8

The value of the Australian dollar (A$) today is $0.69. Yesterday, the value of the Australian dollar was
$0.73. The Australian dollar ____ by ____%?

a. depreciated; 5.80

b. appreciated; 4.00

c. depreciated; 4.00

d. appreciated; 5.80

Question 29

If U.S. inflation suddenly increased while European inflation stayed the same, there would be

a. a decreased demand for euros and an increased supply of euros for sale.

b. an increased demand for euros and a decreased supply of euros for sale.

c. a decreased demand for euros and a decreased supply of euros for sale.

d. an increased demand for euros and an increased supply of euros for sale.

Question 30

Any event that increases the U.S. demand for VND should result in a(n) ____ in the value of the VND
with respect to ____, other things being equal?

a. increase; nondollar currencies

b. decrease; nondollar currencies

c. decrease; U.S. dollar

d. increase; U.S. dollar

Assume that Chinese corporations begin to purchase more supplies from Vietnam as a result of several
labor strikes by Chinese suppliers. This action reflects?

a. an increased demand for Chinese currency (CNY).

b. a decrease in the supply of Chinese currency (CNY) for sale.

c. an increase in the supply of Chinese currency (CNY)for sale.

d. a decrease in the demand for Chinese currency (CNY).

Due to recent trade wars, China places a strict quota on cars imported from the U.S. and the U.S. places
a strict quota on electronics imported from China. This event should immediately cause the U.S. demand
for CNY to ____, and the supply of CNY to be exchanged for U.S. dollars to ____:

a. decline; increase

b. decline; decline

c. increase; increase

d. increase; decline

Question 27

If inflation increases substantially in Vietnam while U.S. inflation remains unchanged, this is expected to
place ____ pressure on the value of the VND with respect to the U.S. dollar?

a. there will be no impact

b. either upward or downward (depending on the degree of the increase in Australian inflation)

c. downward

d. upward

Assume that the U.S. is going to impose a strict quota on fishes imported from Vietnam and that
Vietnam does not retaliate. Holding other factors constant, this event should immediately cause the U.S.
demand for VND to ____ and the value of the VND to ____.

a. decline; increase

b. increase; decline

c. decline; decline

d. increase; increase

Question 23

If a currency's spot rate market is ____, its exchange rate is likely to be ____ to a single large purchase or
sale transaction.

a. none of the above.

b. illiquid; insensitive

c. illiquid; highly sensitive

Question 24

When the "real" interest rate is relatively high in a given country, then the currency of that country is
typically expected to be:

a. weak, since the country's quoted interest rate would be low relative to the inflation rate.

b. weak, since the country's quoted interest rate would be high relative to the inflation rate.

c. strong, since the country's quoted interest rate would be low relative to the inflation rate.

d. strong, since the country's quoted interest rate would be high relative to the inflation rate.

Assume that Swiss investors have francs available to invest in securities, and they initially view and
British interest rates as equally attractive. Now assume that U.S. interest rates decrease while British
interest rates stay the same. This would likely cause?

a. the Swiss demand for dollars to decrease and the dollar will depreciate against the Swiss franc.

b. the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc.

c. the Swiss demand for dollars to increase and the dollar will appreciate against the Swiss franc.

d. the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.

Question 20

The equilibrium exchange rate of pounds is $1.70. At an exchange rate of $1.72 per pound

a. demand for pounds would exceed the supply of pounds for sale and there would be a surplus of
pounds in the foreign exchange market.

b. demand for pounds would be less than the supply of pounds for sale and there would be a surplus of
pounds in the foreign exchange market.

c. demand for pounds would be less than the supply of pounds for sale and there would be a shortage
of pounds in the foreign exchange market.

d. demand for pounds would exceed the supply of pounds for sale and there would be a shortage of
pounds in the foreign exchange market.
Question 21

Investors from Germany, the United States, and the U.K. frequently invest in each other based on
prevailing interest rates. If British interest rates increase, German investors are likely to buy ____ dollar-
denominated securities, and the euro is likely to ____ relative to the dollar.

a. more; depreciate

b. fewer; appreciate

c. more; appreciate

d. fewer; depreciate

Illiquid currencies tend to exhibit ____ volatile exchange rate movements, as the equilibrium prices of
their currencies adjust to ____ changes in supply and demand conditions.

a. less; only large

b. more; even minor

c. less; even minor

d. more; only large

Question 17

The real interest rate adjusts the nominal interest rate for

a. government controls.

b. exchange rate movements.

c. income growth.

d. inflation.

