Exam 5: The Foreign Exchange Market

Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.

A forward contract to deliver British pounds for U.S.dollars could be described either as ________ or ________.

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.

TABLE 5.1 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:

A German firm is attempting to determine the euro/pound exchange rate and has the following exchange rate information: USD/pound = $1.5509/£ and the USD/euro rate = $1.2194/€.Therefore,the euro/pound rate must be:

The greatest amount of foreign exchange trading takes place in the following three cities:

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

What are some of the reasons central banks and treasuries enter the foreign exchange markets,and in what important ways are they different from other foreign exchange participants?

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.

A/an ________ quote in the United States would be foreign units per dollar,while a/an ________ quote would be in dollars per foreign currency unit.

Given the following exchange rates,which of the multiple-choice choices represents a potentially profitable intermarket arbitrage opportunity? ¥129.87/$ €1.1226/$ €0.00864/¥

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.

Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell.Foreign exchange ________,on the other hand,earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.

Business firms in countries with exchange controls,for example,China (mainland),often must surrender foreign exchange earned from exports to the central bank at the daily fixing price.

The most commonly quoted currency exchange is that between the U.S.dollar and the European euro.For example,a quotation of EUR/USD 1.2174.The euro is the base currency and the dollar the price currency.

A confusing "quirk" of international exchange rates occurs when calculating the percentage change in spot rates from one period to another.The percent change in the spot rate from one period to another when quoted using foreign currency terms is always greater than the percent changes quoted when using home currency terms.

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.

TABLE 5.1 Use the table to answer following question(s). -Refer to Table 5.1.The ask price for the two-year swap for a British pound is:

NDFs are traded and settled inside the country of the subject currency,and therefore are within the control of the country's government.

The U.S.dollar suddenly changes in value against the euro moving from an exchange rate of 0.8909/€ to $0.8709/€.Thus,the dollar has ________ by ________.