Question 1

Arbitrage is possible when distinct but essentially equivalent products are priced differently.

Accepted Answer

A) True 
 B)False

Question 2

Reuters is a company that supplies specialised data for foreign exchange (FX) traders.

Accepted Answer

A) True 
 B)False

Question 3

A major factor contributing to economic globalisation over the last 20 years has been:

Accepted Answer

A)  financial deregulation. 
B)  WAP technology. 
C)  the war in Iraq. 
D)  the BIS Basel committee. 
A)  financial deregulation. 
B)  WAP technology. 
C)  the war in Iraq. 
D)  the BIS Basel committee.

Question 4

If a university student wishes to buy $1000 USD for her overseas trip and the current exchange rate with the AUD is AUD/USD = 0.5347, the amount of AUD she must pay is $1870.21.

Accepted Answer

A) True 
 B)False

Question 5

As the exchange rate depreciates, the aggregate value of Australian exports tends to rise.

Accepted Answer

A) True 
 B)False

Question 6

An exchange rate is defined as the rate of return from holding a particular currency for the holding period.

Accepted Answer

A) True 
 B)False

Question 7

Explain the difference between direct and indirect exchange rate quotes.

Accepted Answer

An exchange rate is the price of one cur

Question 8

One step in controlling trading risk is the separation of trading and settlements functions.

Accepted Answer

A) True 
 B)False

Question 9

FX traders quote buy and sell prices so that they can buy high and sell low.

Accepted Answer

A) True 
 B)False

Question 10

Which statement is FALSE?

Accepted Answer

A)  All arbitrage involves a degree of exchange rate risk. 
B)  Speculation involves a risk of loss if exchange rates move in the opposite direction to that expected. 
C)  Foreign exchange swaps may be viewed as combinations of spot and forward contracts. 
D)  Currency options are especially useful when a player does not want to be locked in to buying or selling a currency at a future time. 
A)  All arbitrage involves a degree of exchange rate risk. 
B)  Speculation involves a risk of loss if exchange rates move in the opposite direction to that expected. 
C)  Foreign exchange swaps may be viewed as combinations of spot and forward contracts. 
D)  Currency options are especially useful when a player does not want to be locked in to buying or selling a currency at a future time.

Question 11

The treasury division of a commercial bank generates income primarily by:

Accepted Answer

A)  writing loans. 
B)  setting overall strategic direction. 
C)  running the branch network. 
D)  position- taking. 
A)  writing loans. 
B)  setting overall strategic direction. 
C)  running the branch network. 
D)  position- taking.

Question 12

The trade- weighted index (TWI) of the exchange rate:

Accepted Answer

A)  is less relevant than bilateral rates when looking at the impact of the exchange rate on the economy. 
B)  is set by the RBA and remains fixed until the government alters exchange rate policy. 
C)  is composed of weights based on econometric estimates of exchange rate elasticities with the A$. 
D)  measures the average value of the A$ against all overseas currencies. 
A)  is less relevant than bilateral rates when looking at the impact of the exchange rate on the economy. 
B)  is set by the RBA and remains fixed until the government alters exchange rate policy. 
C)  is composed of weights based on econometric estimates of exchange rate elasticities with the A$. 
D)  measures the average value of the A$ against all overseas currencies.

Question 13

The term currency in an exchange rate quote is one whose price is given in the exchange rate.

Accepted Answer

A) True 
 B)False

Question 14

In foreign currency trading, 'hedging' means:

Accepted Answer

A)  eliminating currency risk by fixing an exchange rate in advance. 
B)  locking in a risk- free profit when the same currency is priced differently in two different markets by simultaneously buying in one market and selling in the other. 
C)  entering a contract to exchange currencies at an agreed future date in which the rate is not specified. 
D)  holding an open position in the hope of gaining from favourable currency movements. 
A)  eliminating currency risk by fixing an exchange rate in advance. 
B)  locking in a risk- free profit when the same currency is priced differently in two different markets by simultaneously buying in one market and selling in the other. 
C)  entering a contract to exchange currencies at an agreed future date in which the rate is not specified. 
D)  holding an open position in the hope of gaining from favourable currency movements.

Question 15

What is the trade- weighted index?

Accepted Answer

The trade- weighted index (TWI) is a mea

Question 16

If the AUD appreciates by 5% against the US dollar and depreciates by 5% against the Japanese yen, then the trade- weighted index (TWI) of the AUD will rise by 10%.

Accepted Answer

A) True 
 B)False

Question 17

Suppose an Australian importer buys manufacturing equipment from France worth 50 million Euros at an exchange rate of AUD/EUR of 0.9622. Then the AUD- equivalent cost is:

Accepted Answer

A)  $51.96 million. 
B)  $50.00 million. 
C)  $53.29 million. 
D)  $48.11 million. 
A)  $51.96 million. 
B)  $50.00 million. 
C)  $53.29 million. 
D)  $48.11 million.

