5 Question Set 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 could be obtained for $1.00 a) how much would the Big Mac cost in Britain and b) Germany respectively? 2. Arbuckle Corporation is selling two million shares of common stock in its initial public offering (IPO). The company’s investment banker, Jones Securities, will offer the stock to the public at $15 per share and charge Arbuckle Corporation an underwriting spread of 7 percent. a) What will be the gross proceeds from the IPSO? b) What will be Arbuckle Corporation’s net proceeds from the offering? c) How much will Jones Securities earn for conducting the offering? (Questions 3 to 5 have only one answer each) 3. There are ______ members of the Federal Reserve Board of Governors, _______ members of the Federal Open Market Committee, and ________ Federal Reserve Banks. a. 12; 7; 12; b. 7; 14; 12; c. 14; 12; 12; d. 7; 12; 12 4. The Fed’s primary tools of monetary policy include all the following except � a. changing the discount rate. � b. open market operations. � c. adjusting reserve requirements. � d. changes in the Federal Funds rate. 5. If a Canadian dollar costs $0.84 in U.S. dollars today and traded for $0.86 last year, the U.S. dollar � a. has appreciated against the Canadian dollar. � b. has depreciated against the Canadian dollar. � c. has more buying power in England. � d. none of the above.
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