Question 1

You are given the exchange rate AUD/USD 1.7652/1.7672. Calculate the bid offer spread.

Accepted Answer

A)  20 pips 
B)  20 cents 
C)  0.0020 
D)  20% 
A)  20 pips 
B)  20 cents 
C)  0.0020 
D)  20% C

Question 2

The U.S. dollar is the most heavily traded currency on the foreign exchange market for all of the following reasons EXCEPT:

Accepted Answer

A)  it is a major component of international reserves 
B)  it is used to settle international transactions 
C)  the sheer size of the U.S. financial markets 
D)  the U.S. is the largest consumer of oil which is priced in U.S. dollar 
A)  it is a major component of international reserves 
B)  it is used to settle international transactions 
C)  the sheer size of the U.S. financial markets 
D)  the U.S. is the largest consumer of oil which is priced in U.S. dollar D

Question 3

Central banks buy and sell currencies on the foreign exchange market to:

Accepted Answer

A)  make profit and accumulate reserves 
B)  smooth out fluctuations in exchange rates 
C)  finance the country's international transactions 
D)  smooth out capital movements 
A)  make profit and accumulate reserves 
B)  smooth out fluctuations in exchange rates 
C)  finance the country's international transactions 
D)  smooth out capital movements B

Question 4

The average daily turnover in the foreign exchange market (USD) in 2001 fell for the first time as recorded in the BIS surveys since 1989 due to:

Accepted Answer

A)  the introduction of the euro 
B)  the terrorist attack on 9/11 
C)  the decline in the value of the U.S. dollar 
D)  none of the given answers 
A)  the introduction of the euro 
B)  the terrorist attack on 9/11 
C)  the decline in the value of the U.S. dollar 
D)  none of the given answers

Question 5

In 2002, the EUR/AUD exchange rate fell from 0.5764 to 0.5403. Calculate the percentage change in the Australian dollar against the euro.

Accepted Answer

A)  +6.26% 
B)  -6.26% 
C)  +6.68% 
D)  -6.68% 
A)  +6.26% 
B)  -6.26% 
C)  +6.68% 
D)  -6.68%

Question 6

The term 'foreign exchange' means:

Accepted Answer

A)  foreign reserves held by central banks 
B)  coins, notes and bank deposits in foreign currencies 
C)  loans and bonds denominated in foreign currencies 
D)  foreign coins and banknotes 
A)  foreign reserves held by central banks 
B)  coins, notes and bank deposits in foreign currencies 
C)  loans and bonds denominated in foreign currencies 
D)  foreign coins and banknotes

Question 7

In order of importance, the following were the major foreign exchange counterparties in 2007.

Accepted Answer

A)  Reserve Banks; Financial Institutions; and Others 
B)  Reserve Banks; Interbank; and Others 
C)  Financial Institutions; Interbank; and Others 
D)  Interbank; Financial Institutions; and Others 
A)  Reserve Banks; Financial Institutions; and Others 
B)  Reserve Banks; Interbank; and Others 
C)  Financial Institutions; Interbank; and Others 
D)  Interbank; Financial Institutions; and Others

Question 8

In the interbank foreign exchange market, the term 'immediate delivery' implies that the delivery of currencies takes place:

Accepted Answer

A)  immediately after the conclusion of the transaction 
B)  one business day after the conclusion of the transaction 
C)  two business days after the conclusion of the transaction 
D)  by the end of the same business day 
A)  immediately after the conclusion of the transaction 
B)  one business day after the conclusion of the transaction 
C)  two business days after the conclusion of the transaction 
D)  by the end of the same business day

Question 9

Which of the following is not a characteristic of the foreign exchange market as an OTC market?

Accepted Answer

A)  The market has no specific physical location 
B)  Buyers and sellers conclude transactions via means of telecommunication 
C)  It comprises both spot and forward transactions 
D)  There are no floor brokers 
A)  The market has no specific physical location 
B)  Buyers and sellers conclude transactions via means of telecommunication 
C)  It comprises both spot and forward transactions 
D)  There are no floor brokers

Question 10

In the foreign exchange market, market makers:

Accepted Answer

A)  buy high and sell low 
B)  buy at the bid rate and sell at the offer rate 
C)  buy at the offer rate and sell at the bid rate 
D)  buy high and sell low, which is the same as buy at the offer rate and sell at the bid rate 
A)  buy high and sell low 
B)  buy at the bid rate and sell at the offer rate 
C)  buy at the offer rate and sell at the bid rate 
D)  buy high and sell low, which is the same as buy at the offer rate and sell at the bid rate

Question 11

Which of the following is not a characteristic of the foreign exchange market as a perfect market?

