Question 1

Currency trading is a service center rather than a profit center for commercial and investment banks.

Accepted Answer

A) True 
 B)False  False

Question 2

As you might expect, the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

Accepted Answer

A) True 
 B)False  False

Question 3

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

Accepted Answer

A) True 
 B)False  True

Question 4

Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange ________, on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.

Accepted Answer

A)  central banks; treasuries 
B)  dealers; brokers 
C)  brokers; dealers 
D)  speculators; arbitrageurs 
A)  central banks; treasuries 
B)  dealers; brokers 
C)  brokers; dealers 
D)  speculators; arbitrageurs

Question 5

The low level of interest rates around the globe in recent years, combined with slowing economic growth and new debt issuances, has had a dampening impact on the swap market.

Accepted Answer

A) True 
 B)False

Question 6

If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the U.S. investor would be ________ and the direct quote for the British investor would be ________.

Accepted Answer

A)  £0.699/$; £0.699/$ 
B)  $0.699/£; £0.699/$ 
C)  £1.43/£; £0.699/$ 
D)  £0.699/$; $1.43/£ 
A)  £0.699/$; £0.699/$ 
B)  $0.699/£; £0.699/$ 
C)  £1.43/£; £0.699/$ 
D)  £0.699/$; $1.43/£

Question 7

________ make money on currency exchanges by the difference between the ________ price, or the price they offer to pay, and the ________ price, or the price at which they offer to sell the currency.

Accepted Answer

A)  Dealers; ask; bid 
B)  Dealers; bid; ask 
C)  Brokers; ask; bid 
D)  Brokers; bid; ask 
A)  Dealers; ask; bid 
B)  Dealers; bid; ask 
C)  Brokers; ask; bid 
D)  Brokers; bid; ask

Question 8

Since in the U.S. the home currency is the dollar and the foreign currency is the euro, in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

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 11

The most commonly quoted currency exchange is that between the U.S. dollar and the European euro. For example, a quotation of EUR/USD 1.2174. The euro is the base currency and the dollar the price currency.

Accepted Answer

A) True 
 B)False

Question 12

Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following may be participants in the foreign exchange markets?

Accepted Answer

A)  bank and nonbank foreign exchange dealers 
B)  central banks and treasuries 
C)  speculators and arbitrageurs 
D)  all of the above 
A)  bank and nonbank foreign exchange dealers 
B)  central banks and treasuries 
C)  speculators and arbitrageurs 
D)  all of the above

Question 14

Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.

Accepted Answer

Spot transactions are exchanging one cur

Question 15

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 16

A ________ transaction in the foreign exchange market requires an almost immediate delivery (typically within two days) of foreign exchange.

Accepted Answer

A)  spot 
B)  forward 
C)  futures 
D)  none of the above 
A)  spot 
B)  forward 
C)  futures 
D)  none of the above

Question 17

Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.

Accepted Answer

A) True 
 B)False

Question 18

A foreign exchange ________ is the price of one currency expressed in terms of another currency. A foreign exchange ________ is a willingness to buy or sell at the announced rate.

Accepted Answer

A)  quote; rate 
B)  quote; quote 
C)  rate; quote 
D)  rate; rate 
A)  quote; rate 
B)  quote; quote 
C)  rate; quote 
D)  rate; rate

Question 19

The U.S. dollar suddenly changes in value against the euro moving from an exchange rate of 0.8909/€ to $0.8709/€. 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 20

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

Accepted Answer

A)  European terms; indirect 
B)  American terms; direct 
C)  American terms; European terms 
D)  European terms; American terms 
A)  European terms; indirect 
B)  American terms; direct 
C)  American terms; European terms 
D)  European terms; American terms

Currency trading is a service center rather than a profit center for commercial and investment banks.

As you might expect, the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

Foreign exchange earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange , on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.

The low level of interest rates around the globe in recent years, combined with slowing economic growth and new debt issuances, has had a dampening impact on the swap market.

If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the U.S. investor would be and the direct quote for the British investor would be .

make money on currency exchanges by the difference between the price, or the price they offer to pay, and the price, or the price at which they offer to sell the currency.

Since in the U.S. the home currency is the dollar and the foreign currency is the euro, in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

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

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

The most commonly quoted currency exchange is that between the U.S. dollar and the European euro. For example, a quotation of EUR/USD 1.2174. The euro is the base currency and the dollar the price currency.

Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.

Which of the following may be participants in the foreign exchange markets?

Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.

It is characteristic of foreign exchange dealers to:

A ________ transaction in the foreign exchange market requires an almost immediate delivery (typically within two days) of foreign exchange.

Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.

A foreign exchange is the price of one currency expressed in terms of another currency. A foreign exchange is a willingness to buy or sell at the announced rate.

The U.S. dollar suddenly changes in value against the euro moving from an exchange rate of 0.8909/€ to $0.8709/€. Thus, the dollar has by .

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as whereas are expressed as dollars per foreign unit.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 5: The Foreign Exchange Market

Currency trading is a service center rather than a profit center for commercial and investment banks.

As you might expect, the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange ________, on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.

The low level of interest rates around the globe in recent years, combined with slowing economic growth and new debt issuances, has had a dampening impact on the swap market.

If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the U.S. investor would be ________ and the direct quote for the British investor would be ________.

________ make money on currency exchanges by the difference between the ________ price, or the price they offer to pay, and the ________ price, or the price at which they offer to sell the currency.

Since in the U.S. the home currency is the dollar and the foreign currency is the euro, in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

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

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

The most commonly quoted currency exchange is that between the U.S. dollar and the European euro. For example, a quotation of EUR/USD 1.2174. The euro is the base currency and the dollar the price currency.

Most transactions in the interbank foreign exchange trading are primarily conducted via telecommunication techniques and little is conducted face-to-face.

Which of the following may be participants in the foreign exchange markets?

Define spot, forward, and swap transactions in the foreign exchange market and give an example of how each could be used.

It is characteristic of foreign exchange dealers to:

A ________ transaction in the foreign exchange market requires an almost immediate delivery (typically within two days) of foreign exchange.

Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.

A foreign exchange ________ is the price of one currency expressed in terms of another currency. A foreign exchange ________ is a willingness to buy or sell at the announced rate.

The U.S. dollar suddenly changes in value against the euro moving from an exchange rate of 0.8909/€ to $0.8709/€. Thus, the dollar has ________ by ________.

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Foreign exchange earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange , on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase.

If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the U.S. investor would be and the direct quote for the British investor would be .

make money on currency exchanges by the difference between the price, or the price they offer to pay, and the price, or the price at which they offer to sell the currency.

A foreign exchange is the price of one currency expressed in terms of another currency. A foreign exchange is a willingness to buy or sell at the announced rate.

The U.S. dollar suddenly changes in value against the euro moving from an exchange rate of 0.8909/€ to $0.8709/€. Thus, the dollar has by .

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as whereas are expressed as dollars per foreign unit.