Question 1

It is characteristic of foreign exchange dealers to

Accepted Answer

A) bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale. 
B) act as market makers, willing to buy and sell the currencies in which they specialize. 
C) trade only with clients in the retail market and never operate in the wholesale market for foreign exchange. 
D) All of the above are characteristics of foreign exchange dealers. 
A) bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale. 
B) act as market makers, willing to buy and sell the currencies in which they specialize. 
C) trade only with clients in the retail market and never operate in the wholesale market for foreign exchange. 
D) All of the above are characteristics of foreign exchange dealers.

Question 2

The authors identify two tiers of foreign exchange markets:

Accepted Answer

A) bank and nonbank foreign exchange. 
B) commercial and investment transactions. 
C) interbank and client markets. 
D) client and retail market. 
A) bank and nonbank foreign exchange. 
B) commercial and investment transactions. 
C) interbank and client markets. 
D) client and retail market.

Question 3

The foreign exchange market is NOT efficient because

Accepted Answer

A) market participants do not compete with one another due to the fact that trading takes place around the world and not in a single centralized location. 
B) dealers have ask prices that are higher than bid prices. 
C) central governments dominate the foreign exchange market and everybody knows that by definition, central governments are inefficient. 
D) none of the reasons listed are accurate because the foreign exchange market is efficient. 
A) market participants do not compete with one another due to the fact that trading takes place around the world and not in a single centralized location. 
B) dealers have ask prices that are higher than bid prices. 
C) central governments dominate the foreign exchange market and everybody knows that by definition, central governments are inefficient. 
D) none of the reasons listed are accurate because the foreign exchange market is efficient.

Question 4

The greatest amount of foreign exchange trading takes place in the following three cities:

Accepted Answer

A) New York, London, and Tokyo. 
B) New York, Singapore, and Zurich. 
C) London, Frankfurt, and Paris. 
D) London, Tokyo, and Zurich. 
A) New York, London, and Tokyo. 
B) New York, Singapore, and Zurich. 
C) London, Frankfurt, and Paris. 
D) London, Tokyo, and Zurich.

Question 5

A/an ________ quote in the United States would be foreign units per dollar,while a/an ________ quote would be in dollars per foreign currency unit.

Accepted Answer

A) direct; direct 
B) direct; indirect 
C) indirect; indirect 
D) indirect; direct 
A) direct; direct 
B) direct; indirect 
C) indirect; indirect 
D) indirect; direct

Question 6

Which of the following is NOT true regarding nondeliverable forward (NDF)contracts?

Accepted Answer

A) NDFs are used primarily for emerging market currencies. 
B) Pricing of NDFs reflects basic interest rate differentials plus an additional premium charged for dollar settlement. 
C) NDFs can only be traded by central banks. 
D) All of the above are true. 
A) NDFs are used primarily for emerging market currencies. 
B) Pricing of NDFs reflects basic interest rate differentials plus an additional premium charged for dollar settlement. 
C) NDFs can only be traded by central banks. 
D) All of the above are true.

Question 7

For arbitrage opportunities to be practical,

Accepted Answer

A) participants must have instant access to quotes. 
B) participants must have instant access to executions. 
C) bank traders must be able to execute the arbitrage trades without an initial sum of money relying on their bank's credit standing. 
D) all of the above must be true. 
A) participants must have instant access to quotes. 
B) participants must have instant access to executions. 
C) bank traders must be able to execute the arbitrage trades without an initial sum of money relying on their bank's credit standing. 
D) all of the above must be true.

Question 8

New York City has the greatest volume of foreign exchange activity in the world.

Accepted Answer

A) True 
 B)False

Question 9

TABLE 6.1
Use the table to answer the following question(s).
  
-Refer to Table 6.1.Cross rates

Accepted Answer

A) are often reported in the form of a matrix in the financial newspapers. 
B) can be used to check on opportunities for intermarket arbitrage. 
C) for the spot market in the table are "188.10" (using the mid rates). 
D) are all of the above. 
A) are often reported in the form of a matrix in the financial newspapers. 
B) can be used to check on opportunities for intermarket arbitrage. 
C) for the spot market in the table are "188.10" (using the mid rates). 
D) are all of the above.

