Exam 6: Currency and Foreign Exchange

In the context of institutions that make foreign exchange happen, nonfinancial customers include:

Unlike electronic currencies, fiat currencies:

The government of Ambria generally does not interfere in the value of the nation's currency. However, recently when the nation faced a severe financial crisis leading to its currency being depreciated to a great extent, the government decided to explicitly intervene by increasing the supply of money. In this scenario, the Ambrian government can be said to be engaging in a _____.

In the context of managing exchange rate risks, which of the following best exemplifies a company that is engaged in forward exchange rate transactions?

Bank of Linsdon lends $1,000,000 to SBC Techno Inc. with an understanding that the company will need to repay the loan in monthly installments of $25,000. SBC Techno Inc. successfully makes the monthly payments for two consecutive years. However, due to a financial crisis, it faces cash flow problems and eventually stops paying the installments. In this scenario, Bank of Linsdon is said to have a(n) _____.

In contrast to digital forms of money, a fiat currency:

To keep its currency cheap, China had pegged the renminbi to the U.S. dollar. Evaluate the consequences of the renminbi being more than 40 percent undervalued.

When the nation of Varnia faced rampant economic inflation, it became evident that the inflation would reduce Varnia's domestic currency's buying power. As a result, the Varnian government decided to officially use the currency of Rhotabha as legal tender for conducting transactions. In this scenario, the Varnian government's action of abandoning its own domestic currency and using Rhotabha's currency instead is called _____.

Mantonian franc is the currency of Mantonia, a country with a floating exchange rate system. The government of Mantonia does not directly intervene in the currency exchange. Hence, it has no direct influence on the price of the nation's currency. However, it is involved in other indirect actions such as buying currencies of other countries. Which of the following statements supports the fact that the act of buying currencies of other countries can affect the floating exchange rate?

In the context of foreign exchange rates, when the country of Zansia fixes its currency Zan to the U.S dollar at 5.5 Zan per dollar, it can be said that:

_____ are electronic currencies that are monitored by distributed peer networks that simultaneously keep track of currency ownership and trades.

RedFliers orders 50,000 pieces of steel rods from its supplier in Xonamba, priced at 1 Xon each, when the exchange rate is 0.60 Xon per dollar. Instead of paying the supplier immediately, RedFliers sells its dollars at the current rate and agrees to buy Xonamba's currency in 30 days at a fixed forward price. In this way, the company manages to lock in the price of the exchange, eliminating the risk from currency fluctuations in the future. This scenario exemplifies that RedFliers is involved in _____.

In the context of currency exchange rate changes, with examples based on instances that have happened around the world, assess how international companies have faced the risk of economic exposure.

In the country of Losan, majority of the population is employed in the manufacturing sector. However, as the nation's overall income is low, little demand exists within Losan for the manufactured products. Yet, the government of Losan keeps its currency valuation quite low to ensure that:

FreeMart is an online fashion store that readily accepts payments in the form of cryptocurrencies. These digital currencies can be sent directly by a consumer to the store's wallet. This enables faster processing of a consumer's order. In this scenario, these currencies:

In the context of managing exchange rate risks, which of the following is true of a future?

ABC Corp., a U.S.-based company, is signing a business deal with Syphed Inc., a company based in the country of Yanghor. The base currency for the deal is the U.S. dollar. The counter currency for the transactions between the two companies is Yang, the official currency of Yanghor. To be able to conduct business in Yanghor, ABC Corp. should identify how much of U.S. dollars will be required to buy an equivalent amount of purchasing power in Yang. In short, ABC Corp. needs to identify the _____ of the currency of Yanghor.

In contrast to undervalued currencies, overvalued currencies:

The country of Ghathan has been in serious foreign debt for quite some time. It has large amounts of debt denominated in dollars, euros, and pounds. In the given scenario, the government of Ghathan is most likely to:

In the context of foreign exchange rates, which of the following statements best describes the process of dollarization?