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Northeastern University Finance 6204 International Finance Management International Financial Management by Jeff Madura, 13th edition

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Northeastern University

Finance 6204 International Finance Management

International Financial Management by Jeff Madura, 13th edition. (ISBN-13: 978-1337099738)

These Questions are designed to test your knowledge of international financial market transactions, exchange rate movements, and exchange rate equilibrium. Answer the following questions:

1. Other things equal, what effect will an increase in the      current account deficit have on the home currency value? Will it      increase, decrease or remain the same? Please provide an explanation for      your answer.
2. What effect on a country's current account balance is      an increase in the use of quotas expected to have? Will it increase,      decrease or remain the same? Please provide an explanation for your      answer. Would your answer change if other governments retaliate? If      so, how? Please explain.
3. Assume that a bank's bid rate on Euro is $1.45 and its      ask rate is $1.47. What is its bid ask percentage spread?
4. Assume the Canadian dollar is equal to $.75 and the      U.S. Dollar is equal to 1.35 Euro. What is the value of the Canadian      dollar in Euros?
5. Which currency is used the most to denominate      Eurobonds?
6. Assume that the U.S. places a strict quota on goods      imported from Chile and that Chile does not retaliate. Holding other      factors constant, this event will have what effect on U.S. demand for      Chilean pesos? What effect on the value of the peso? Will it increase,      decrease or remain the same? Please provide an explanation for your      answers.
7. If a country experiences low inflation relative to the      U.S., what is the expected effect on its exports to the U.S? Imports from      the U.S.? Impact on its currency's equilibrium value? Will it increase,      decrease or remain the same? Please provide an explanation for your      answers.