A target zone agreement is maintained by forcing the exchange rate not to change over time a country buying the currency that is losing value out of the range a country buying the currency that is gaining value out of the range reducing trade between countries until the rate corrects

A target zone agreement is maintained by forcing the exchange rate not to change over time a country buying the currency that is losing value out of the range a country buying the currency that is gaining value out of the range reducing trade between countries until the rate corrects

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter4: Exchange Rate Determination

Section: Chapter Questions

Problem 22QA

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A direct exchange quotation is one in which the exchange rate is quoted O a. For the immediate delivery of currencies exchanged O b. For the future delivery of currencies exchanged O c. In terms of how many units of the domestic currency can be converted into one unit of foreign currency O d. In terms of how many units of the foreign currency can be converted into one unit of domestic currency
In the context of foreign exchange, how are non-deliverable currency situations typically handled? The difference between the contracted forward rate and the prevailing spot rate is settled in a widely traded currency, such as the USD. Non-deliverable currencies are avoided entirely in forward contracts to prevent any complications. Both parties agree to extend the contract until the currency becomes deliverable. The currencies are exchanged physically at a predetermined future date.
The exchange loss/gain due to a transaction exposure is estimated while O a. Converting a foreign currency into a domestic currency O b. Quoting a price for a foreign currency transaction O c. Entering into a transaction in foreign exchange O d. Verifying the fluctuation in the exchange rate
Which of the following is true regarding Bretton Woods Agreement EXCEPT _______. A. silver replaces gold as the medium of exchange B. every currencies are backed by gold C. declaring fixed exchange rates between currencies D. government intervention to limit exchange rates fluctuation above or below their initially established levels
On initial recognition of IFRS, a foreign currency transaction should be recorded at:A. the spot exchange rateB. Forward exchange rateC. Historical exchange rate D. All of the aboveE. None of the abov
Average exchange rates are used to translate certain items from foreign income statements into U.S. dollars. Such averages are used to: a. Avoid using different exchange rates for some revenue and expense accounts b. Smooth out large exchange gains and losses c. Eliminate large and temporary fluctuations in exchange rates that may reverse in the near future d. Approximate the effects of using the current exchange rates in effect on the transaction dates
Description A system in which exchange rates are held constant A system in which exchange rates are determined by market forces, rather than government intervention A system in which exchange rates are allowed to fluctuate, but are subject to government intervention A system in which the home currency is synchronized with the value of a particular foreign currency One advantage of a Fixed Exchange Rate Systems Managed Float Freely Floating Pegged exchange rate system is that the country with such a system is less affected by inflation in other countries.
Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses?
Under a flexible exchange rate system, an increase in the value of the U.S. dollarin terms of other currencies is referred to as Answer 1. a depreciation of the U.S. dollar. 2. an appreciation of the U.S. dollar. 3. a monetizing of the U.S. dollar. 4. a devaluation of the U.S. dollar.
Under a flexible exchange rate system, an increase in the value of the U.S. dollarin tems of other currencies is referred to as Answer 1. a depreciation of the U.S. dollar. 2. an appreciation of the U.S. dollar. 3. a monetizing of the U.S. dollar. 4. a devaluation of the U.S. dollar.
The Hi-Stakes Company has a number of importing and exporting transactions. Importing activities result in payables and exporting activities result in receivables (CU represents the local currency unit of the foreign entity) Required: a. If the direct exchange rate increases, does the dollar weaken or strengthen relative to the other currency? If the indirect exchange rate increases, does the dollar weaken or strengthen relative to the other currency? Direct exchange rate Indirect exchange rate b. Indicate in the following table whether H-Stakes will have a foreign currency transaction gain, loss, or not be affected (NA) by changes in the direct or indirect exchange rates for each of the four situations presented Importing Importing Exporting Exporting Dollar LCU Dollar LCU
Why the single currency eliminates exchange rate fluctuation and why is better for the countries to use the a common currency?