Question 1

Estimates are that speculation accounts for only about 10 percent of the daily trading activity in the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the trade-weighted value of the dollar indicates a dollar appreciation relative to the currencies of its major trading partners and a worsening of U.S.international competitiveness.

Accepted Answer

A) True 
 B)False

Question 3

Concerning the management of foreign exchange risk, some business firms do not hedge at all either because they cannot determine how much money will be coming in from abroad or because they have a deliberate strategy of allowing currencies to balance each other out around the world.

Accepted Answer

A) True 
 B)False

Question 4

The supply of foreign currency may be

Accepted Answer

A)  upward-sloping. 
B)  backward-sloping. 
C)  vertical. 
D)  shifting rightward. 
A)  upward-sloping. 
B)  backward-sloping. 
C)  vertical. 
D)  shifting rightward.

Question 5

The exchange rate is kept the same in all parts of the market by

Accepted Answer

A)  forward cover. 
B)  hedging. 
C)  exchange speculation. 
D)  exchange arbitrage. 
A)  forward cover. 
B)  hedging. 
C)  exchange speculation. 
D)  exchange arbitrage.

Question 6

Exhibit 11.1

Assume the following: (1) the interest rate on six-month treasury bills is 8 percent per annum in the United Kingdom and 4 percent per annum in the United States; (2) today's spot price of the pound is $1.50, while the six-month forward price of the pound is $1.485.

-Refer to Exhibit 11.1.If the price of the six-month forward pound were to ____, then U.S.investors would no longer earn an extra return by shifting funds to the United Kingdom.

Accepted Answer

A)  rise to $1.52 
B)  rise to $1.53 
C)  fall to $1.48 
D)  fall to $1.47 
A)  rise to $1.52 
B)  rise to $1.53 
C)  fall to $1.48 
D)  fall to $1.47

Question 7

A speculator engages in a short position by initially selling a currency (that she does not own) at a high price and then buying it back later at a low price.

Accepted Answer

A) True 
 B)False

Question 8

In 2013, Japanese automakers found that their vehicles were becoming more affordable to American consumers.Why? The exchange value of the yen was appreciating against the dollar.

Accepted Answer

A) True 
 B)False

Question 9

In the table above, if the exchange rate is equal to $1.00 per pound, then there is a ______, and the exchange rate will______.

Accepted Answer

A)  surplus of pounds, decrease 
B)  surplus of pounds, increase 
C)  shortage of pounds, decrease 
D)  shortage of pounds, increase 
A)  surplus of pounds, decrease 
B)  surplus of pounds, increase 
C)  shortage of pounds, decrease 
D)  shortage of pounds, increase

Question 10

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, a decrease in the demand schedule causes an appreciation of the dollar against the pound.

Accepted Answer

A) True 
 B)False

Question 11

Where are foreign currency options traded?

Accepted Answer

Foreign-currency options are traded in a

Question 12

Concerning foreign exchange trading, a "futures contract" is characterized by which of the following?

Accepted Answer

A)  The size of the contract is standardized in round lots. 
B)  The contract's costs are based on bid/offer spread. 
C)  Trading happens over the counter by telephone. 
D)  The date of delivery is negotiable. 
A)  The size of the contract is standardized in round lots. 
B)  The contract's costs are based on bid/offer spread. 
C)  Trading happens over the counter by telephone. 
D)  The date of delivery is negotiable.

Question 13

A depreciation of the dollar refers to

Accepted Answer

A)  a fall in the dollar price of foreign currency. 
B)  an increase in the dollar price of foreign currency. 
C)  a loss of foreign-exchange reserves for the U.S. 
D)  an intervention in the international money market. 
A)  a fall in the dollar price of foreign currency. 
B)  an increase in the dollar price of foreign currency. 
C)  a loss of foreign-exchange reserves for the U.S. 
D)  an intervention in the international money market.

Question 14

If Chase Manhattan Bank quotes bid and offer rates for the Swiss franc at $.5250/$.5260, then the bank would realize profits of $1,000 on the purchase and sale of 1 million francs.

Accepted Answer

A) True 
 B)False

Question 15

In recent years, the smallest amount of foreign-exchange trading has involved

Accepted Answer

A)  spot transactions. 
B)  forward transactions. 
C)  foreign-exchange options. 
D)  foreign-exchange swaps. 
A)  spot transactions. 
B)  forward transactions. 
C)  foreign-exchange options. 
D)  foreign-exchange swaps.

Question 16

Futures contracts of the International Monetary Market have no set size, the contracts' dates of delivery are negotiable, and their costs are based on the bid-offer spread.

Accepted Answer

A) True 
 B)False

Question 17

When the value of the Mexican peso declines relative to another currency, the exchange rate for the Peso has

Accepted Answer

A)  revalued. 
B)  appreciated. 
C)  depreciated. 
D)  deposited. 
A)  revalued. 
B)  appreciated. 
C)  depreciated. 
D)  deposited.

Question 18

The euro shows a forward discount against the dollar (the forward rate is less than the spot rate) when interest rates in Europe are lower than those in the United States.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are main centers for foreign exchange trading EXCEPT

Accepted Answer

A)  Tokyo. 
B)  London. 
C)  Edmonton. 
D)  New York. 
A)  Tokyo. 
B)  London. 
C)  Edmonton. 
D)  New York.

