Question 1

The effectiveness of the forward 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 2

A single moving average rule requires selling a currency when:

Accepted Answer

A)  the moving average cuts the exchange rate from below 
B)  the exchange rate is equal to the moving average 
C)  the moving average cuts then exchange rate from above 
D)  none of the given answers 
A)  the moving average cuts the exchange rate from below 
B)  the exchange rate is equal to the moving average 
C)  the moving average cuts then exchange rate from above 
D)  none of the given answers

Question 3

A single moving average rule requires buying a currency when:

Accepted Answer

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

Question 4

If the foreign currency is expected to depreciate:

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

Question 5

A 1.00% filter rule requires selling a currency when it:

Accepted Answer

A)  appreciates by 1.00% above its average value over the past period 
B)  appreciates by 1.00% from its recent trough 
C)  depreciates by 1.00% from its recent peak 
D)  depreciates by 1.00% below the average over the past period 
A)  appreciates by 1.00% above its average value over the past period 
B)  appreciates by 1.00% from its recent trough 
C)  depreciates by 1.00% from its recent peak 
D)  depreciates by 1.00% below the average over the past period

Question 6

Central bank intervention requires exchange rate forecasting for:

Accepted Answer

A)  making a speculative profit 
B)  calculating the future value of foreign reserves 
C)  curbing speculative activity against the domestic currency 
D)  attempting to make the expected path of the exchange rate converge on the desired path 
A)  making a speculative profit 
B)  calculating the future value of foreign reserves 
C)  curbing speculative activity against the domestic currency 
D)  attempting to make the expected path of the exchange rate converge on the desired path

Question 7

The foreign exchange market is said to be in a trading range when:

Accepted Answer

A)  the tops and bottoms are at the same level 
B)  traders can buy at the bottom and sell at the top 
C)  the exchange rate moves between the upper and lower limits allowed by the underlying exchange rate arrangement 
D)  the trading volume is extremely high 
A)  the tops and bottoms are at the same level 
B)  traders can buy at the bottom and sell at the top 
C)  the exchange rate moves between the upper and lower limits allowed by the underlying exchange rate arrangement 
D)  the trading volume is extremely high

Question 8

An imminent trend reversal is indicated when the exchange rate breaks through:

Accepted Answer

A)  the lower line of the channel in a bear market 
B)  the upper line of the channel in a bull market 
C)  the upper line of the channel in a bear market 
D)  all of the given answers 
A)  the lower line of the channel in a bear market 
B)  the upper line of the channel in a bull market 
C)  the upper line of the channel in a bear market 
D)  all of the given answers

Question 9

If a forecast indicates that the spot exchange rate will be higher 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 10

The difference between judgmental forecasting and econometric forecasting is that the former:

Accepted Answer

A)  takes into account qualitative factors only 
B)  is less accurate but cheaper 
C)  is not based on a formal model 
D)  is used for short-term forecasting only 
A)  takes into account qualitative factors only 
B)  is less accurate but cheaper 
C)  is not based on a formal model 
D)  is used for short-term forecasting only

Question 11

If the foreign currency is expected to depreciate:

Accepted Answer

A)  a borrower is more likely to borrow foreign currency, than if the foreign currency were expected to appreciate 
B)  a borrower is less likely to borrow foreign currency, than if the foreign currency were expected to appreciate 
C)  a borrower is more likely to borrow domestic currency, than if the foreign currency were expected to appreciate 
D)  a borrower will definitely borrow domestic currency rather than foreign currency 
A)  a borrower is more likely to borrow foreign currency, than if the foreign currency were expected to appreciate 
B)  a borrower is less likely to borrow foreign currency, than if the foreign currency were expected to appreciate 
C)  a borrower is more likely to borrow domestic currency, than if the foreign currency were expected to appreciate 
D)  a borrower will definitely borrow domestic currency rather than foreign currency

Question 12

Which of the following statements is NOT true?

Accepted Answer

A)  Flags are continuous patterns 
B)  The flag's pole has to be a continuation of a previous trend 
C)  A flag occurs when major trends are interrupted 
D)  Flags provide an unambiguous buy signal 
A)  Flags are continuous patterns 
B)  The flag's pole has to be a continuation of a previous trend 
C)  A flag occurs when major trends are interrupted 
D)  Flags provide an unambiguous buy signal

Question 13

If the foreign currency is expected to appreciate to a value in excess of the appropriate forward rate:

Accepted Answer

A)  a hedger will hedge foreign payables by buying the foreign currency forward 
B)  a hedger will hedge foreign payables by selling the foreign currency forward 
C)  a hedger will not hedge foreign payables 
D)  a hedger will regret his decision to hedge foreign payables if the foreign currency is higher than the forward rate at maturity 
A)  a hedger will hedge foreign payables by buying the foreign currency forward 
B)  a hedger will hedge foreign payables by selling the foreign currency forward 
C)  a hedger will not hedge foreign payables 
D)  a hedger will regret his decision to hedge foreign payables if the foreign currency is higher than the forward rate at maturity

Question 14

If the foreign currency is expected to appreciate:

