Question 1

A double moving average rule requires buying a currency when:

Accepted Answer

A)  the long moving average cuts the short moving average from below 
B)  the short moving average is equal to the long moving average 
C)  the long moving average cuts the short moving average from above 
D)  none of the given answers 
A)  the long moving average cuts the short moving average from below 
B)  the short moving average is equal to the long moving average 
C)  the long moving average cuts the short moving average from above 
D)  none of the given answers C

Question 2

Which of the measures below is NOT a measure of forecasting accuracy?

Accepted Answer

A)  the mean absolute error 
B)  the standard variation 
C)  the mean square error 
D)  the root mean square error 
A)  the mean absolute error 
B)  the standard variation 
C)  the mean square error 
D)  the root mean square error B

Question 3

There are several problems associated with forecasting exchange rates using single-equation econometric models, including:

Accepted Answer

A)  they explain the value of the exchange rate in terms of other variables, without explaining how these other variables are determined 
B)  they are very expensive models to run 
C)  they may be conditional on the future value of the explanatory variables 
D)  they explain the value of the exchange rate in terms of other variables, without explaining how these other variables are determined AND they may be conditional on the future value of the explanatory variables 
A)  they explain the value of the exchange rate in terms of other variables, without explaining how these other variables are determined 
B)  they are very expensive models to run 
C)  they may be conditional on the future value of the explanatory variables 
D)  they explain the value of the exchange rate in terms of other variables, without explaining how these other variables are determined AND they may be conditional on the future value of the explanatory variables D

Question 4

If the foreign currency is expected to appreciate:

Accepted Answer

A)  a foreign currency investment is more likely to show a higher effective rate of return compared with . a domestic investment, than it would if the foreign currency were expected to depreciate 
B)  a domestic currency investment is more likely to show a higher effective rate of return compared . with a foreign investment, than it would if the foreign currency were expected to depreciate 
C)  a foreign currency investment is less likely to show a higher effective rate of return compared with a . domestic investment, than it would if the foreign currency were expected to depreciate 
D)  a foreign currency investment will definitely show a higher effective rate of return compared with a domestic investment 
A)  a foreign currency investment is more likely to show a higher effective rate of return compared with . a domestic investment, than it would if the foreign currency were expected to depreciate 
B)  a domestic currency investment is more likely to show a higher effective rate of return compared . with a foreign investment, than it would if the foreign currency were expected to depreciate 
C)  a foreign currency investment is less likely to show a higher effective rate of return compared with a . domestic investment, than it would if the foreign currency were expected to depreciate 
D)  a foreign currency investment will definitely show a higher effective rate of return compared with a domestic investment

Question 5

Which of the following is NOT a reason for using composite forecasting?

Accepted Answer

A)  different forecasters possess different information and forecasting ability 
B)  different forecasts differ in forecasting accuracy 
C)  diversification reduces the risk of large forecasting error 
D)  the greater the forecast sample the greater the consensus 
A)  different forecasters possess different information and forecasting ability 
B)  different forecasts differ in forecasting accuracy 
C)  diversification reduces the risk of large forecasting error 
D)  the greater the forecast sample the greater the consensus

Question 6

Which of the following statements is NOT true?

Accepted Answer

A)  Triangles can be ascending descending or symmetrical 
B)  A symmetrical triangle provides an ambiguous signal 
C)  A symmetrical triangle provides an unambiguous signal 
D)  An ascending triangle occurs when buyers come into the market at progressively higher levels while sellers get out at the same level 
A)  Triangles can be ascending descending or symmetrical 
B)  A symmetrical triangle provides an ambiguous signal 
C)  A symmetrical triangle provides an unambiguous signal 
D)  An ascending triangle occurs when buyers come into the market at progressively higher levels while sellers get out at the same level

Question 7

The major problem with time-series forecasting is that:

Accepted Answer

A)  if the foreign exchange market is weakly efficient, exchange rates will follow a random walk 
B)  they are too complicated 
C)  they quickly get out of date 
D)  they require too much data to compute 
A)  if the foreign exchange market is weakly efficient, exchange rates will follow a random walk 
B)  they are too complicated 
C)  they quickly get out of date 
D)  they require too much data to compute

Question 8

A double moving average rule requires selling a currency when:

Accepted Answer

A)  the long moving average cuts the short moving average from below 
B)  the short moving average is equal to the long moving average 
C)  the long moving average cuts the short moving average from above 
D)  none of the given answers 
A)  the long moving average cuts the short moving average from below 
B)  the short moving average is equal to the long moving average 
C)  the long moving average cuts the short moving average from above 
D)  none of the given answers

Question 9

Which of the following statement is NOT true?

