12.

The price of a Lexus SUV out of Japan is 4,800,000 and the exchange rate is 80/$. Calculate the new price in dollars if Lexus absorbs 65% of the rise when the yen appreciates to 75/$.

		$63,000
		$64,000
		$61,400
		$60,000
		$62,600

11.

If Canada runs a trade surplus with Mexico and exchange rates are floating:

		The Mexican peso will appreciate relative to the Canadian dollar
		The prices of foreign goods from all countries will fall for Canadians
		The Mexican peso will depreciate relative to the Canadian dollar
		The prices of foreign goods from all countries will rise for Canadians
		The exchange rate between the Mexican peso and the Canadian dollar will not be affected

10.

The Federal Reserve enters into currency swap agreements with other central banks to

		Stabilize the value of the U.S. dollar
		Loan U.S. dollars on short-term basis
		Stabilize the value of foreign currencies
		Loan gold on long-term basis
		Loan U.S. dollars on long-term basis

9.

The spot rate on the Canadian dollar is C$1.28/$ and the 3-month forward rate is C$1.25/$. How can a U.S. importer who has to pay C$1,000,000 in 3 months hedge her foreign exchange risk?

		By entering into a forward contract to buy C$1,000,000 and sell $781,250
		By entering into a forward contract to buy C$1,000,000 and sell $1,250,000
		By entering into a forward contract to sell C$1,000,000 and buy $1,250,,000
		By entering into a forward contract to buy C$1,000,000 and sell $800,000
		By entering into a forward contract to sell C$1,000,000 and buy $800,000

8.

The interest rate (on an annual basis) on 6-month Treasury bills is 2% in Japan and 4% in the U.S. and the spot rate 120/$. If the 6-month forward rate is 118/$ and you have $1,000,000 to invest, can you make a covered interest arbitrage profit and how much? Assume you are a U.S. investor.

		Yes, $ 7,118.64
		Yes, $ 2,911.39
		No, arbitrage profit is not possible
		Yes, $ 1,428.57
		Yes, $ 3,487.39