Exam 12: The Foreign Exchange Market

Suppose that in the free market,where the supply of the foreign currency is equal to demand for that currency,the peso-dollar exchange rate is 4 pesos = $1. Assume the central bank sets an official exchange rate at 3 pesos = $1,we can say that in the official market the dollar is

(Multiple Choice)

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Question 21

An increase in the exchange rate from $2.00 = 1 € to $2.20 = 1 € is a

(Multiple Choice)

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Question 22

The difference between bid (buying)rates and ask (selling)rates is called the

(Multiple Choice)

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Question 23

The market where currencies may be bought and sold for immediate delivery is known as

(Multiple Choice)

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Question 24

The size of the spread that a dealer will quote for a foreign exchange transaction will vary depending on

(Multiple Choice)

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Question 25

A European option differs from an American option in that it may be exercised

(Multiple Choice)

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Question 26

If a foreign exchange speculator expects the spot rate of the dollar nine months from today to be lower than today's forward rate on the dollar for delivery in nine months,she may

(Multiple Choice)

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Question 27

What is the difference between black and parallel markets for foreign exchange? How are these created?

(Essay)

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Question 28

Foreign exchange activity is dominated by the spot and swaps markets.

(True/False)

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Question 29

Central banks intervene in the foreign exchange market

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Question 30

A ________ is a transaction in which both a spot transaction and a forward transaction are agreed upon simultaneously.

(Multiple Choice)

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Question 31

Suppose in London £/$ = 0.5 while in New York £/SF = 0.2. The corresponding cross rate (SF/$)is

(Multiple Choice)

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Question 32

If the bank is selling euros for $0.74,then what is the implied euro price of the dollar?

(Multiple Choice)

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Question 33

A bottle of wine manufactured in Paris,France cost 45 euros.What is the dollar value of the wine if the exchange rate is $0.80 per euro?

(Multiple Choice)

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Question 34

If the exchange rate goes from $2.00 = 1 € to $1.80 = 1 €,the result is a

(Multiple Choice)

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Question 35

An investor can write any size contract in both forward and futures markets as long as the other party involved is in agreement.

(True/False)

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Question 36

Why is it true that exchange rates tend to be equal worldwide? Briefly explain.

(Essay)

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Question 37

Because of the threat of arbitrage,the forward rate must equal the spot rate at all times.

(True/False)

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Question 38

Exchange rates (for instance,the dollar price of yen)tend to be different worldwide at any point in time because of different tastes for currencies in each country.

(True/False)

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Question 39

Riskless transactions to take advantage of profit opportunities due to a price differential or a yield differential in excess of transaction costs are called

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Question 40

Showing 21 - 40 of 50

Suppose that in the free market,where the supply of the foreign currency is equal to demand for that currency,the peso-dollar exchange rate is 4 pesos = $1. Assume the central bank sets an official exchange rate at 3 pesos = $1,we can say that in the official market the dollar is

An increase in the exchange rate from $2.00 = 1 € to $2.20 = 1 € is a

The difference between bid (buying)rates and ask (selling)rates is called the

The market where currencies may be bought and sold for immediate delivery is known as

The size of the spread that a dealer will quote for a foreign exchange transaction will vary depending on

A European option differs from an American option in that it may be exercised

If a foreign exchange speculator expects the spot rate of the dollar nine months from today to be lower than today's forward rate on the dollar for delivery in nine months,she may

What is the difference between black and parallel markets for foreign exchange? How are these created?

Foreign exchange activity is dominated by the spot and swaps markets.

Central banks intervene in the foreign exchange market

A ________ is a transaction in which both a spot transaction and a forward transaction are agreed upon simultaneously.

Suppose in London £/$ = 0.5 while in New York £/SF = 0.2. The corresponding cross rate (SF/$)is

If the bank is selling euros for $0.74,then what is the implied euro price of the dollar?

A bottle of wine manufactured in Paris,France cost 45 euros.What is the dollar value of the wine if the exchange rate is $0.80 per euro?

If the exchange rate goes from $2.00 = 1 € to $1.80 = 1 €,the result is a

An investor can write any size contract in both forward and futures markets as long as the other party involved is in agreement.

Why is it true that exchange rates tend to be equal worldwide? Briefly explain.

Because of the threat of arbitrage,the forward rate must equal the spot rate at all times.

Exchange rates (for instance,the dollar price of yen)tend to be different worldwide at any point in time because of different tastes for currencies in each country.

Riskless transactions to take advantage of profit opportunities due to a price differential or a yield differential in excess of transaction costs are called

An Introduction to International Trade

Tools of Analysis for International Trade Models

The Classical Model of International Trade

The Heckscher-Ohlin Model

Tests of Trade Models: the Leontief Paradox and Its Aftermath

Tariffs

Nontariff Barriers and Arguments for Protection

Commercial Policy: History and Practice

Preferential Trade Agreements

International Trade and Economic Growth

The Balance of Payments

International Monetary Systems

Exchange Rates in the Short Run

Exchange Rates in the Long Run

Theories of the Current Account Balance

Open Economy Macroeconomics

International Banking, debt and Risk

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