Question 1

Concerning foreign exchange trading,wholesale transactions involving more than 1 million currency units generally

Accepted Answer

A)  occur between banks or with large corporate customers 
B)  occur only in Hong Kong and Frankfurt 
C)  are limited to transactions in the spot market 
D)  are limited to transactions in the forward market 
A)  occur between banks or with large corporate customers 
B)  occur only in Hong Kong and Frankfurt 
C)  are limited to transactions in the spot market 
D)  are limited to transactions in the forward market

Question 2

-In the table above,a change in the ______ will result in a movement along the demand schedule for pounds

Accepted Answer

A)  dollar/pound exchange rate 
B)  rate of interest in the United States 
C)  per-capita income of Americans 
D)  level of technology in the United States 
A)  dollar/pound exchange rate 
B)  rate of interest in the United States 
C)  per-capita income of Americans 
D)  level of technology in the United States

Question 3

If it takes $1.5515 to buy 1 pound and $0.6845 to buy 1 franc,it takes 2.27 francs to buy 1 pound.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would not induce the U.S.demand curve for foreign exchange to shift backward to the left?

Accepted Answer

A)  Worsening American tastes for goods produced overseas 
B)  Decreasing interest rates in the U.S.compared to those overseas 
C)  A fall in the level of U.S.income 
D)  A depreciation in the U.S.dollar against foreign currencies 
A)  Worsening American tastes for goods produced overseas 
B)  Decreasing interest rates in the U.S.compared to those overseas 
C)  A fall in the level of U.S.income 
D)  A depreciation in the U.S.dollar against foreign currencies

Question 5

A person needing foreign exchange immediately would purchase it on the spot market.

Accepted Answer

A) True 
 B)False

Question 6

Most foreign exchange transactions involve the transfer of cash,rather than electronic balances,between commercial banks or foreign exchange dealers.

Accepted Answer

A) True 
 B)False

Question 7

Table 11.1 gives the exchange rate quotations for the U.S.dollar and the British pound.
Table 11.1.Foreign Exchange Quotations
  
-Consider Table 11.1.If one were to buy pounds for immediate delivery,on Tuesday the dollar cost of each pound would be:

Accepted Answer

A)  $0.7008 
B)  $0.7037 
C)  $1.4211 
D)  $1.4270 
A)  $0.7008 
B)  $0.7037 
C)  $1.4211 
D)  $1.4270

Question 8

An increase in the dollar price of other currencies tends to cause:

Accepted Answer

A)  U.S.goods to be cheaper than foreign goods 
B)  U.S.goods to be more expensive than foreign goods 
C)  Foreign goods to be more expensive to residents of foreign nations 
D)  Foreign goods to be cheaper to residents of the United States 
A)  U.S.goods to be cheaper than foreign goods 
B)  U.S.goods to be more expensive than foreign goods 
C)  Foreign goods to be more expensive to residents of foreign nations 
D)  Foreign goods to be cheaper to residents of the United States

Question 9

If a Citibank dealer expects the Swiss franc to appreciate against the U.S.dollar,she will attempt to lower both bid and offer rates for the franc,attempting to persuade other dealers to buy francs from Citibank and dissuade other dealers from selling francs to Citibank.

Accepted Answer

A) True 
 B)False

Question 10

If the dollar's real exchange rate index increases,American products become more affordable to foreign buyers.

Accepted Answer

A) True 
 B)False

Question 11

When the real exchange rate of Japan's yen appreciates

Accepted Answer

A)  the yen's nominal exchange rate must remain constant 
B)  the yen's nominal exchange rate must also appreciate 
C)  the yen's nominal exchange rate must depreciate 
D)  none of the above 
A)  the yen's nominal exchange rate must remain constant 
B)  the yen's nominal exchange rate must also appreciate 
C)  the yen's nominal exchange rate must depreciate 
D)  none of the above

Question 12

The demand schedule for Swiss francs is always downsloping while the supply schedule of francs is always upsloping.

Accepted Answer

A) True 
 B)False

Question 13

The pound shows a forward premium against the dollar (the forward rate is greater than the spot rate) when

Accepted Answer

A)  interest rates in the United Kingdom are higher than those in the United States 
B)  interest rates in the United Kingdom are lower than those in the United States 
C)  real GDP is higher in the United Kingdom than in the United States 
D)  real GDP is lower in the United Kingdom than in the United States 
A)  interest rates in the United Kingdom are higher than those in the United States 
B)  interest rates in the United Kingdom are lower than those in the United States 
C)  real GDP is higher in the United Kingdom than in the United States 
D)  real GDP is lower in the United Kingdom than in the United States

Question 14

In the interbank market for foreign exchange,the ____ refers to the difference between the offer rate and the bid rate.

Accepted Answer

A)  Cross rate 
B)  Option 
C)  Arbitrage 
D)  Spread 
A)  Cross rate 
B)  Option 
C)  Arbitrage 
D)  Spread

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

International investors who hedge against exchange rate risk often use currency forward contracts.

