Question 1

For the Aussie/euro spot rate (AUD/EUR 1.8088-1.8098),the percentage spread is:

Accepted Answer

A)  1 
B)  5.5 
C)  10 
D)  none of the given answers. 
A)  1 
B)  5.5 
C)  10 
D)  none of the given answers.

Question 2

If the forward points are _______at a specific date,the base currency is at a _______.

Accepted Answer

A)  rising; forward discount 
B)  falling; forward discount 
C)  rising; forward loss 
D)  falling; forward gain 
A)  rising; forward discount 
B)  falling; forward discount 
C)  rising; forward loss 
D)  falling; forward gain

Question 3

Foreign exchange dealers are regarded as forming a/an __________ market.

Accepted Answer

A)  regulated and organised 
B)  over-the-counter 
C)  auction 
D)  exclusively broker 
A)  regulated and organised 
B)  over-the-counter 
C)  auction 
D)  exclusively broker

Question 4

In the FX markets a/an _____ quote is where the USD is the unit of the quotation.

Accepted Answer

A)  cross rate 
B)  direct 
C)  American 
D)  indirect 
A)  cross rate 
B)  direct 
C)  American 
D)  indirect

Question 5

Which of the following statements about the foreign exchange markets is incorrect?

Accepted Answer

A)  Much of the trading volume in the FX markets can be described as speculative transactions. 
B)  Most foreign-exchange trading takes place in London. 
C)  The FX markets are over-the-counter markets. 
D)  Trading volume worldwide exceeds USD 4000 billion per day. 
A)  Much of the trading volume in the FX markets can be described as speculative transactions. 
B)  Most foreign-exchange trading takes place in London. 
C)  The FX markets are over-the-counter markets. 
D)  Trading volume worldwide exceeds USD 4000 billion per day.

Question 6

In general,the foreign exchange dealer's bid-offer spread _______ with time to settlement.

Accepted Answer

A)  is not concerned 
B)  increases 
C)  decreases 
D)  narrows 
A)  is not concerned 
B)  increases 
C)  decreases 
D)  narrows

Question 7

Foreign exchange market participants who seek out the best FX rates in the markets and match the buy and sell orders for a fee are called:

Accepted Answer

A)  FX dealers. 
B)  FX brokers. 
C)  FX arbitrageurs. 
D)  FX day traders. 
A)  FX dealers. 
B)  FX brokers. 
C)  FX arbitrageurs. 
D)  FX day traders.

Question 8

If differences occur for FX rates between three or more currencies,FX dealers may perform:

Accepted Answer

A)  locational arbitrage. 
B)  triangular arbitrage. 
C)  cross arbitrage. 
D)  speculative arbitrage. 
A)  locational arbitrage. 
B)  triangular arbitrage. 
C)  cross arbitrage. 
D)  speculative arbitrage.

Question 9

The second currency named in an FX quote is called the:

Accepted Answer

A)  basis currency. 
B)  base currency. 
C)  unit currency. 
D)  terms currency. 
A)  basis currency. 
B)  base currency. 
C)  unit currency. 
D)  terms currency.

Question 10

If interest rate parity holds,the currency of the country with the relatively _______ interest rates will trade at a forward _______ to the country with the relatively high interest rate.

Accepted Answer

A)  low; discount 
B)  low; premium 
C)  low; loss 
D)  none of the given choices 
A)  low; discount 
B)  low; premium 
C)  low; loss 
D)  none of the given choices

Question 11

If a British car sells for £20 000 and the British pound is worth A$2.75,the Australian dollar price of the car is:

Accepted Answer

A)  $13 333. 
B)  $30 000. 
C)  $55 000. 
D)  $133 333. 
A)  $13 333. 
B)  $30 000. 
C)  $55 000. 
D)  $133 333.

Question 12

A floating exchange rate regime is one:

Accepted Answer

A)  which limits exchange rate movements within a band that is set by the major banks. 
B)  which limits exchange rate movements within a band that is set by the central bank. 
C)  exchange rate for a currency is allowed to move as factors of supply and demand dictate. 
D)  which limits exchange rate movements within a band that is set by the major FX traders. 
A)  which limits exchange rate movements within a band that is set by the major banks. 
B)  which limits exchange rate movements within a band that is set by the central bank. 
C)  exchange rate for a currency is allowed to move as factors of supply and demand dictate. 
D)  which limits exchange rate movements within a band that is set by the major FX traders.

Question 13

The convention in the FX markets is for the first currency mentioned in a FX quote is:

Accepted Answer

A)  direct currency. 
B)  indirect currency. 
C)  terms currency. 
D)  unit of the quotation. 
A)  direct currency. 
B)  indirect currency. 
C)  terms currency. 
D)  unit of the quotation.

Question 14

If an Australian importer has a contract for Japanese goods denominated in yen payable in three months' time and is concerned that the AUD may appreciate,the importer may enter into a forward contract to sell the yen for delivery in three months' time.

