Exam 10: The Foreign Exchange Market

If $1 bought more yen with a spot exchange than with a 30-day forward exchange it indicates the dollar is expected to depreciate against the yen in the next 30 days. When this occurs, we say the dollar is selling at a premium on the 30-day forward market.

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(True/False)

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Question 1

Correct Answer:

Verified

False

Which of the following occurs when traders start moving as a herd in the same direction at the same time?

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(Multiple Choice)

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Question 2

Correct Answer:

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Compare and contrast currencies that are freely convertible, externally convertible, and nonconvertible.

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(Essay)

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Question 3

Correct Answer:

Verified

A country's currency is said to be freely convertible when the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it. In contrast, a currency is said to be externally convertible if only nonresidents may convert it into a foreign currency without limitations. Finally, a currency is nonconvertible when neither residents nor nonresidents are allowed to convert it into a foreign currency.

_____ are reported on a real time basis on many financial Web sites and are continually changing-their value being determined by supply and demand for that currency relative to others.

(Multiple Choice)

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Question 4

What are the two main functions of the foreign exchange market?

(Multiple Choice)

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Question 5

A(n) _____ is quoted for 30 days, 90 days, and 180 days into the future.

(Multiple Choice)

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Question 6

Which of the following occurs when the quantity of money in circulation in a country rises faster than the country's stock of goods and services?

(Multiple Choice)

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Question 7

Describe translation exposure. How can translation exposure be minimized?

(Essay)

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Question 8

Differences in the spot exchange rate and the 30-day forward rate are normal and reflect the expectations of the foreign exchange market about:

(Multiple Choice)

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Question 9

What are the main uses of foreign exchange markets for international business?

(Essay)

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Question 10

Currency _____ typically involves the long-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

(Multiple Choice)

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Question 11

When two parties agree to exchange currency and execute the deal immediately, the transaction is a _____.

(Multiple Choice)

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Question 12

The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.

(True/False)

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Question 13

To minimize the risk of an unanticipated change in exchange rates, a company can protect itself by entering into a forward exchange contract.

(True/False)

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Question 14

The international Fisher effect:

(Multiple Choice)

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Question 15

The purchasing power parity (PPP) theory tells us that a country with a high inflation rate will:

(Multiple Choice)

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Question 16

Discuss the two schools of thought on exchange rate forecasting.

(Essay)

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Question 17

The _____ states that, for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

(Multiple Choice)

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Question 18

Restrictions on external convertibility can:

(Multiple Choice)

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Question 19

The foreign exchange market is a market for converting the currency of one country into that of another country.

(True/False)

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Question 20

Showing 1 - 20 of 105

If $1 bought more yen with a spot exchange than with a 30-day forward exchange it indicates the dollar is expected to depreciate against the yen in the next 30 days. When this occurs, we say the dollar is selling at a premium on the 30-day forward market.

Which of the following occurs when traders start moving as a herd in the same direction at the same time?

Compare and contrast currencies that are freely convertible, externally convertible, and nonconvertible.

_____ are reported on a real time basis on many financial Web sites and are continually changing-their value being determined by supply and demand for that currency relative to others.

What are the two main functions of the foreign exchange market?

A(n) _____ is quoted for 30 days, 90 days, and 180 days into the future.

Which of the following occurs when the quantity of money in circulation in a country rises faster than the country's stock of goods and services?

Describe translation exposure. How can translation exposure be minimized?

Differences in the spot exchange rate and the 30-day forward rate are normal and reflect the expectations of the foreign exchange market about:

What are the main uses of foreign exchange markets for international business?

Currency _____ typically involves the long-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

When two parties agree to exchange currency and execute the deal immediately, the transaction is a _____.

The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.

To minimize the risk of an unanticipated change in exchange rates, a company can protect itself by entering into a forward exchange contract.

The international Fisher effect:

The purchasing power parity (PPP) theory tells us that a country with a high inflation rate will:

Discuss the two schools of thought on exchange rate forecasting.

The _____ states that, for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

Restrictions on external convertibility can:

The foreign exchange market is a market for converting the currency of one country into that of another country.

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