Exam 11: Foreign Exchange

Concerning foreign exchange trading,a forward contract is characterized by

What foreign exchange transactions do banks typically engage in?

The U.S.demand for pounds is derived from U.S.exports to the United Kingdom,U.K.investments in the United States,and U.K.tourist expenditures in the United States.

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.Comparing Tuesday to the previous Monday,by Tuesday the dollar had:

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

In recent years,major international banks that trade in the foreign exchange market have included

Is it possible to trade foreign exchange in the futures market? How does such trading differ from the forward market?

The most important (in terms of dollar value) type of foreign exchange transaction by U.S.banks is the:

Where are foreign currency options traded?

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

A U.S.export company scheduled to receive 1 million pounds six months from today can hedge its foreign exchange risk by:

The supply of francs is derived from the desire of the Swiss to purchase German goods,make investments in Germany,repay debts to German lenders,and extend transfer payments to German residents.

If interest rates in the U.K.are higher than those in the United States,the pound shows a forward discount which means the forward rate is less than the spot rate.

You are engaging in a ______ if you initially sell a currency (that you do not own) at a high price,then buy it back later on at a low price.

Table 11.3.Key Currency Cross Rates -Referring to Table 11.3,the yen cost of purchasing 100 British pounds is roughly:

Figure 11.1 illustrates the supply and demand schedules for the Swiss franc.Assume that exchange rates are flexible. Figure 11.1.Supply and Demand Schedules of Francs -Refer to Figure 11.1.Suppose the exchange rate is $.30 per franc.Free-market forces would lead to a (an) ____ of the dollar against the franc and a (an) ____ in U.S.international competitiveness:

Between 2015 and 2016,the dollar

A foreign currency trader who works for a bank is assigned a position limit that stipulates the amount of buying and selling that can be conducted in a given currency.

A U.S.investor's extra rate of return on an investment in France,as compared to the United States,equals the interest-rate differential adjusted for any change in the dollar/franc exchange rate.

During 2012-2013,currency speculator George Soros made a lucrative currency trade.Having expectations of a future depreciation of the yen,Soros made big bets against it.He sold large amounts of yen,pushed its value down,and profited by re-buying the yen when its price bottomed out.What Soros was engaging in was a