Accepted Answer

A)  The volume of daily turnover is extremely high 
B)  A large number of buyers and sellers operate in the market 
C)  There is free access to information 
D)  The products are homogenous 
A)  The volume of daily turnover is extremely high 
B)  A large number of buyers and sellers operate in the market 
C)  There is free access to information 
D)  The products are homogenous

Question 12

Exporters participate in the foreign exchange market because:

Accepted Answer

A)  the market provides letters of credit 
B)  the market provides short-term loans 
C)  they sell foreign currency they receive from foreigners buying their goods 
D)  foreign exchange brokers bring together importers and exporters 
A)  the market provides letters of credit 
B)  the market provides short-term loans 
C)  they sell foreign currency they receive from foreigners buying their goods 
D)  foreign exchange brokers bring together importers and exporters

Question 13

Importers participate in the foreign exchange market because:

Accepted Answer

A)  the market provides letters of credit 
B)  the market provides short-term loans 
C)  they need foreign currency to pay for imported goods 
D)  foreign exchange brokers bring together importers and exporters 
A)  the market provides letters of credit 
B)  the market provides short-term loans 
C)  they need foreign currency to pay for imported goods 
D)  foreign exchange brokers bring together importers and exporters

Question 14

This means that: The following are the spot and the swap forward rates of the AUD/USD.

Accepted Answer

A)  the U.S. dollar is selling at a forward discount 
B)  the U.S. dollar is selling at a forward premium 
C)  the Australian dollar is selling at a forward discount 
D)  after allowing for transaction costs, both currencies sell at par 
A)  the U.S. dollar is selling at a forward discount 
B)  the U.S. dollar is selling at a forward premium 
C)  the Australian dollar is selling at a forward discount 
D)  after allowing for transaction costs, both currencies sell at par

Question 15

If the exchange rate between the Australian dollar and the British pound is expressed in indirect quotation from an Australian perspective, then a fall in the exchange rate implies:

Accepted Answer

A)  depreciation of the pound 
B)  appreciation of the Australian dollar 
C)  depreciation of the Australian dollar 
D)  both depreciation of the pound and appreciation of the Australian dollar 
A)  depreciation of the pound 
B)  appreciation of the Australian dollar 
C)  depreciation of the Australian dollar 
D)  both depreciation of the pound and appreciation of the Australian dollar

Question 16

Calculate the USD/AUD 3-months forward spread in percentage terms. Complete the missing values in the blotter provided below:

Accepted Answer

A)  USD Deal Amount: -2,824,859; and USD Balance: -8,474,576 
B)  USD Deal Amount: -2,824,859; and USD Balance: -8,486,732 
C)  USD Deal Amount: +8,850,000; and USD Balance: +14,511,873 
D)  USD Deal Amount: +2,824,859; and USD Balance: +8,486,732 
A)  USD Deal Amount: -2,824,859; and USD Balance: -8,474,576 
B)  USD Deal Amount: -2,824,859; and USD Balance: -8,486,732 
C)  USD Deal Amount: +8,850,000; and USD Balance: +14,511,873 
D)  USD Deal Amount: +2,824,859; and USD Balance: +8,486,732

Question 17

In the foreign exchange market, a 'contract date' is:

Accepted Answer

A)  the expiry date of a forward contract 
B)  the date on which a futures contract is traded 
C)  the date on which two banks start a currency swap 
D)  the date on which a foreign exchange transaction is concluded at the exchange rate prevailing at the time 
A)  the expiry date of a forward contract 
B)  the date on which a futures contract is traded 
C)  the date on which two banks start a currency swap 
D)  the date on which a foreign exchange transaction is concluded at the exchange rate prevailing at the time

Question 18

The British pound is still heavily traded because it is:

Accepted Answer

A)  a hard currency 
B)  a petrocurrency 
C)  historically an important currency 
D)  the domestic currency in London, which is the most important foreign exchange centre 
A)  a hard currency 
B)  a petrocurrency 
C)  historically an important currency 
D)  the domestic currency in London, which is the most important foreign exchange centre