Question 10

TABLE 6.1
Use the table to answer the following question(s).
  
-Refer to Table 6.1.The current spot rate of dollars per pound as quoted in a newspaper is ________ or ________.

Accepted Answer

A) £1.4484/$; $0.6904/£ 
B) $1.4481/£; £0.6906/$ 
C) $1.4484/£; £0.6904/$ 
D) £1.4487/$; $0.6903/£ 
A) £1.4484/$; $0.6904/£ 
B) $1.4481/£; £0.6906/$ 
C) $1.4484/£; £0.6904/$ 
D) £1.4487/$; $0.6903/£

Question 11

Daily trading volume of foreign exchange had actually decreased in 2010 from the levels reported in 2007.

Accepted Answer

A) True 
 B)False

Question 12

________ are NOT one of the three categories reported for foreign exchange.

Accepted Answer

A) Spot transactions 
B) Swap transactions 
C) Strip transactions 
D) Futures transactions 
A) Spot transactions 
B) Swap transactions 
C) Strip transactions 
D) Futures transactions

Question 13

While trading in foreign exchange takes place worldwide,the major currency trading centers are located in

Accepted Answer

A) London, New York, and Tokyo. 
B) New York, Zurich, and Bahrain. 
C) Paris, Frankfurt, and London. 
D) Los Angeles, New York, and London. 
A) London, New York, and Tokyo. 
B) New York, Zurich, and Bahrain. 
C) Paris, Frankfurt, and London. 
D) Los Angeles, New York, and London.

Question 14

The U.S.dollar suddenly changes in value against the euro moving from an exchange rate of $0.8909/euro to $0.08709/euro.Thus,the dollar has ________ by ________.

Accepted Answer

A) appreciated; 2.30% 
B) depreciated; 2.30% 
C) appreciated; 2.24% 
D) depreciated; 2.24% 
A) appreciated; 2.30% 
B) depreciated; 2.30% 
C) appreciated; 2.24% 
D) depreciated; 2.24%

Question 15

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

Accepted Answer

A) Speculators and arbitragers 
B) Foreign exchange brokers 
C) Central banks 
D) Treasuries 
A) Speculators and arbitragers 
B) Foreign exchange brokers 
C) Central banks 
D) Treasuries

Question 16

A common type of swap transaction in the foreign exchange market is the ________ where the dealer buys the currency in the spot market and sells the same amount back to the same bank in the forward market.

Accepted Answer

A) "forward against spot" 
B) "forspot" 
C) "repurchase agreement" 
D) "spot against forward" 
A) "forward against spot" 
B) "forspot" 
C) "repurchase agreement" 
D) "spot against forward"

Question 17

With several exceptions,most interbank quotes are stated in European terms (meaning foreign currency unit per U.S.dollar).

Accepted Answer

A) True 
 B)False

Question 18

Daily trading volume in the foreign exchange market was about ________ per ________ in 2007.

Accepted Answer

A) $3,200 billion; month 
B) $1,000 billion; month 
C) $3,200 billion; day 
D) $1,000 billion; day 
A) $3,200 billion; month 
B) $1,000 billion; month 
C) $3,200 billion; day 
D) $1,000 billion; day

Question 19

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

Accepted Answer

A) True 
 B)False

Question 20

A forward contract to deliver British pounds for U.S.dollars could be described either as ________ or ________.

Accepted Answer

A) buying dollars forward; buying pounds forward 
B) selling pounds forward; selling dollars forward 
C) selling pounds forward; buying dollars forward 
D) selling dollars forward; buying pounds forward 
A) buying dollars forward; buying pounds forward 
B) selling pounds forward; selling dollars forward 
C) selling pounds forward; buying dollars forward 
D) selling dollars forward; buying pounds forward

It is characteristic of foreign exchange dealers to

The authors identify two tiers of foreign exchange markets:

The foreign exchange market is NOT efficient because

The greatest amount of foreign exchange trading takes place in the following three cities:

A/an quote in the United States would be foreign units per dollar,while a/an quote would be in dollars per foreign currency unit.

