Question : 101.The nominal interest rate 9 percent in Brazil and 6 : 1299378

101.The nominal interest rate is 9 percent in Brazil and 6 percent in Japan. Applying the international Fisher effect, the Brazilian real should:  

A. appreciate by 3 percent against the Japanese yen.

B. depreciate by 3 percent against the Japanese yen.

C. appreciate by 1.5 percent against the Japanese yen.

D. depreciate by 1.5 percent against the Japanese yen.

E. appreciate by 15 percent against the Japanese yen.

102.Which of the following refers to the bandwagon effect?  

A. When securities are purchased in one market for immediate resale in another

B. When dominant enterprises exercise a degree of pricing power, setting different prices in different markets to reflect varying demand conditions

C. When traders move like a herd, all in the same direction and at the same time, in response to each others’ perceived actions

D. When governments routinely intervene in international trade, creating tariff and nontariff barriers to cross-border trade

E. When the output of goods and services grows at a lesser rate than that of the money supply

103.Which of the following is the reason for the failure of purchasing power parity theory and international Fisher effect in predicting short-term movements in exchange rates?  

A. The impact of investor psychology on short-run exchange rate movements

B. The strong relationship between inflation rates and interest rates

C. The impact of interest rates and short-term exchange rate movements

D. The strong relationship between interest rate differentials and subsequent changes in spot exchange rates

E. Government intervention in cross-border trade that violates the assumption of efficient markets

104.Which of the following positions is adopted by the inefficient market school of thought toward exchange rate forecasting?  

A. Forward exchange rates are the best possible predictors of future spot exchange rates.

B. Forward exchange rates represent market participants’ collective predictions of likely spot exchange rates.

C. Companies cannot beat the markets because forward rates reflect all available information about likely future changes in exchange rates.

D. Investing in forecasting services can improve the foreign exchange market’s estimate of future exchange rates.

E. The foreign exchange market is efficient at setting forward rates which are unbiased predictors of future spot rates.

105.Which of the following is true of the efficient market school of thought toward exchange rate forecasting?  

A. Forward rates are not unbiased predictors of future spot rates.

B. Accurate predictions of future spot rates can be calculated from publicly available information.

C. Prices do not reflect all available information about the market.

D. Inaccuracies in predictions will not be consistently above or below future spot rates; they will be random.

E. Forecasts might provide better predictions of future spot rates than forward exchange rates do.

106.In terms of exchange rate forecasting, a(n) _____ market is one in which prices do not reflect all available information.  

A. inefficient

B. spot

C. futures

D. efficient

E. forward

107.In terms of the approaches to exchange rate forecasting, _____ draw(s) on economic theory to construct sophisticated econometric models for predicting exchange rate movements.  

A. technical analysis

B. fractional integration models

C. Markov switching models

D. fundamental analysis

E. chart analysis

108.Which of the following is a variable used in exchange rate forecasting models based on fundamental analysis?  

A. Relative strength indicator

B. Moving average

C. Inflation rate

D. Business cycles

E. Regression

109.Which of the following is true of a country that is running a deficit on a balance-of-payments current account?  

A. It is importing fewer goods and services than it is exporting.

B. It may result in depreciation of the country’s currency on the foreign exchange market.

C. It will lead to very low interest rates in the country.

D. It will lead to a shortage of the country’s currency in the foreign exchange market.

E. It is engaging in neo-mercantilism.

110.Which of the following approaches to forecasting exchange rate movements uses price and volume data to determine past trends?  

A. Technical analysis

B. Behavioral equilibrium model

C. Interest rate parity equation model

D. Fundamental analysis

E. Portfolio balance model