DescriptionA system in which exchange rates are held constantA system in which exchange rates are determined by market forces, rather thangovernment interventionA system in which exchange rates are allowed to fluctuate, but are subject togovernment interventionA system in which the home currency is synchronized with the value of a particularforeign currencyOne advantage of aFixedExchange Rate SystemsManagedFloatFreelyFloatingOPeggedOexchange rate system is that the country with such a system is less affected by inflation in other countries.

In the context of foreign exchange market exchange rate is the rate at which currency of one country…

Answered: Description A system in which exchange…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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In a floating exchange rate system: Question 15 options: The Balance of payments will always equal the government budget The Balance of Payments should always be in surplus The government intervenes to influence the exchange rate The exchange rate should adjust to equate the supply and demand of the currency
Suppose the real exchange rate is constant – say, at the level required for net exports (or the current account) to equal zero. In this case, if foreign inflation is higher than domestic inflation, what must happen to the nominal exchange rate over time?
How are spot exchange rates determined? Multiple Choice predicting future currency movements in nonmember countries the interaction between demand and supply of a currency relative to other currencies by government decree O using historical average prices of different currencies taking the average of a basket of currencies
Which of the following statement is incorrect? O Currency crisis is more likely happen under the fixed exchange rate system. O Capital flight is more likely occur under the fixed exchange rate system. Fixed exchange rate regime relied on the ability of central banks to intervene in the currency market. O China is taking free floating exchange rate system.
Question 22 Which of the following statements relating to foreign currency translation and remeasurement is correct? If a foreign entity's recording currency is not it's functional currency, but the functional currency is the reporting currency, translation using the current rate method is not required. if a foreign entity's recording currency is not it's functional currency, remeasurement into the functional currency using the temporal method is required If a foreign entity operates in a highly inflationary economcy, the reporting currency of the U.S. parent-the U.S. dollar, should be used. All of these statements are correct
If a foreign currency appreciates, that country's goods and services become relatively more expensive for Omani buyers. * True False
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.
During much of the 1800s, developed nations employed what came to be known as the ______________ international monetary system to manage exchange rates * Bretton Woods Gold Standard Fixed Regime Floating Regime
With a dirty float system, Answer 1. market forces and the countryƉs stock of gold determine its exchange rate. 2. central banks may intervene to affect the value of a country's currency. 3. market forces do not play a role in determining the value of a currency. 4. the International Monetary Fund and the Groups of Five and Seven determine fixed exchange rates.
Exchange rates can move up or down, and spot rates could move favourably as well as adversely. However, many companies prefer to hedge their currency risks by fixing an exchange rate now for a future transaction, even if this means that it will not be able to benefit from any favourable future movement in the exchange rate. Required Discuss the methods of hedging exposures to foreign exchange risk.
Suppose quotes for the dollar–euro exchange rate E$/€ are as follows: in New York $1.05 per euro, and in Tokyo $1.15 per euro. Describe how investors use arbitrage to take advantage of the difference in exchange rates. Explain how this process will affect the dollar price of the euro in New York and Tokyo.
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.

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