The present value of receiving M dollars in year t when the prevailing interest rate is i is equal to
a. M - it
b. M (1 - i)t
c. M/(1 + i)t
d. M it
e. M/it
QUESTION 2If on Tuesday you can buy 125 yen per U.S. dollar and on Wednesday you can buy 120 yen per U.S. dollar,
a. both the U.S. dollar and the yen have appreciated
b. both the U.S. dollar and the yen have depreciated
c. the U.S. dollar has appreciated and the yen has depreciated
d. the U.S. dollar has depreciated and the yen has appreciated
e. the yen has appreciated and the U.S. dollar has remained constant
QUESTION 3If you will receive 5,000 two years from today, what is its present value if the discount rate is 5 percent?
a. 5,025
b. 4,500
c. 3,429
d. 4,535
e. 4,762
QUESTION 4If the U.S. dollar appreciates, it means that
a. the value of the U.S. dollar has decreased
b. the value of foreign exchange has increased
c. fewer U.S. dollars are required to purchase foreign exchange
d. more U.S. dollars are required to purchase foreign exchange
e. exports will fall immediately
QUESTION 5The present value of receiving M dollars two years from now when the prevailing interest rate is i is equal to
a. M - i2
b. M i2
c. M/i
d. M/(1 - i)
e. M/(1 + i)2
QUESTION 6A German who exchanges euros for dollars in a U.S. airport is
a. contributing to U.S. exports
b. lending dollars to Germans
c. participating in the foreign exchange market
d. engaging in speculative activities
e. engaging in illegal activities
QUESTION 7The present value of a given payment will be lower
a. if the payment comes sooner than expected
b. the lower the prevailing interest rate
c. the further in the future the payment is to be received
d. the sooner the payment is to be received
e. if the payment is made in cash
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