Accepted Answer

A) True 
 B)False

Question 15

The exchange rate where the value of the pegged currency is tied into the value of another currency or basket of currencies is a:

Accepted Answer

A)  crawling peg regime. 
B)  floating rate regime. 
C)  managed floating regime. 
D)  linked exchange rate regime. 
A)  crawling peg regime. 
B)  floating rate regime. 
C)  managed floating regime. 
D)  linked exchange rate regime.

Question 16

The foreign exchange market is where:

Accepted Answer

A)  exports and imports are traded. 
B)  exports and imports are interchanged for gold bullion. 
C)  different currencies are bought and sold. 
D)  companies organise their foreign long-term financing. 
A)  exports and imports are traded. 
B)  exports and imports are interchanged for gold bullion. 
C)  different currencies are bought and sold. 
D)  companies organise their foreign long-term financing.

Question 17

Foreign exchange brokers:

Accepted Answer

A)  quote two-way prices at which they are willing to buy and sell at. 
B)  in Australia require an authority from the central bank to operate. 
C)  arbitrage price differences between the various FX markets. 
D)  seek out the best exchange rates and deal mostly with FX dealers. 
A)  quote two-way prices at which they are willing to buy and sell at. 
B)  in Australia require an authority from the central bank to operate. 
C)  arbitrage price differences between the various FX markets. 
D)  seek out the best exchange rates and deal mostly with FX dealers.

Question 18

Given USD/EURO0.6450-0.6455 an FX dealer would buy USD1 from you and give you EURO0.6455

Accepted Answer

A) True 
 B)False

Question 19

For spot transactions,the FX contract value date is:

Accepted Answer

A)  that day. 
B)  one business day from the day of the transaction. 
C)  two business days from the day of the transaction. 
D)  three business days from the day of the transaction. 
A)  that day. 
B)  one business day from the day of the transaction. 
C)  two business days from the day of the transaction. 
D)  three business days from the day of the transaction.

Question 20

In the FX market,trading:

Accepted Answer

A)  stops after the London markets have closed. 
B)  is restricted to the hours that the Australian banks are open. 
C)  takes place at any hour of the night or day. 
D)  stops after the London and New York markets have closed. 
A)  stops after the London markets have closed. 
B)  is restricted to the hours that the Australian banks are open. 
C)  takes place at any hour of the night or day. 
D)  stops after the London and New York markets have closed.

Exam 15: Foreign Exchange: The Structure and Operation of the Fx Market

For the Aussie/euro spot rate (AUD/EUR 1.8088-1.8098),the percentage spread is:

If the forward points are _______at a specific date,the base currency is at a _______.

Foreign exchange dealers are regarded as forming a/an __________ market.

In the FX markets a/an _____ quote is where the USD is the unit of the quotation.

Which of the following statements about the foreign exchange markets is incorrect?

In general,the foreign exchange dealer's bid-offer spread _______ with time to settlement.

Foreign exchange market participants who seek out the best FX rates in the markets and match the buy and sell orders for a fee are called:

If differences occur for FX rates between three or more currencies,FX dealers may perform:

The second currency named in an FX quote is called the:

If interest rate parity holds,the currency of the country with the relatively _______ interest rates will trade at a forward _______ to the country with the relatively high interest rate.

If a British car sells for £20 000 and the British pound is worth A$2.75,the Australian dollar price of the car is:

A floating exchange rate regime is one:

The convention in the FX markets is for the first currency mentioned in a FX quote is:

If an Australian importer has a contract for Japanese goods denominated in yen payable in three months' time and is concerned that the AUD may appreciate,the importer may enter into a forward contract to sell the yen for delivery in three months' time.

The exchange rate where the value of the pegged currency is tied into the value of another currency or basket of currencies is a:

The foreign exchange market is where:

Foreign exchange brokers:

Given USD/EURO0.6450-0.6455 an FX dealer would buy USD1 from you and give you EURO0.6455

For spot transactions,the FX contract value date is:

In the FX market,trading:

A Modern Financial System: An Overview

Commercial Banks

Non-Bank Financial Institutions

The Share Market and the Corporation

Corporations Issuing Equity in the Share Market

Investors in the Share Market

Forecasting Share Price Movements

Mathematics of Finance: An Introduction to Basic Concepts and Calculations

Short-Term Debt

Medium-To-Long-Term Debt

International Debt Markets

Government Debt, monetary Policy and the Payments System

An Introduction to Interest Rate Determination and Forecasting

Interest Rate Risk

Foreign Exchange: Factors That Influence the Exchange Rate

Foreign Exchange: Risk Identification and Management

An Introduction to Risk Management and Derivatives

Future Contracts and Forward Rate Agreements

Options

Interest Rate Swaps, Cross-Currency Swaps and Credit Default

Filters

If the forward points are _at a specific date,the base currency is at a _.

If interest rate parity holds,the currency of the country with the relatively _ interest rates will trade at a forward _ to the country with the relatively high interest rate.