1. Under s historical cost accounting system, as the united states now has, most accounting theoreticians would probably argue that the appropriate method for translation is the

a)Monetary/nonmonetary method

b) Current/ noncurrent method

c)Current rate method

d)Temporal method

2. The spot and 30day forward rates for the Dutch guilder are $0.3075 and $0.3110, respectively. The guilder is said to be selling at a forward

a) premium of 19.51%

b) premium of 17.56%

c) premium of 13.66%

d) discount of 13.66%

3. At some point, the quote for DM was DM 2.9865 92. Then the percent spread was

a) 2.31%

b) 0.97%

c) 0.62%

d) 0.09%

4. Galaxys Swiss subsidiary has the following balance sheet:

Cash, marketable securities Accounts receivable Inventory (at market. Fixed Assets Total assets

SF 250,000 1,000,000 2,700,000 5,100,000 ----------------- DM 9,050,000

Current liabilities Long-term debt Equity Total liabilities plus equity

SF 750,000 3,400,000 4,900,000 --------------- DM 9,050,000

Suppose the SF appreciates from $0.70 to $0.76 during the period.

Under the current/noncurrent method, what is Galaxys translation gain (loss).?

a) a gain of $294,000

b) a gain of $192,000

c) a loss of $174,000

d) a loss of $12,000

5. If the direct price of the dollar is 2.5 in Sofia and transaction costs are .4% of the amount transacted, then the minimum maximum direct quotes for the Bulgarian Lev in New York were:

a) $.39684032

b) $2.48002.5200

c) $.3984.4016

d) $2.49002.5100

6. In a freely floating exchange rate system, if the current account is running a deficit

a) the balance of payments must run a deficit

b) the balance of payments must be zero

c) the capital account must run a surplus

d) b and c above

7. According to the J-curve theory, a countrys trade deficit

a) Decrease just after its currency depreciates

b) Increases just after its currency appreciates

c) Increases just after its currency is pegged to the dollar

d) Worsens just after its currency depreciates

8. Balance of payments data of the host country is a useful forecasting tool for a foreign company because

a) It shows how much the company has been able to export

b) It shows the total amount of foreign investment accumulated by the country

c) It provides information about past currency fluctuation

d) It reflects imbalances that may give rise to political action

9. When an Italian student attends a US college, which of the following balance of payments entries occurs for the United States?

a) A service export

b) A good export

c) A capital flow

d) A direct investment

10. All of the following are appropriate response for a U.S. exporter to appreciation of the dollar EXCEPT?

a) raise the foreign currency price if the dollar appreciation was expected to be temporary and the cost of regaining market share was minimal

b) move some production offshore if the appreciation were expected to persist for an extended period

c) keep the foreign currency price constant if demand is highly elastic

d) keep the local currency price constant if demand is highly elastic