Exam 5: The Foreign Exchange Market

TABLE 6.1 Use the table to answer following question(s). -Refer to Table 6.1. The ask price for the two-year swap for a British pound is ________.

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 ________.

The foreign exchange market is NOT efficient because

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.

The primary motive of foreign exchange activities by most central banks is profit.

American and British meanings differ for the word billion. Therefore, when traders refer to an American billion, they call it a/an ________.

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

The European and American terms for foreign currency exchange are square roots of one another.

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

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 the market for foreign exchange?

A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency.

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

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

Currency trading increased tremendously between 2004 and 2007 with daily trading volume jumping from $1.9 trillion to $3.2 trillion. Which of the following do experts think was a major driving force behind the increased daily volume?

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

TABLE 6.1 Use the table to answer following question(s). -Refer to Table 6.1. According to the information provided in the table, the 6-month yen is selling at a forward ________ of approximately ________ per annum. (Use the mid rates to make your calculations.)

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

A spot transaction in the interbank market for foreign exchange would typically involve a two-day delay in the actual delivery of the currencies, while such a transaction between a bank and its commercial customer would not necessarily involve a two-day wait.

The ________ is a derivative forward contract that was created in the 1990s. It has the same characteristics and documentation requirements as traditional forward contracts except that they are only settled in U.S. dollars and the foreign currency involved in the transaction is not delivered.