Accepted Answer

A) True 
 B)False

Question 18

A commercial bank profits from foreign-exchange trading when its bid rate exceeds its offer rate.

Accepted Answer

A) True 
 B)False

Question 19

Exhibit 11.1 Assume the following: 
(1) the interest rate on 6-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 6-month forward price of the pound is $1.485.
-Assume that you are the Chase Manhattan Bank of the United States,and you have 1 million Swiss francs in your vault that you will need to use in 30 days.Moreover,you need 500,000 British pounds for the next 30 days.You arrange to loan your francs to Barclays Bank of London for 30 days in exchange for 500,000 pounds today,and reverse the transaction at the end of 30 days.You have just arranged a:

Accepted Answer

A)  Forward contract 
B)  Futures contract 
C)  Spot contract 
D)  Currency swap 
A)  Forward contract 
B)  Futures contract 
C)  Spot contract 
D)  Currency swap

Question 20

If the Swiss demand for dollars is inelastic,an appreciation of the dollar against the franc will lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars.

Accepted Answer

A) True 
 B)False

Concerning foreign exchange trading,wholesale transactions involving more than 1 million currency units generally

-In the table above,a change in the ______ will result in a movement along the demand schedule for pounds

If it takes $1.5515 to buy 1 pound and $0.6845 to buy 1 franc,it takes 2.27 francs to buy 1 pound.

Which of the following would not induce the U.S.demand curve for foreign exchange to shift backward to the left?

A person needing foreign exchange immediately would purchase it on the spot market.

Most foreign exchange transactions involve the transfer of cash,rather than electronic balances,between commercial banks or foreign exchange dealers.

Table 11.1 gives the exchange rate quotations for the U.S.dollar and the British pound. Table 11.1.Foreign Exchange Quotations -Consider Table 11.1.If one were to buy pounds for immediate delivery,on Tuesday the dollar cost of each pound would be:

An increase in the dollar price of other currencies tends to cause:

If a Citibank dealer expects the Swiss franc to appreciate against the U.S.dollar,she will attempt to lower both bid and offer rates for the franc,attempting to persuade other dealers to buy francs from Citibank and dissuade other dealers from selling francs to Citibank.

If the dollar's real exchange rate index increases,American products become more affordable to foreign buyers.

When the real exchange rate of Japan's yen appreciates

The demand schedule for Swiss francs is always downsloping while the supply schedule of francs is always upsloping.

The pound shows a forward premium against the dollar (the forward rate is greater than the spot rate) when

In the interbank market for foreign exchange,the ____ refers to the difference between the offer rate and the bid rate.

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

A depreciation of the dollar refers to:

International investors who hedge against exchange rate risk often use currency forward contracts.

A commercial bank profits from foreign-exchange trading when its bid rate exceeds its offer rate.

If the Swiss demand for dollars is inelastic,an appreciation of the dollar against the franc will lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars.

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

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

Filters

Exam 11: Foreign Exchange

Concerning foreign exchange trading,wholesale transactions involving more than 1 million currency units generally

-In the table above,a change in the ______ will result in a movement along the demand schedule for pounds

If it takes $1.5515 to buy 1 pound and $0.6845 to buy 1 franc,it takes 2.27 francs to buy 1 pound.

Which of the following would not induce the U.S.demand curve for foreign exchange to shift backward to the left?

A person needing foreign exchange immediately would purchase it on the spot market.

Most foreign exchange transactions involve the transfer of cash,rather than electronic balances,between commercial banks or foreign exchange dealers.

Table 11.1 gives the exchange rate quotations for the U.S.dollar and the British pound. Table 11.1.Foreign Exchange Quotations -Consider Table 11.1.If one were to buy pounds for immediate delivery,on Tuesday the dollar cost of each pound would be:

An increase in the dollar price of other currencies tends to cause:

If a Citibank dealer expects the Swiss franc to appreciate against the U.S.dollar,she will attempt to lower both bid and offer rates for the franc,attempting to persuade other dealers to buy francs from Citibank and dissuade other dealers from selling francs to Citibank.

If the dollar's real exchange rate index increases,American products become more affordable to foreign buyers.

When the real exchange rate of Japan's yen appreciates

The demand schedule for Swiss francs is always downsloping while the supply schedule of francs is always upsloping.

The pound shows a forward premium against the dollar (the forward rate is greater than the spot rate) when

In the interbank market for foreign exchange,the ____ refers to the difference between the offer rate and the bid rate.

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

A depreciation of the dollar refers to:

International investors who hedge against exchange rate risk often use currency forward contracts.

A commercial bank profits from foreign-exchange trading when its bid rate exceeds its offer rate.

If the Swiss demand for dollars is inelastic,an appreciation of the dollar against the franc will lead to a greater quantity of francs being supplied to the foreign exchange market to obtain dollars.

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

Macroeconomic Policy in an Open-economy

International Banking: Reserves, Debt, and Risk

Filters