Which of the following is NOT true regarding nondeliverable forward (NDF)contracts?

For arbitrage opportunities to be practical,

New York City has the greatest volume of foreign exchange activity in the world.

TABLE 6.1 Use the table to answer the following question(s). -Refer to Table 6.1.Cross rates

TABLE 6.1 Use the table to answer the following question(s). -Refer to Table 6.1.The current spot rate of dollars per pound as quoted in a newspaper is or .

Daily trading volume of foreign exchange had actually decreased in 2010 from the levels reported in 2007.

________ are NOT one of the three categories reported for foreign exchange.

While trading in foreign exchange takes place worldwide,the major currency trading centers are located in

The U.S.dollar suddenly changes in value against the euro moving from an exchange rate of $0.8909/euro to $0.08709/euro.Thus,the dollar has by .

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

A common type of swap transaction in the foreign exchange market is the ________ where the dealer buys the currency in the spot market and sells the same amount back to the same bank in the forward market.

With several exceptions,most interbank quotes are stated in European terms (meaning foreign currency unit per U.S.dollar).

Daily trading volume in the foreign exchange market was about per in 2007.

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

A forward contract to deliver British pounds for U.S.dollars could be described either as or .

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

Exam 6: The Foreign Exchange Market

It is characteristic of foreign exchange dealers to

The authors identify two tiers of foreign exchange markets:

The foreign exchange market is NOT efficient because

The greatest amount of foreign exchange trading takes place in the following three cities:

A/an ________ quote in the United States would be foreign units per dollar,while a/an ________ quote would be in dollars per foreign currency unit.

Which of the following is NOT true regarding nondeliverable forward (NDF)contracts?

For arbitrage opportunities to be practical,

New York City has the greatest volume of foreign exchange activity in the world.

TABLE 6.1 Use the table to answer the following question(s). -Refer to Table 6.1.Cross rates

TABLE 6.1 Use the table to answer the following question(s). -Refer to Table 6.1.The current spot rate of dollars per pound as quoted in a newspaper is ________ or ________.

Daily trading volume of foreign exchange had actually decreased in 2010 from the levels reported in 2007.

________ are NOT one of the three categories reported for foreign exchange.

While trading in foreign exchange takes place worldwide,the major currency trading centers are located in

The U.S.dollar suddenly changes in value against the euro moving from an exchange rate of $0.8909/euro to $0.08709/euro.Thus,the dollar has ________ by ________.

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

A common type of swap transaction in the foreign exchange market is the ________ where the dealer buys the currency in the spot market and sells the same amount back to the same bank in the forward market.

With several exceptions,most interbank quotes are stated in European terms (meaning foreign currency unit per U.S.dollar).

Daily trading volume in the foreign exchange market was about ________ per ________ in 2007.

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

A forward contract to deliver British pounds for U.S.dollars could be described either as ________ or ________.

Current Multinational Challenges and the Global Economy

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007 - 2009

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction and Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Sourcing Equity and Debt Globally

Multinational Tax Management

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Portfolio Theory and Diversification

Working Capital Management

International Trade Finance

Filters

A/an quote in the United States would be foreign units per dollar,while a/an quote would be in dollars per foreign currency unit.

TABLE 6.1 Use the table to answer the following question(s). -Refer to Table 6.1.The current spot rate of dollars per pound as quoted in a newspaper is or .

The U.S.dollar suddenly changes in value against the euro moving from an exchange rate of $0.8909/euro to $0.08709/euro.Thus,the dollar has by .

Daily trading volume in the foreign exchange market was about per in 2007.

A forward contract to deliver British pounds for U.S.dollars could be described either as or .