Question : 21.Calculate the required return for a project undertaken in Italy : 1325784

 

21.Calculate the required return for a project undertaken in Italy given the following information. The appropriate risk free rate is 5%, the project has a calculated beta of 1.35 relative to the Italian stock market, and the market risk premium for the Italian stock market is 7%.

a.4.45%

b.5.0%

c.14.45%

d.9.45%

22.The spot rate for Canadian and U.S. dollars is $0.7213/C$. The annualized interest rate on a six-month government bond in Canada is 6% and the same rate in the United States is 5%. Calculate the 6-month forward rate that is needed for interest rate parity to hold.

a.$0.7281/C$

b.$0.7248/C$

c.$0.7353/C$

d.$0.7178/C$

23.The annualized rate of interest on a three-month government bond in Japan is 8% and the rate on a similar instrument in the United States is 6%. The current spot rate is $0.0079/¥. Calculate the 3-month forward needed for interest rate parity to hold.

a.$0.00821/¥

b.$0.00786/¥

c.$0.00794/¥

d.$0.00805/¥

24.In Italy the annualized rate on a three-month government bond is 4% and in Canada the rate is 5%. The current spot rate is €0.6542/C$. Calculate the 3-month forward rate needed for interest rate parity to hold.

a.€0.6526/C$

b.€0.6480/C$

c.€0.6558/C$

d.€0.6605/C$

25.In a floating exchange rate environment the price of a currency is determined by

a.the country’s national government

b.the supply and demand for that currency

c.the International Monetary Fund

d.the World Bank

26.Yesterday, in the Wall Street Journal, the exchange rate between Canadian and U.S. dollars was $0.7347/C$. Today the rate is $0.7432/C$. From yesterday to today the Canadian dollar ____ and the U.S. dollar ____ relative to one another.

a.Depreciated; appreciated

b.was unchanged; was unchanged

c.appreciated; appreciated

d.appreciated; depreciated

27.The quote for a Euro in terms of U.S. dollars is $1.1232/€. How many Euros equals one U.S. dollar($)?

a.€1 equals $1 since there exchange rates are fixed to one another

b.€0.8903 is equal to $1

c.€1.1232 is equal to $1

d.You can not figure this out since both the U.S. dollar and the Euro are floating exchange rates

28.The exchange rate between the U.S. dollar and the Japanese Yen is $.008072/¥. If the exchange rate changes to $0.0080069/¥ then you could say

a.the U.S. dollar is appreciating against the Japanese Yen and the Japanese Yen is depreciating against the U.S. dollar.

b.the U.S. dollar is depreciating against the Japanese Yen and the Japanese Yen is appreciating against the U.S. dollar.

c.the U.S. dollar is depreciating.

d.nothing, because the exchange rates can not be compared to one another.

29.The spot rate for U.S. dollars and Euros is $1.232/€. The 90 day forward rate for the two currencies is $1.254/€. The U.S. dollar

a.trades at a 1.79% 90 day forward premium.

b.trades at a 7.14% annual forward premium.

c.trades at a 1.79% 90 day forward discount.

d.trades at a 7.14% annual forward discount.

30.If the exchange rate quote for the U.S. dollar and the Euro is $1.1234/€ and the exchange rate quote for the U.S. dollar and the Canadian dollar (C$) is $0.7258/C$ then the cross exchange rate between Euros and Canadian dollars is

a.C$1.5478/€

b.€0.5478/C$

c.C$0.6461/€

d.€0.6461/C$

 

 

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