Question 18

If an FX dealer gives a quote of AUD1/USD0.7510- 20 it means:

Accepted Answer

A)  the spread is 0.10. 
B)  the trader is willing to buy AUD for 75.10 US cents and sell for 75.20 US cents. 
C)  the dealer is giving a two- way quote. 
D)  all of the above. 
A)  the spread is 0.10. 
B)  the trader is willing to buy AUD for 75.10 US cents and sell for 75.20 US cents. 
C)  the dealer is giving a two- way quote. 
D)  all of the above.

Question 19

The AUD is ranked where in the world in turnover?

Accepted Answer

A)  Sixth. 
B)  Thirteenth. 
C)  Twenty- eighth. 
D)  Fifty- third. 
A)  Sixth. 
B)  Thirteenth. 
C)  Twenty- eighth. 
D)  Fifty- third.

Question 20

The Australian FX market is ranked 9th in the world in volume of daily turnover.

Accepted Answer

A) True 
 B)False

Arbitrage is possible when distinct but essentially equivalent products are priced differently.

Reuters is a company that supplies specialised data for foreign exchange (FX) traders.

A major factor contributing to economic globalisation over the last 20 years has been:

If a university student wishes to buy $1000 USD for her overseas trip and the current exchange rate with the AUD is AUD/USD = 0.5347, the amount of AUD she must pay is $1870.21.

As the exchange rate depreciates, the aggregate value of Australian exports tends to rise.

An exchange rate is defined as the rate of return from holding a particular currency for the holding period.

Explain the difference between direct and indirect exchange rate quotes.

One step in controlling trading risk is the separation of trading and settlements functions.

FX traders quote buy and sell prices so that they can buy high and sell low.

Which statement is FALSE?

The treasury division of a commercial bank generates income primarily by:

The trade- weighted index (TWI) of the exchange rate:

The term currency in an exchange rate quote is one whose price is given in the exchange rate.

In foreign currency trading, 'hedging' means:

What is the trade- weighted index?

If the AUD appreciates by 5% against the US dollar and depreciates by 5% against the Japanese yen, then the trade- weighted index (TWI) of the AUD will rise by 10%.

Suppose an Australian importer buys manufacturing equipment from France worth 50 million Euros at an exchange rate of AUD/EUR of 0.9622. Then the AUD- equivalent cost is:

If an FX dealer gives a quote of AUD1/USD0.7510- 20 it means:

The AUD is ranked where in the world in turnover?

The Australian FX market is ranked 9th in the world in volume of daily turnover.

Financial Markets

Debt Securities and Markets

Introduction to Financial Calculations

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

Interest Rates, the Yield Curve and Monetary Policy

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Foreign Exchange Risk

Managing Interest Rate Risk

Filters

Exam 8: The Foreign Exchange Market

Arbitrage is possible when distinct but essentially equivalent products are priced differently.

Reuters is a company that supplies specialised data for foreign exchange (FX) traders.

A major factor contributing to economic globalisation over the last 20 years has been:

If a university student wishes to buy $1000 USD for her overseas trip and the current exchange rate with the AUD is AUD/USD = 0.5347, the amount of AUD she must pay is $1870.21.

As the exchange rate depreciates, the aggregate value of Australian exports tends to rise.

An exchange rate is defined as the rate of return from holding a particular currency for the holding period.

Explain the difference between direct and indirect exchange rate quotes.

One step in controlling trading risk is the separation of trading and settlements functions.

FX traders quote buy and sell prices so that they can buy high and sell low.

Which statement is FALSE?

The treasury division of a commercial bank generates income primarily by:

The trade- weighted index (TWI) of the exchange rate:

The term currency in an exchange rate quote is one whose price is given in the exchange rate.

In foreign currency trading, 'hedging' means:

What is the trade- weighted index?

If the AUD appreciates by 5% against the US dollar and depreciates by 5% against the Japanese yen, then the trade- weighted index (TWI) of the AUD will rise by 10%.

Suppose an Australian importer buys manufacturing equipment from France worth 50 million Euros at an exchange rate of AUD/EUR of 0.9622. Then the AUD- equivalent cost is:

If an FX dealer gives a quote of AUD1/USD0.7510- 20 it means:

The AUD is ranked where in the world in turnover?

The Australian FX market is ranked 9th in the world in volume of daily turnover.

Financial Markets

Debt Securities and Markets

Introduction to Financial Calculations

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

Interest Rates, the Yield Curve and Monetary Policy

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Foreign Exchange Risk

Managing Interest Rate Risk

Filters