Finance

1A Canadian exporter expects to receive a payment of 1000 USD after two weeks The exporter has purchased an option to sell 1000 USD for CAD after two weeks at an exchange rate of 1 USD = 125 CAD The exporter should exercise this option if after 2 weeks, the USD-CAD exchange rate becomes

A USD = 13 CAD

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BUSD = 12 CAD

CUSD = 14 CAD

DUSD = 15 CAD

2Suppose the price of a Big Mac in Denmark is 25 krone The exchange rate between the krone and USD is 1 USD = 5 krone Assume that the price of a Big Mac in the US is 4 USD Then, using the Big Mac index, the krone is

A4 percent

B0 percent

C3 percent

D2 percent

3Suppose the price of a Big Mac in Denmark is 25 krone The exchange rate between the krone and USD is 1 USD = 5 krone Assume that the price of a Big Mac in the US is 4 USD Then, using the Big Mac index, the krone is

Aover-valued by 5 percent with respect to USD

Bover-valued by 50 percent with respect to USD

Cunder-valued by 25 percent with respect to USD

Dover-valued by 25 percent with respect to USD

4 Denmark pegs the exchange rate of its currency to the euro In the absence of capital controls, a 2 percent decrease in the short-run eurozone interest rate will

A

reduce the Danish interest rate by 2 percent

B

reduce the Danish interest rate by more than 2 percent

C

raise the Danish interest rate by 2 percent

D

reduce the Danish interest rate by less than 2 percent

“A company expects to have a constant growth rate of 5 percent It recently paid a dividend of $200 per share, and its required rate of return on equity is 15 percent

What is the current price of this company’s stock?”

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