Exam 5: The Foreign Exchange Market

If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the U.S. investor would be ________ and the direct quote for the British investor would be ________.

A ________ transaction in the interbank market is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.

The authors identify two tiers of foreign exchange markets:

The four currencies that constitute about 80% of all foreign exchange trading are:

The primary motive of foreign exchange activities by most central banks is profit.

Currency trading is a service center rather than a profit center for commercial and investment banks.

As you might expect, the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

Because the market for foreign exchange is worldwide, the volume of foreign exchange currency transactions is level throughout the 24-hour day.

Which of the following is NOT true regarding nondeliverable forward (NDF) contracts?

A foreign exchange ________ is the price of one currency expressed in terms of another currency. A foreign exchange ________ is a willingness to buy or sell at the announced rate.

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

A ________ transaction in the foreign exchange market requires an almost immediate delivery (typically within two days) of foreign exchange.

Since in the U.S. the home currency is the dollar and the foreign currency is the euro, in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

From the viewpoint of a British investor, which of the following would be a direct quote in the foreign exchange market?

When the cross rate for currencies offered by two banks differs from the exchange rate offered by a third bank, a triangular arbitrage opportunity exists.

For individuals and firms involved in the import and export of goods and services, using the foreign exchange market is necessary, but incidental, to their underlying commercial or investment purpose.

Use the table to answer following question(s). -Refer to Table 5.1. The one-month forward bid price for dollars as denominated in Japanese yen is:

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

Which of the following is NOT true regarding the market for foreign exchange?