Accepted Answer

A)  a borrower is more likely to borrow foreign currency, than if the foreign currency were expected to depreciate 
B)  a borrower is less likely to borrow foreign currency, than if the foreign currency were expected to depreciate 
C)  a borrower is less likely to borrow domestic currency, than if the foreign currency were expected to depreciate 
D)  a borrower will definitely borrow domestic currency rather than foreign currency 
A)  a borrower is more likely to borrow foreign currency, than if the foreign currency were expected to depreciate 
B)  a borrower is less likely to borrow foreign currency, than if the foreign currency were expected to depreciate 
C)  a borrower is less likely to borrow domestic currency, than if the foreign currency were expected to depreciate 
D)  a borrower will definitely borrow domestic currency rather than foreign currency

Question 15

If the foreign currency is expected to appreciate to a value higher than the appropriate forward rate:

Accepted Answer

A)  a hedger will hedge foreign payables by buying a put option 
B)  a hedger will hedge foreign payables by selling the foreign currency forward 
C)  a hedger will not hedge foreign payables 
D)  a hedger will regret his decision to hedge foreign payables if the foreign currency is lower than the forward rate at maturity 
A)  a hedger will hedge foreign payables by buying a put option 
B)  a hedger will hedge foreign payables by selling the foreign currency forward 
C)  a hedger will not hedge foreign payables 
D)  a hedger will regret his decision to hedge foreign payables if the foreign currency is lower than the forward rate at maturity

Question 16

If the foreign currency is expected to appreciate to a value lower than the appropriate forward rate:

Accepted Answer

A)  a hedger will hedge foreign receivables by buying the foreign currency forward 
B)  a hedger will hedge foreign receivables by selling the foreign currency forward 
C)  a hedger will not hedge foreign receivables 
D)  a hedger will regret his decision to hedge foreign receivables if the foreign currency is lower than the forward rate at maturity 
A)  a hedger will hedge foreign receivables by buying the foreign currency forward 
B)  a hedger will hedge foreign receivables by selling the foreign currency forward 
C)  a hedger will not hedge foreign receivables 
D)  a hedger will regret his decision to hedge foreign receivables if the foreign currency is lower than the forward rate at maturity

Question 17

A 5.00% filter rule requires buying a currency when it:

Accepted Answer

A)  appreciates by 5.00% above its average value over the past period 
B)  appreciates by 5.00% from its recent trough 
C)  depreciates by 5.00% from its recent peak 
D)  depreciates by 5.00% from the average over the past period 
A)  appreciates by 5.00% above its average value over the past period 
B)  appreciates by 5.00% from its recent trough 
C)  depreciates by 5.00% from its recent peak 
D)  depreciates by 5.00% from the average over the past period

Question 18

Composite forecasting is used because:

Accepted Answer

A)  different forecasters have different forecasting accuracy 
B)  diversification reduces the risk associated with forecasting accuracy 
C)  combining technical and fundamental forecasting produces better forecasting results than using any one technique 
D)  all of the answers given 
A)  different forecasters have different forecasting accuracy 
B)  diversification reduces the risk associated with forecasting accuracy 
C)  combining technical and fundamental forecasting produces better forecasting results than using any one technique 
D)  all of the answers given

Question 19

A spot speculator:

Accepted Answer

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

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

A single moving average rule requires selling a currency when:

A single moving average rule requires buying a currency when:

If the foreign currency is expected to depreciate:

A 1.00% filter rule requires selling a currency when it:

Central bank intervention requires exchange rate forecasting for:

The foreign exchange market is said to be in a trading range when:

An imminent trend reversal is indicated when the exchange rate breaks through:

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

The difference between judgmental forecasting and econometric forecasting is that the former:

If the foreign currency is expected to depreciate:

Which of the following statements is NOT true?

If the foreign currency is expected to appreciate to a value in excess of the appropriate forward rate:

If the foreign currency is expected to appreciate:

If the foreign currency is expected to appreciate to a value higher than the appropriate forward rate:

If the foreign currency is expected to appreciate to a value lower than the appropriate forward rate:

A 5.00% filter rule requires buying a currency when it:

Composite forecasting is used because:

A spot speculator:

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

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

A single moving average rule requires selling a currency when:

A single moving average rule requires buying a currency when:

If the foreign currency is expected to depreciate:

A 1.00% filter rule requires selling a currency when it:

Central bank intervention requires exchange rate forecasting for:

The foreign exchange market is said to be in a trading range when:

An imminent trend reversal is indicated when the exchange rate breaks through:

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

The difference between judgmental forecasting and econometric forecasting is that the former:

If the foreign currency is expected to depreciate:

Which of the following statements is NOT true?

If the foreign currency is expected to appreciate to a value in excess of the appropriate forward rate:

If the foreign currency is expected to appreciate:

If the foreign currency is expected to appreciate to a value higher than the appropriate forward rate:

If the foreign currency is expected to appreciate to a value lower than the appropriate forward rate:

A 5.00% filter rule requires buying a currency when it:

Composite forecasting is used because:

A spot speculator:

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