Exam 12: The Foreign Exchange Market

The ________ rate represents the difference between the spot and forward price.

If one dollar buys 10 pesos,then one peso buys ten cents of a dollar.

The euro is said to be selling at a ________ if the spot dollar price is $1.18 and the nine-month forward rate is $1.16.

The reduction or covering of a foreign exchange risk is called

Explain the similarities and differences between the forward and futures markets.

A pair of shoes manufactured in Milan,Italy cost 195 euros.What is the dollar value of the shoes if the exchange rate is $0.89 per euro?

Speculation is the opposite of hedging.

In swap transactions,the trader is interested in

In the foreign exchange market,a broker reveals the names of the banks making bids or offers to the trading banks before the trade has been agreed upon.

A European option can only be exercised on the final day,the expiration date.