Q31. A ________ is an exchange rate quoted today for settlement at some time in the future. a. currency rate b. spot rate c. forward rate d. yield curve Q32. According to the international Fisher Effect, if an investor purchases a five-year U.S. bond that has an annual interest rate of 5% rather than a comparable British bond that has an annual interest rate of 6%, then the investor must be expecting the ________ to ________ at a rate of at least 1% per year over the next 5 years. a. British pound; revalue b. British pound; appreciate c. U.S. dollar; depreciate d. U.S. dollar; appreciate Q33. Assume a nominal interest rate on one-year U.S. Treasury Bills of 4.60% and a real rate of interest of 2.50%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year? a. 2.10% b. 1.90% c. 2.00% d. 2.05% Q34. The relationship between the percentage change in the spot exchange rate over time and the differential between comparable interest rates in different national capital markets is known as ________. a. the international Fisher Effect b. the law of one price c. absolute PPP d. relative PPP Q35. Products that are relatively price inelastic tend to also demonstrate a low degree of exchange rate pass-through. a. true b. false Q36. The price elasticity of demand for DVD players manufactured by Sony of Japan is greater than one. If the Japanese yen appreciates against the U.S. dollar by 10% and the price of the Sony DVD players in the U.S. also rises by 10%, then other things equal, the total dollar sales revenues of Sony DVDs would ________. a. increase b. insufficient information c. decline d. stay the same Q37. Dimson, Marsh, and Staunton (2002) found that real exchange rates ________ to exhibit a long term upward or downward trend, and they ________ clearly volatile. a. do not appear; are not b. appear; are c. do not appear; are d. appear; are not Q38. Consider the price elasticity of demand. If a product has price elasticity less than one it is considered to have relatively elastic demand. a. true b. false Q39. If foreign exchange markets are efficient, then forward exchange rates are unbiased predictors of future spot rates. a. true b. false Q40. If the current exchange rate is 124 Japanese yen per U.S. dollar, the price of a Big Mac hamburger in the United States is $2.54, and the price of a Big Mac hamburger in Japan is 294 yen, then other things equal, the Big Mac hamburger in Japan is ________. a. under priced b. correctly priced c. over priced d. not enough information to determine if the price is appropriate or not