
(3.6 pages)
Strong Essays [preview]
ACG 2021, Introduction to Financial Accounting, Spring 2001, Exam 3 Final - 2021FINALSP01 5/9/2001 FORM CODE: A Page 1 ACG 2021 – FINAL EXAM SPRING 2001 NAME _____________________________________ SS# ____________________________ Instructions: NOW: Bubble in your section number on your Scan Sheet. Fill in your name and social security number on this examination and your scan sheet. 1. Listen carefully for any comments your proctor may have related to the exam. Read these instructions carefully. Failure to do so may result in your losing points. 2. This exam consists of 60 multiple-choice questions....   [tags: UFL Florida Business Accounting] 4736 words
(13.5 pages)
Strong Essays [preview]
Essay on ACG 2021, Introduction to Financial Accounting, Spring 2001, Exam 2 - MT2SPR01 5/9/2001 Page 1 FORM CODE: A ACG 2021 – EXAM 2 SPRING 2001 NAME _____________________________________ SS# ____________________________ Instructions: NOW: Bubble in your section number on your Scan Sheet. Fill in your name and social security number on this examination and your scan sheet. 1. Listen carefully for any comments your proctor may have related to the exam. Read these instructions carefully. Failure to do so may result in your losing points. 2. This exam consists of 50 multiple-choice questions....   [tags: UFL Florida Business Accounting] 4210 words
(12 pages)
Powerful Essays [preview]
The Rites of Spring by Modris Eksteins Essay - Modris Eksteins presented a tour-de-force interpretation of the political, social and cultural climate of the early twentieth century. His sources were not merely the more traditional sources of the historian: political, military and economic accounts; rather, he drew from the rich, heady brew of art, music, dance, literature and philosophy as well. Eksteins examined ways in which life influenced, imitated, and even became art. Eksteins argues that life and art, as well as death, became so intermeshed as to be indistinguishable from one another....   [tags: Eksteins Rites Spring] 1030 words
(2.9 pages)
Good Essays [preview]
Essay about The Power of Rachel Carson’s Silent Spring - The Power of Rachel Carson’s Silent Spring In 1962, Rachel Carson published Silent Spring and was greeted with a roar of protest and approval. After years and years of controversy and skepticism surrounding its argument, Silent Spring was and still is recognized as a perceptive warning of things in progress and things to come. The book set the stage for the first real and effectual environmental movement. In 17 chapters, many of which can stand alone as essays, Carson develops a deceptively simple premise: the use and overuse of synthetic chemicals to control insect pests introduces these chemicals into the air, water, and soil and into the food chain where they poison animals and humans,...   [tags: Silent Spring] 1472 words
(4.2 pages)
Strong Essays [preview]
Essay about The Conflicted Japan of Yukio Mishima’s Spring Snow - The Conflicted Japan of Yukio Mishima’s Spring Snow Yukio Mishima was a revolutionary author. His dramatic public suicide is the perfect capstone to a life full of turmoil and unrest. Mishima himself was as conflicted as his many stories and plays, which tend to play out the problem of which direction is Japan heading, and should the nation be developing that way. Mishima romanticized the samurai and nurtured a lifelong affair with traditional Japanese theater. At the same time, he admired the West and studied Western art and literature avidly....   [tags: Spring Snow] 1627 words
(4.6 pages)
Strong Essays [preview]
Essay about William Williams' Spring and All - William Williams' "Spring and All" The Modernist era of poetry, like all reactionary movements, was directed, influenced, and determined by the events preceding it. The gradual shift away from the romanticized writing of the Victorian Era served as a litmus test for the values, and the shape of poetry to come. Adopting this same idea, William Carlos Williams concentrated his poetry in redirecting the course of Modernist writing, continuing a break from the past in more ways than he saw being done, particularly by T.S....   [tags: Williams Spring All Poetry Poem Essays]
:: 4 Works Cited
2005 words
(5.7 pages)
Term Papers [preview]
Essay on Prague Spring - The Prague Spring The Prague Spring is referred to when the Warsaw Pact allies invaded Czechoslovakia in 1968. Below are the details surrounding the incident. In 1948, communism was the only political party in Czechoslovakia. The communist take-over was a very popular movement. The first reason why it was a popular movement is because Joseph Stalin signed an agreement with Winston Churchill and Franklin Roosevelt that the Red Army, which would then lead to pro-communism, would liberate Czechoslovakia....   [tags: History Prague Spring Invasion] 1440 words
(4.1 pages)
Strong Essays [preview]

Related Searches






b) Explain how and why the model leads to “overshooting”

c) Is the overshooting greater or smaller when we assume long-run “neutrality of money” (as opposed to exogenous long-run exchange rates and prices)? Explain.

d) Carefully explain the trajectory of exchange rates, interest rates, and prices, as this model predicts they would respond to a permanent increase in the money supply



7) (15 points)

a) Why might a firm enter into a contract “selling forward” foreign exchange?



b) What circumstances might make a firm prefer a foreign exchange futures contract to a forward contract?



c) What circumstances might make a firm prefer a foreign exchange options contract to a futures contract?



d) What circumstance might make a firm prefer a currency swap to any of the above alternatives?



8) (15 points)

a) Derive the equation (show your work) for the bilateral dollar/euro exchange rate according to the “monetary approach to the exchange rate.”



b) What does this model predict will happen if domestic real income rises?



c) Why is this thought to be more of a long-run than a short-run theory?


Return to 123HelpMe.com