Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

Accepted Answer

A)  The transfer of purchasing power between countries. 
B)  Obtaining or providing credit for international trade transactions. 
C)  Minimizing the risks of exchange rate changes. 
D)  All of the above were identified as functions of the foreign exchange market. 
A)  The transfer of purchasing power between countries. 
B)  Obtaining or providing credit for international trade transactions. 
C)  Minimizing the risks of exchange rate changes. 
D)  All of the above were identified as functions of the foreign exchange market.

Question 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

Liquidity seekers profit of the profit seekers because

Accepted Answer

A)  profit seekers are usually much better informed about the market and share that information with liquidity seekers. 
B)  profit seekers simply wish to secure enough of currency for their transactions. 
C)  profit seekers are inducing exceptional growth of the foreign exchange market. 
D)  None of the above. Profit seekers generally profit from liquidity seekers. 
A)  profit seekers are usually much better informed about the market and share that information with liquidity seekers. 
B)  profit seekers simply wish to secure enough of currency for their transactions. 
C)  profit seekers are inducing exceptional growth of the foreign exchange market. 
D)  None of the above. Profit seekers generally profit from liquidity seekers.

Question 6

TABLE 5.1
Use the table to answer the following question(s).
  
-Refer to Table 5.1. The ask price for the two-year swap for a British pound is

Accepted Answer

A)  $1.4250/£. 
B)  $1.4257/£. 
C)  -$230. 
D)  -$238. 
A)  $1.4250/£. 
B)  $1.4257/£. 
C)  -$230. 
D)  -$238.

Question 7

Swap and forward transactions account for an insignificant portion of the foreign exchange market.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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

Question 10

The foreign exchange market has expanded significantly in the last 20 years. What is the volume of swap, forward, and spot transactions in the market as of the most recent survey data (April 2013)?

Accepted Answer

The total market has grown from approxim

Question 11

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

Accepted Answer

A)  spot 
B)  forward 
C)  swap 
D)  currency 
A)  spot 
B)  forward 
C)  swap 
D)  currency

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Dealers sometimes use brokers in the foreign exchange market because the dealers desire

Accepted Answer

A)  speed. 
B)  accuracy. 
C)  to remain anonymous. 
D)  all of the above. 
A)  speed. 
B)  accuracy. 
C)  to remain anonymous. 
D)  all of the above.

Question 15

NDFs are traded and settled outside the country of the subject currency, and therefore are beyond the control of the country's government.

Accepted Answer

A) True 
 B)False

Question 16

Although the "big three" (dollar, euro, and yen) continue to dominate global trades, it will probably not be long before a fourth, not yet on the map-the Chinese renminbi-will move into greater prominence.

Accepted Answer

A) True 
 B)False

Question 17

TABLE 5.1
Use the table to answer the following question(s).
  
-Refer to Table 5.1. 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 18

What are the typical functions of money?

Accepted Answer

A)  a unit of account, a store of value, a medium of exchange 
B)  a substitute for debt, symbol of purchasing power 
C)  instrument for payment of goods and services 
D)  None of the above 
A)  a unit of account, a store of value, a medium of exchange 
B)  a substitute for debt, symbol of purchasing power 
C)  instrument for payment of goods and services 
D)  None of the above

Question 19

In the foreign exchange market, ________ seek all of their profit from exchange rate changes while ________ seek to profit from simultaneous exchange rate differences in different markets.

Accepted Answer

A)  wholesalers; retailers 
B)  central banks; treasuries 
C)  speculators; arbitragers 
D)  dealers; brokers 
A)  wholesalers; retailers 
B)  central banks; treasuries 
C)  speculators; arbitragers 
D)  dealers; brokers

Question 20

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

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

Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

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

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

Liquidity seekers profit of the profit seekers because

TABLE 5.1 Use the table to answer the following question(s). -Refer to Table 5.1. The ask price for the two-year swap for a British pound is

Swap and forward transactions account for an insignificant portion of the foreign exchange market.

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

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

The foreign exchange market has expanded significantly in the last 20 years. What is the volume of swap, forward, and spot transactions in the market as of the most recent survey data (April 2013)?

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

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

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.

Dealers sometimes use brokers in the foreign exchange market because the dealers desire

NDFs are traded and settled outside the country of the subject currency, and therefore are beyond the control of the country's government.

Although the "big three" (dollar, euro, and yen) continue to dominate global trades, it will probably not be long before a fourth, not yet on the map-the Chinese renminbi-will move into greater prominence.

TABLE 5.1 Use the table to answer the following question(s). -Refer to Table 5.1. Cross rates

What are the typical functions of money?

In the foreign exchange market, seek all of their profit from exchange rate changes while seek to profit from simultaneous exchange rate differences in different markets.

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this is 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 and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

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

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

Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

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

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

Liquidity seekers profit of the profit seekers because

TABLE 5.1 Use the table to answer the following question(s). -Refer to Table 5.1. The ask price for the two-year swap for a British pound is

Swap and forward transactions account for an insignificant portion of the foreign exchange market.

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

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

The foreign exchange market has expanded significantly in the last 20 years. What is the volume of swap, forward, and spot transactions in the market as of the most recent survey data (April 2013)?

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

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

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.

Dealers sometimes use brokers in the foreign exchange market because the dealers desire

NDFs are traded and settled outside the country of the subject currency, and therefore are beyond the control of the country's government.

Although the "big three" (dollar, euro, and yen) continue to dominate global trades, it will probably not be long before a fourth, not yet on the map-the Chinese renminbi-will move into greater prominence.

TABLE 5.1 Use the table to answer the following question(s). -Refer to Table 5.1. Cross rates

What are the typical functions of money?

In the foreign exchange market, ________ seek all of their profit from exchange rate changes while ________ seek to profit from simultaneous exchange rate differences in different markets.

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this is 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 and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

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

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.

In the foreign exchange market, seek all of their profit from exchange rate changes while seek to profit from simultaneous exchange rate differences in different markets.

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