Question 18

Which of the following events would lead to appreciation of the VND?

a. Vietnam’s inflation is very high.

b. State Bank of Vietnam is going to reduce interest rates

c. None of above is correct

d. State Bank of Vietnam is going to increase interest rates.

a. decrease; VND

b. decrease; nondollar currencies

c. increase; VND

d. increase; nondollar currencies

Question 14

BIDV can borrow either $20 million or €20 million. The current spot rate of the euro is $1.13.
Furthermore, BIDV expects the spot rate of the euro to be $1.10 in 90 days. Today, U.S. Dollar ($)
lending rate is 6.73% and borrowing rate is 7.20%. On the other hand, Euro (€) lending rate is 6.80% and
borrowing rate is 7.28%. What is BIDV's dollar profit from speculating if the spot rate of the euro is
indeed $1.10 in 90 days? (Write down the number only, no currency symbol, round up to 0 decimal
number, assume that 1 year has 360 days) 60000

Question 15

BIDV can borrow either AUD10 million or $5 million. The current spot rate of the AUD is $0.48 and AUD
will increase to $0.5 in the next 5 days. Furthermore, BIDV expects the spot rate of the euro to be $1.10
in 90 days. Today, U.S. Dollar ($) lending rate is 7.10% and borrowing rate is 7.50%. On the other hand,
AUD lending rate is 6.80% and borrowing rate is 7.25%. If BIDV's forecast is correct, what will its dollar
profit be from speculation over the five-day period? (assuming it does not use any of its existing
consumer deposits to capitalize on its expectations) (Write down the number only, no currency symbol,
round up to 0 decimal number, assume that 1 year has 360 days)

Answer: 833333

The value of euro was $1.30 last week. During last week the euro depreciated by 5%. What is the value
of euro today? (write down the number only, round up to 2 decimal number, no currency symbol)

Answer: 1.24

Question 11

Assume that the Vietnam experiences a significant decline in income, while Japan's income remains
steady. This event should place ____ pressure on the value of the Japanese yen(Assume that interest
rates and other factors are not affected.)?

a. no

b. downward

c. upward and downward (offsetting)

Question 12

The value of SGD was $0.64 last week. During last week the SGD increase by 5%. How many SGD that is
equal to 1 USD today? (write down the number only, round up to 2 decimal number, no currency
symbol)

Answer: 0.67

Assume that the inflation rate becomes much higher in the Vietnam relative to the China. This will place
____ pressure on the value of the VND. Also, assume that interest rates in the Vietnam begin to rise
relative to interest rates in the China. The change in interest rates will place ____ pressure on the value
of the VND

a. downward; downward

b. upward; downward

c. downward; upward

d. upward; upward

Question 8

Any event that increases the supply of Japanese Yen to be exchanged for VND should result in a(n) ____
in the value of the Japanese Yen with respect to ____, other things being equal?

a. increase; VND

b. decrease; nondollar currencies

c. decrease; VND

d. increase; nondollar currencies

Question 9

If inflation in Vietnam suddenly increased while China inflation stayed the same, there would be

a. an inward shift in the demand schedule for VND and an inward shift in the supply schedule for VND.

b. an outward shift in the demand schedule for VND and an inward shift in the supply schedule for VND.

c. an inward shift in the demand schedule for VND and an outward shift in the supply schedule for VND.
d. an outward shift in the demand schedule for VND and an outward shift in the supply schedule for
VND.

If the VND is expected to appreciate against the U.S. dollar and interest rates in the U.S. and Vietnam
are similar, BIDV may try speculating on this anticipated exchange rate movement by borrowing ____
and investing in ____.?

a. dollars; dollars

b. VND; dollars

c. VND; VND

d. dollars; VND

Question 5

An increase in Vietnam interest rates relative to Thailand interest rates would likely ____ the Vietnam
demand for Thai Baht and ____ the supply of Thai Baht for sale.

a. reduce; reduce

b. reduce; increase

c. increase; reduce

d. increase; increase

Question 6

If inflation reduces substantially in Vietnam while U.S. inflation remains unchanged, this is expected to
place ____ pressure on the value of the VND with respect to the U.S. dollar

a. downward

b. either upward or downward (depending on the degree of the increase in Australian inflation)

c. upward

d. there will be no impact

Assume that Swiss investors have francs available to invest in securities, and they initially view U.S. and
British interest rates as equally attractive. Now assume that U.S. interest rates stay the same while
British interest rates increase. This would likely cause?

a. the Swiss demand for dollars to decrease and the dollar will depreciate against the Swiss franc.

b. the Swiss demand for the pound to increase and the pound will appreciate against the Swiss franc.

c. the Swiss demand for dollars to decrease and the dollar will appreciate against the pound.
d. the Swiss demand for dollars to increase and the dollar will depreciate against the Swiss franc.

Question 2

Which of the following would change currency supply and demand?

a. Relative interest rates

b. Relative income levels

c. All of above is correct

d. Relative inflation rates

Question 3

A large increase in the income level in Vietnam along with no growth in the China income level is
normally expected to cause (assuming no change in interest rates or other factors) a(n) ____ in
Vietnamese demand for Chinese, and the VND should ____.

a. decrease; depreciate

b. increase; depreciate

c. increase; appreciate

d. decrease; appreciate