1. If Japanese consumers suddenly demand more of American rice when other things
ID: 2744634 • Letter: 1
Question
1. If Japanese consumers suddenly demand more of American rice when other things are equal, the
a. dollar would tend to appreciate
b. value of yen in terms of dollar would remained unchanged
c. yen would tend to appreciate, making American rice more expensive
d. yen would tend to depreciate, making American rice cheaper
Ceteris paribus, if interest rates rise in the United States but remain unchanged in U.K., the $/British Pound exchange rate will . This means the dollar will .
a. increase; appreciate
b. increase; depreciate
c. decline; appreciate
d. decline; depreciate
A foreign currency contract allowing the holder (buyer) the right to purchase British Pounds 32,500 on or before March 167, 2016 at a price of $1.5 Per British Pound is
a. a forward contract
b. a put option on British Pounds
c. a March futures contract on British Pounds
d. an American call option on British Pounds
A July call option on the Canadian dollar with an exercise price of $1.4506/C$ (contract size for each option is C$50,000) will
a. be exercised when the future spot exchange rate is greater than $1.4506/C$
b. increase in values as the spot price increases
c. all of the above
If the U.S. government was concerned that the depreciating value of the US$ caused the Japanese government unstable, it would sell in the foreign exchange market. If successful the $/yen exchange rate would .
a. yen; increase
b. yen; decline
c. dollars; increase
d. dollars; decline
Explanation / Answer
1)
Importing country currency value decreases with increase in imports. This is the main principle underlying in currency values. If the exports increase currency value will increase. Here, yen will depreciate against USD as it is increased importing of rice from America.
Hence, correct option is (A).
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