FIN 535 INTERNATIONAL FINANCE : QUIZ4 : 5 QUESTIONS

FIN 535 – International Financequiz 4 for help Question 1According to the international Fisher effect, if Venezuela has a much higher nominal rate than other countries, its inflation rate will likely be ____ than other countries, and its currency will ____.   lower; strengthen  lower; weaken  higher; weaken  higher; strengthen1 points   Question 2The Fisher effect is used to determine the:   real inflation rate.  real interest rate.  real spot rate.  real forward rate.Question 3According to the IFE, if British interest rates exceed U.S. interest rates:   the British pound’s value will remain constant.  the British pound will depreciate against the dollar.  the British inflation rate will decrease.  the forward rate of the British pound will contain a premium.  today’s forward rate of the British pound will equal today’s spot rate.Question 4Which of the following theories suggests that the percentage difference between the forward rate and the spot rate depends on the interest rate differential between two countries?  purchasing power parity (PPP).  triangular arbitrage.  international Fisher effect (IFE).  interest rate parity (IRP).Question 5 Assume that the U.S. inflation rate is higher than the New Zealand inflation rate. This will cause U.S. consumers to ____ their imports from New Zealand and New Zealand consumers to ____ their imports from the U.S. According to purchasing power parity (PPP), this will result in a(n) ____ of the New Zealand dollar (NZ$).  reduce; increase; appreciation  increase; reduce; appreciation  reduce; increase; depreciation  reduce; increase; appreciation