ECON 4131, International Finance, Spring 2002, Exam 2 Essays -- UMN Mi

Midterm Exam International Finance April 7, 2004 Answer all questions in examination booklets 1. (15 points) Define the following a) The â€Å"spot† exchange rate b) The â€Å"forward† exchange rate c) A capital account â€Å"surplus† d) Currency depreciation e) Arbitrage 2. (10 points) Briefly discuss the essential features of forward contracts, currency futures, and currency options. 3. (15 points) Use the BOP accounts guide on the last page of this exam to indicate where each of the following transactions should be recorded in the U.S. balance of payments (e.g.: â€Å"i3†, â€Å"e2†, etc.). Bear in mind that each transaction should generate a capital account and a current account entry. a) A Canadian firm buys a $75 million jet from the American company Boeing, which it pays for with a check drawn on Banc du Quebec b) Cargill (out of Mpls.) buys $10m. of Canadian wheat, which it pays for with a check drawn on Twin Cities Federal c) An American...