1) If purchasing power parity applied to Big Macs, and a Big Mac cost $2.50 in the United States while the British pound cost $1.50 and €0.90 euros can be obtained for $1.00, (a) how much will the Big Mac cost in Britain and (b) Germany respectively?
2) Compute the gross profit that an underwriter will make if it sold $10 million worth of bonds at par (face value) and paid the firm that sold bonds 99.25% of par.
(Questions 3 to 5 have only one answer each)
3) An expansion in the U.S. money supply
a. would increase domestic interest rates
b. would cause the exchange value of the dollar to increase.
c. would cause U.S. exports to increase.
d. would cause U.S. imports to increase.
4) Which Fed action does not directly increase total reserves in a banking system?
a. Lowering Discount Rate
b. Lowering reserve requirements
c. Buying U.S. Government securities on the open market
d. None of the above
5) If cost of yen per dollar changes from 100 to 110 yen per dollar,
a. The yen has appreciated against dollar.
b. The dollar has depreciated against yen.
c. The dollar has appreciated against yen.
d. The cost of a yen has increased in terms of dollars.