Accepted Answer

A)  Forecasting is an important input in decision making 
B)  Meese and Rogoff found forecasting models of exchange rates perform poorly out-of-sample 
C)  Boughton found that for the USD SDR exchange rate some fundamental exchange rate models . performed better than the random walk in out-of-sample testing 
D)  MacDonald and Taylor used an error correction model to show that the monetary model can. forecast no better than the random walk model 
A)  Forecasting is an important input in decision making 
B)  Meese and Rogoff found forecasting models of exchange rates perform poorly out-of-sample 
C)  Boughton found that for the USD SDR exchange rate some fundamental exchange rate models . performed better than the random walk in out-of-sample testing 
D)  MacDonald and Taylor used an error correction model to show that the monetary model can. forecast no better than the random walk model

Question 10

Which of the following is NOT a feature of the head and shoulders formation?

Accepted Answer

A)  It comes after a prolonged upward change 
B)  The head must be higher than the tops of the shoulders on either side 
C)  It must be followed by a reverse head and shoulders formation 
D)  The shoulder tops must be at approximately equal levels 
A)  It comes after a prolonged upward change 
B)  The head must be higher than the tops of the shoulders on either side 
C)  It must be followed by a reverse head and shoulders formation 
D)  The shoulder tops must be at approximately equal levels

Question 11

A spot speculator:

Accepted Answer

A)  sells a currency if a forecast indicates that it will depreciate 
B)  buys a currency if a forecast indicates that it will depreciate 
C)  short sells a currency if a forecast indicates that it will depreciate 
D)  either sells or short sells a currency if a forecast indicates that it will depreciate 
A)  sells a currency if a forecast indicates that it will depreciate 
B)  buys a currency if a forecast indicates that it will depreciate 
C)  short sells a currency if a forecast indicates that it will depreciate 
D)  either sells or short sells a currency if a forecast indicates that it will depreciate

Question 12

If the underlying currency is expected to depreciate:

Accepted Answer

A)  a speculator will go long a call option or long a put option 
B)  a speculator will go long a call option or short a put option 
C)  a speculator will go short a call option or long a put option 
D)  a speculator will go short a call option or short a put option 
A)  a speculator will go long a call option or long a put option 
B)  a speculator will go long a call option or short a put option 
C)  a speculator will go short a call option or long a put option 
D)  a speculator will go short a call option or short a put option

Question 13

Which of the following operations does NOT require exchange rate forecasting?

Accepted Answer

A)  spot-forward speculation 
B)  uncovered interest arbitrage 
C)  covered interest arbitrage 
D)  hedging foreign exchange exposure 
A)  spot-forward speculation 
B)  uncovered interest arbitrage 
C)  covered interest arbitrage 
D)  hedging foreign exchange exposure

Question 14

If the underlying currency is expected to appreciate:

Accepted Answer

A)  a speculator will go long a call option or long a put option 
B)  a speculator will go long a call option or short a put option 
C)  a speculator will go short a call option or long a put option 
D)  a speculator will go short a call option or short a put option 
A)  a speculator will go long a call option or long a put option 
B)  a speculator will go long a call option or short a put option 
C)  a speculator will go short a call option or long a put option 
D)  a speculator will go short a call option or short a put option

Question 15

Which of the following is NOT an argument put forward by technical analysts as a reason for ignoring information on the fundamental variables affecting the exchange rate?

Accepted Answer

A)  Fundamental variables affect the exchange rate in the long run only 
B)  The information contains significant errors 
C)  It is not easy to pinpoint all of the fundamental variables 
D)  Some of the fundamental variables cannot be measured 
A)  Fundamental variables affect the exchange rate in the long run only 
B)  The information contains significant errors 
C)  It is not easy to pinpoint all of the fundamental variables 
D)  Some of the fundamental variables cannot be measured

Question 16

If the forward rate is used as a forecaster of the spot rate:

Accepted Answer

A)  the forecasting error equals the difference between the current spot rate and the forward rate at the maturity of the forward contract 
B)  the forecasting error equals the difference between the current forward rate and the spot rate at the maturity of the forward contract 
C)  the forecasting error equals the difference between the current forward rate and the current spot rate 
D)  none of the given answers 
A)  the forecasting error equals the difference between the current spot rate and the forward rate at the maturity of the forward contract 
B)  the forecasting error equals the difference between the current forward rate and the spot rate at the maturity of the forward contract 
C)  the forecasting error equals the difference between the current forward rate and the current spot rate 
D)  none of the given answers

Question 17

If a forecast indicates that the spot exchange rate will be lower than the forward rate on the maturity date of the forward contract:

Accepted Answer

A)  a speculator will buy forward and sell spot upon delivery 
B)  a speculator will sell forward and sell spot upon delivery 
C)  a speculator will buy forward and buy spot upon delivery 
D)  a speculator will sell forward and buy spot upon delivery 
A)  a speculator will buy forward and sell spot upon delivery 
B)  a speculator will sell forward and sell spot upon delivery 
C)  a speculator will buy forward and buy spot upon delivery 
D)  a speculator will sell forward and buy spot upon delivery

Question 18

The effectiveness of the spot rate as a market based forecast relies on:

Accepted Answer

A)  the validity of the covered interest parity hypothesis 
B)  the validity of the purchasing power parity hypothesis 
C)  the validity of the random walk hypothesis 
D)  the forward market efficiency 
A)  the validity of the covered interest parity hypothesis 
B)  the validity of the purchasing power parity hypothesis 
C)  the validity of the random walk hypothesis 
D)  the forward market efficiency

Question 19

Which of the following describes an econometric model of exchange rate forecasting?

