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FIN 582 EXAM 1 (UNIT 1,2,3,4) QUESTIONS WITH CORRECT ANSWERS.
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FIN 582 EXAM 1 (UNIT 1,2,3,4) QUESTIONS WITH CORRECT ANSWERS.
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FIN 582 EXAM 1 (UNIT 1,2,3,4)QUESTIONS WITH CORRECT ANSWERS
I: ooSuppose oothe ooexchange oorate oois oo$1.3902/€. ooConvert oo$571 oointo ooEUR.
ooWhat oois oothe ooequivalent ooEuro ooamount ooto oo$571? oo(correct ooto oothe oonearest
oo$.01 ooor oo"penny") oo- ooAnswer oo*When ooyou ooconvert ooone oocurrency oointo
ooanother, oothe oocurrency oosymbols oohave ooto oocancel ooout!
- oo= oo$571*(C1/C2)
- oo= oo$571*($1.3902/€)
- oo*The oo$ oosymbols oomust oocancel ooout!
- oo= oo$571*(€/$1.3902)
- oo*Assume ooyou ooare oomultiplying ooby ooone
- oo= oo$571*(1/$1.3902)
= oo€410.73
J: ooSuppose oothe ooexchange oorate oois oo€.8544/$. ooWhat oois oothe ooequivalent oodollar
ooamount ooto oo€75? oo(correct ooto oothe oonearest oo.01) oo- ooAnswer oo$87.78
K: ooSuppose oothe ooexchange oorate oois oo€.8544/$. ooWhat oois oothe ooequivalent ooEuro
ooamount ooto oo$156.20? oo(correct ooto oothe oonearest oo.01) oo- ooAnswer
oo$156.20^(C1/C2)=€
- oo*The oodollars oohave ooto oocancel ooout
- oo$156.20^(€.8544/$)
- oo=€133.46
J. ooIf ooyou oocan ooexchange oo€822 oofor oo$1,026, oowhat oomust oobe oothe ooexchange
oorate? oo(put ooyour ooanswer ooin ooterms ooof oo$/€ ooand oocorrect ooto oo4 oodecimal
ooplaces oo- oosuch ooas oo$1.3211/€) oo- ooAnswer oo$1.2482/€
K: oo€.7525/$
1. ooWhat oois oothe ooequivalent oo$ ooamount ooto oo€815?
2. ooWhat oois oothe ooequivalent oo€ ooamount ooto oo$255.25? oo- ooAnswer oo1. oo€815 oo*
oo(1/.7525)
= oo$1083.06
2. oo= oo$255.25 oo* oo(€.7525/$)
= oo€192.08
, What ooare oodirect ooand ooindirect ooexchange oorates? oo- ooAnswer ooAll ooDirect
ooExchange oorates: ooHome oocurrency ooamount ooper ooone oounit ooof ooforeign
oocurrency. oo
(HC)/(FC)
All ooIndirect ooExchange oorates: ooForeign ooCurrency ooof ooone oounit ooof oohome
oocurrency. oo
(FC)/(HC)
• ooDirect ooexchange oorate oo- ooAnswer oo• ooDirect ooexchange oorate
ooThe ooamount ooof ooyour oocurrency oothat oois ooequivalent ooto ooONE oounit ooof
ooforeign oocurrency.
ooExample: ooIt ootakes oo$1.46 ooto oopurchase ooone ooEuro.
ooUsually oowritten ooin oothe ooform oo$1.46/€ oothe oo€ oois oocalled oothe oo"base"
oocurrency oo(the ooper ooone oounit oocurrency, oothe oosecond oocurrency oolisted)
oothe ooUSD oo(U.S. oodollar) oois oocalled oothe oo"terms" oocurrency
ooRepresents oothe oodollar ooequivalent ooof oo€1
oo$1.46 oo= oo€1
Going ooto ooa oomovie oocosts oo€7 ooin ooSpain. ooWhat oois oothe oocost ooin oodollars?
ooDirect oo- ooAnswer oo€7× oo($1.46/€) oo= oo$10.22
• ooIndirect ooexchange oorate oo- ooAnswer oo• ooIndirect ooexchange oorate
The ooamount ooof ooforeign oocurrency oothat oois ooequivalent ooto ooONE oounit ooof ooyour
oocurrency.
ooThis ooanswers, oofor ooexample, oothe ooquestion ooof oowhat oois oothe ooeuro
ooequivalent ooof oo$1?
ooWe oowant oothe oo€ ooto oobe oothe ooterms oocurrency ooand oothe oo$ ooto oobe oothe
oobase oocurrency oo- oowe oowant oothem ooto oobe ooswitched oofrom oothe oooriginal
oo$1.46/€ ooto oobe ooin ooterms ooof oo€ oo_ oo_ oo_ oo_ oo/ oo$ oo
ooMentally, ooswitch oothe ooorder ooof oothe oooriginal ooexchange oorate ooand ooyou oohave
oo€1 oo/ oo$1.46. ooThis oois oofine ooto oodo oobecause oothe oo" oo/ oo" ooreally oorepresents
ooan oo" oo= oo"
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