Question 20

Concerning the covering of exchange market risks, assuming that a depreciation of the domestic currency is anticipated, one can say that there is an incentive for

Accepted Answer

A)  exporters to rush to cover their future needs. 
B)  importers to rush to cover their future needs. 
C)  both exporters and importers to rush to cover their future needs. 
D)  neither exporters nor importers to rush to cover their future needs. 
A)  exporters to rush to cover their future needs. 
B)  importers to rush to cover their future needs. 
C)  both exporters and importers to rush to cover their future needs. 
D)  neither exporters nor importers to rush to cover their future needs.

Estimates are that speculation accounts for only about 10 percent of the daily trading activity in the foreign exchange market.

An increase in the trade-weighted value of the dollar indicates a dollar appreciation relative to the currencies of its major trading partners and a worsening of U.S.international competitiveness.

Concerning the management of foreign exchange risk, some business firms do not hedge at all either because they cannot determine how much money will be coming in from abroad or because they have a deliberate strategy of allowing currencies to balance each other out around the world.

The supply of foreign currency may be

The exchange rate is kept the same in all parts of the market by

A speculator engages in a short position by initially selling a currency (that she does not own) at a high price and then buying it back later at a low price.

In 2013, Japanese automakers found that their vehicles were becoming more affordable to American consumers.Why? The exchange value of the yen was appreciating against the dollar.

In the table above, if the exchange rate is equal to $1.00 per pound, then there is a , and the exchange rate will.

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, a decrease in the demand schedule causes an appreciation of the dollar against the pound.

Where are foreign currency options traded?

Concerning foreign exchange trading, a "futures contract" is characterized by which of the following?

A depreciation of the dollar refers to

If Chase Manhattan Bank quotes bid and offer rates for the Swiss franc at $.5250/$.5260, then the bank would realize profits of $1,000 on the purchase and sale of 1 million francs.

In recent years, the smallest amount of foreign-exchange trading has involved

Futures contracts of the International Monetary Market have no set size, the contracts' dates of delivery are negotiable, and their costs are based on the bid-offer spread.

When the value of the Mexican peso declines relative to another currency, the exchange rate for the Peso has

The euro shows a forward discount against the dollar (the forward rate is less than the spot rate) when interest rates in Europe are lower than those in the United States.

All of the following are main centers for foreign exchange trading EXCEPT

Concerning the covering of exchange market risks, assuming that a depreciation of the domestic currency is anticipated, one can say that there is an incentive for

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

Exam 11: Foreign Exchange

Estimates are that speculation accounts for only about 10 percent of the daily trading activity in the foreign exchange market.

An increase in the trade-weighted value of the dollar indicates a dollar appreciation relative to the currencies of its major trading partners and a worsening of U.S.international competitiveness.

Concerning the management of foreign exchange risk, some business firms do not hedge at all either because they cannot determine how much money will be coming in from abroad or because they have a deliberate strategy of allowing currencies to balance each other out around the world.

The supply of foreign currency may be

The exchange rate is kept the same in all parts of the market by

A speculator engages in a short position by initially selling a currency (that she does not own) at a high price and then buying it back later at a low price.

In 2013, Japanese automakers found that their vehicles were becoming more affordable to American consumers.Why? The exchange value of the yen was appreciating against the dollar.

In the table above, if the exchange rate is equal to $1.00 per pound, then there is a ______, and the exchange rate will______.

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds, a decrease in the demand schedule causes an appreciation of the dollar against the pound.

Where are foreign currency options traded?

Concerning foreign exchange trading, a "futures contract" is characterized by which of the following?

A depreciation of the dollar refers to

If Chase Manhattan Bank quotes bid and offer rates for the Swiss franc at $.5250/$.5260, then the bank would realize profits of $1,000 on the purchase and sale of 1 million francs.

In recent years, the smallest amount of foreign-exchange trading has involved

Futures contracts of the International Monetary Market have no set size, the contracts' dates of delivery are negotiable, and their costs are based on the bid-offer spread.

When the value of the Mexican peso declines relative to another currency, the exchange rate for the Peso has

The euro shows a forward discount against the dollar (the forward rate is less than the spot rate) when interest rates in Europe are lower than those in the United States.

All of the following are main centers for foreign exchange trading EXCEPT

Concerning the covering of exchange market risks, assuming that a depreciation of the domestic currency is anticipated, one can say that there is an incentive for

The International Economy and Globalization

Foundations of Modern Trade Theory Comparative Advantage

Sources of Comparative Advantage

Tariffs

Nontariff Trade Barriers

Trade Regulations and Industrial Policies

Trade Policies for the Developing Nations

Regional Trading Arrangements

International Factor Movements and Multinational Enterprises

The Balance of Payments

Exchange Rate Determination

Mechanisms of International Adjustment

Exchange Rate Adjustments and the Balance of Payments

Exchange Rate Systems and Currency Crises

Filters

In the table above, if the exchange rate is equal to $1.00 per pound, then there is a , and the exchange rate will.