Accepted Answer

A)  a model based on the PPP hypothesis 
B)  a model based on the previous history of the exchange rate 
C)  a model based on chart formations 
D)  a model based on the high, low and close values of the exchange rate 
A)  a model based on the PPP hypothesis 
B)  a model based on the previous history of the exchange rate 
C)  a model based on chart formations 
D)  a model based on the high, low and close values of the exchange rate

Question 20

Market efficiency will hold if:

Accepted Answer

A)  the forward rate is an unbiased and efficient forecaster of the spot exchange rate 
B)  if the forward rate equals the current spot rate 
C)  if the forward rate is greater than the current spot rate 
D)  if biased efficiency holds 
A)  the forward rate is an unbiased and efficient forecaster of the spot exchange rate 
B)  if the forward rate equals the current spot rate 
C)  if the forward rate is greater than the current spot rate 
D)  if biased efficiency holds

A double moving average rule requires buying a currency when:

Which of the measures below is NOT a measure of forecasting accuracy?

There are several problems associated with forecasting exchange rates using single-equation econometric models, including:

If the foreign currency is expected to appreciate:

Which of the following is NOT a reason for using composite forecasting?

Which of the following statements is NOT true?

The major problem with time-series forecasting is that:

A double moving average rule requires selling a currency when:

Which of the following statement is NOT true?

Which of the following is NOT a feature of the head and shoulders formation?

A spot speculator:

If the underlying currency is expected to depreciate:

Which of the following operations does NOT require exchange rate forecasting?

If the underlying currency is expected to appreciate:

Which of the following is NOT an argument put forward by technical analysts as a reason for ignoring information on the fundamental variables affecting the exchange rate?

If the forward rate is used as a forecaster of the spot rate:

If a forecast indicates that the spot exchange rate will be lower than the forward rate on the maturity date of the forward contract:

The effectiveness of the spot rate as a market based forecast relies on:

Which of the following describes an econometric model of exchange rate forecasting?

Market efficiency will hold if:

An Overview

The Foreign Exchange Market

The Balance of Payments and Effective Exchange Rate

Exchange Rate Determination

The International Monetary System and Exchange Rate Arrangements

The Eurocurrency Market and International Banking

International Banking Regulation and Basel Accords

Currency Futures and Swaps

Currency Options

International Arbitarage

Foreign Exchange Risk and Exposure

Foreign Exchange Risk Management

International Short-Term Financing and Investment

International Long-Term Financing and Investment

Foreign Direct Investment and International

Filters

Exam 8: Exchange Rate Forecasting, Technical Analysis and Trading Rules

A double moving average rule requires buying a currency when:

Which of the measures below is NOT a measure of forecasting accuracy?

There are several problems associated with forecasting exchange rates using single-equation econometric models, including:

If the foreign currency is expected to appreciate:

Which of the following is NOT a reason for using composite forecasting?

Which of the following statements is NOT true?

The major problem with time-series forecasting is that:

A double moving average rule requires selling a currency when:

Which of the following statement is NOT true?

Which of the following is NOT a feature of the head and shoulders formation?

A spot speculator:

If the underlying currency is expected to depreciate:

Which of the following operations does NOT require exchange rate forecasting?

If the underlying currency is expected to appreciate:

Which of the following is NOT an argument put forward by technical analysts as a reason for ignoring information on the fundamental variables affecting the exchange rate?

If the forward rate is used as a forecaster of the spot rate:

If a forecast indicates that the spot exchange rate will be lower than the forward rate on the maturity date of the forward contract:

The effectiveness of the spot rate as a market based forecast relies on:

Which of the following describes an econometric model of exchange rate forecasting?

Market efficiency will hold if:

An Overview

The Foreign Exchange Market

The Balance of Payments and Effective Exchange Rate

Exchange Rate Determination

The International Monetary System and Exchange Rate Arrangements

The Eurocurrency Market and International Banking

International Banking Regulation and Basel Accords

Currency Futures and Swaps

Currency Options

International Arbitarage

Foreign Exchange Risk and Exposure

Foreign Exchange Risk Management

International Short-Term Financing and Investment

International Long-Term Financing and Investment

Foreign Direct Investment and International

Filters