Question 19

A foreign exchange dealer engages in:

Accepted Answer

A)  taking speculative open positions on currencies 
B)  exploiting arbitrage opportunities 
C)  buying and selling currencies to hedge open positions 
D)  all of the given answers 
A)  taking speculative open positions on currencies 
B)  exploiting arbitrage opportunities 
C)  buying and selling currencies to hedge open positions 
D)  all of the given answers

Question 20

A foreign exchange transaction consists of the following sequential process:

Accepted Answer

A)  Price discovery; Decision making; Execution; Settlement; and Position keeping 
B)  Decision making; Price discovery; Execution; Settlement; and Position keeping 
C)  Decision making; Execution; Price discovery; Settlement; and Position keeping 
D)  Decision making; Execution; Settlement; Price discovery; and Position keeping 
A)  Price discovery; Decision making; Execution; Settlement; and Position keeping 
B)  Decision making; Price discovery; Execution; Settlement; and Position keeping 
C)  Decision making; Execution; Price discovery; Settlement; and Position keeping 
D)  Decision making; Execution; Settlement; Price discovery; and Position keeping

You are given the exchange rate AUD/USD 1.7652/1.7672. Calculate the bid offer spread.

The U.S. dollar is the most heavily traded currency on the foreign exchange market for all of the following reasons EXCEPT:

Central banks buy and sell currencies on the foreign exchange market to:

The average daily turnover in the foreign exchange market (USD) in 2001 fell for the first time as recorded in the BIS surveys since 1989 due to:

In 2002, the EUR/AUD exchange rate fell from 0.5764 to 0.5403. Calculate the percentage change in the Australian dollar against the euro.

The term 'foreign exchange' means:

In order of importance, the following were the major foreign exchange counterparties in 2007.

In the interbank foreign exchange market, the term 'immediate delivery' implies that the delivery of currencies takes place:

Which of the following is not a characteristic of the foreign exchange market as an OTC market?

In the foreign exchange market, market makers:

Which of the following is not a characteristic of the foreign exchange market as a perfect market?

Exporters participate in the foreign exchange market because:

Importers participate in the foreign exchange market because:

This means that: The following are the spot and the swap forward rates of the AUD/USD.

If the exchange rate between the Australian dollar and the British pound is expressed in indirect quotation from an Australian perspective, then a fall in the exchange rate implies:

Calculate the USD/AUD 3-months forward spread in percentage terms. Complete the missing values in the blotter provided below:

In the foreign exchange market, a 'contract date' is:

The British pound is still heavily traded because it is:

A foreign exchange dealer engages in:

A foreign exchange transaction consists of the following sequential process:

An Overview

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

Exchange Rate Forecasting, Technical Analysis and Trading Rules

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 2: The Foreign Exchange Market

You are given the exchange rate AUD/USD 1.7652/1.7672. Calculate the bid offer spread.

The U.S. dollar is the most heavily traded currency on the foreign exchange market for all of the following reasons EXCEPT:

Central banks buy and sell currencies on the foreign exchange market to:

The average daily turnover in the foreign exchange market (USD) in 2001 fell for the first time as recorded in the BIS surveys since 1989 due to:

In 2002, the EUR/AUD exchange rate fell from 0.5764 to 0.5403. Calculate the percentage change in the Australian dollar against the euro.

The term 'foreign exchange' means:

In order of importance, the following were the major foreign exchange counterparties in 2007.

In the interbank foreign exchange market, the term 'immediate delivery' implies that the delivery of currencies takes place:

Which of the following is not a characteristic of the foreign exchange market as an OTC market?

In the foreign exchange market, market makers:

Which of the following is not a characteristic of the foreign exchange market as a perfect market?

Exporters participate in the foreign exchange market because:

Importers participate in the foreign exchange market because:

This means that: The following are the spot and the swap forward rates of the AUD/USD.

If the exchange rate between the Australian dollar and the British pound is expressed in indirect quotation from an Australian perspective, then a fall in the exchange rate implies:

Calculate the USD/AUD 3-months forward spread in percentage terms. Complete the missing values in the blotter provided below:

In the foreign exchange market, a 'contract date' is:

The British pound is still heavily traded because it is:

A foreign exchange dealer engages in:

A foreign exchange transaction consists of the following sequential process:

An Overview

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

Exchange Rate Forecasting, Technical Analysis and Trading Rules

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