Question 1

Financial institutions active in the FX markets include:

Accepted Answer

A)  commercial banks. 
B)  commodity traders. 
C)  insurance companies. 
D)  all of the given answers. 
A)  commercial banks. 
B)  commodity traders. 
C)  insurance companies. 
D)  all of the given answers.

Question 2

If the Australian central bank wished to cause the AUD to _______,it would _______ AUD and _______ foreign currency.

Accepted Answer

A)  depreciate; buy; sell 
B)  appreciate; sell; buy 
C)  depreciate; sell; buy 
D)  appreciate; buy; buy 
A)  depreciate; buy; sell 
B)  appreciate; sell; buy 
C)  depreciate; sell; buy 
D)  appreciate; buy; buy

Question 3

The FX market is organised as an over-the-counter market in which deposits denominated in foreign currencies are bought and sold.

Accepted Answer

A) True 
 B)False

Question 4

If a FX dealer buys USD from a client and holds USD on its own account on the expectation of the USD rising in value in the near future,it is taking a:

Accepted Answer

A)  a hold position in the USD. 
B)  a long position in the USD. 
C)  a short position in the USD. 
D)  forward position in the USD. 
A)  a hold position in the USD. 
B)  a long position in the USD. 
C)  a short position in the USD. 
D)  forward position in the USD.

Question 5

The largest FX market is based in New York.

Accepted Answer

A) True 
 B)False

Question 6

For a floating exchange rate,if a central bank does not intervene to influence the currency this is called a :

Accepted Answer

A)  partial float. 
B)  clean float. 
C)  dirty float. 
D)  hard float. 
A)  partial float. 
B)  clean float. 
C)  dirty float. 
D)  hard float.

Question 7

An exchange rate regime that allows the currency to appreciate gradually over time but within a specified limited band set by government is a:

Accepted Answer

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

Question 8

If it takes 1.25 euros to buy 1 US dollar,the direct quote for the exchange rate is:

Accepted Answer

A)  0.25 
B)  0.8 
C)  1.00 
D)  1.25 
A)  0.25 
B)  0.8 
C)  1.00 
D)  1.25

Question 9

Which of the following about global FX markets is NOT correct?

Accepted Answer

A)  Trading in FX is conducted using telephones and computer-based technological systems. 
B)  New York is the largest FX market. 
C)  The Bank for International Settlements estimates turnover in excess of USD 4000 billion. 
D)  A free float FX regime is one where the exchange rate moves according to the forces of supply and demand. 
A)  Trading in FX is conducted using telephones and computer-based technological systems. 
B)  New York is the largest FX market. 
C)  The Bank for International Settlements estimates turnover in excess of USD 4000 billion. 
D)  A free float FX regime is one where the exchange rate moves according to the forces of supply and demand.

Question 10

If the value of a currency is influenced by a central bank that intervenes from time to time in the foreign exchange market,this is regarded as a:

Accepted Answer

A)  partial float. 
B)  clean float. 
C)  dirty float. 
D)  soft float. 
A)  partial float. 
B)  clean float. 
C)  dirty float. 
D)  soft float.

Question 11

When an FX dealer calculates a forward exchange rate for NZD/JPY they must adjust both interest rates to allow for the different quotation rates between Japan and New Zealand.

Accepted Answer

A) True 
 B)False

Question 12

The physical location of FX dealers,generally within an institution's treasury room is called an FX:

Accepted Answer

A)  broker's room. 
B)  dealing room. 
C)  auction room. 
D)  quotation room. 
A)  broker's room. 
B)  dealing room. 
C)  auction room. 
D)  quotation room.

Question 13

All of the following are considered 'hard' or major currencies,except the:

Accepted Answer

A)  US dollar. 
B)  euro. 
C)  Mexican peso. 
D)  British pound. 
A)  US dollar. 
B)  euro. 
C)  Mexican peso. 
D)  British pound.

Question 14

If the value of a currency moves within a defined band,relative to another major currency this is a:

Accepted Answer

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

Question 15

An indirect exchange rate can be converted to a direct exchange rate by:

Accepted Answer

A)  dividing the indirect rate by 100. 
B)  multiplying the indirect rate by the spot rate. 
C)  dividing the indirect rate by the number of US dollars required to purchase one unit of the terms' currency. 
D)  transposing the indirect rate. 
A)  dividing the indirect rate by 100. 
B)  multiplying the indirect rate by the spot rate. 
C)  dividing the indirect rate by the number of US dollars required to purchase one unit of the terms' currency. 
D)  transposing the indirect rate.

Question 16

The dealer quotes of a buy and a sell price on an FX currency are called:

Accepted Answer

A)  arbitrage quotes. 
B)  two-way prices. 
C)  dealer spreads. 
D)  term quotes. 
A)  arbitrage quotes. 
B)  two-way prices. 
C)  dealer spreads. 
D)  term quotes.

Question 17

The financial institutions that quote buy and sell prices and act as principals in the FX markets are called:

Accepted Answer

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

Question 18

When a smaller amount of a foreign currency is required to buy the Australian dollar,the currency is said to have _______ with respect to the dollar.

Accepted Answer

A)  appreciated 
B)  consolidated 
C)  depreciated 
D)  remained fixed 
A)  appreciated 
B)  consolidated 
C)  depreciated 
D)  remained fixed

Question 19

In the FX markets a/an _____ quote is where the USD is the base currency.

Accepted Answer

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

Question 20

If a FX speculator sells USD that the speculator currently does not hold the speculator has entered into a:

Accepted Answer

A)  a hold position in the USD. 
B)  a long position in the USD. 
C)  a short position in the USD. 
D)  forward position in the USD. 
A)  a hold position in the USD. 
B)  a long position in the USD. 
C)  a short position in the USD. 
D)  forward position in the USD.

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

Financial institutions active in the FX markets include:

If the Australian central bank wished to cause the AUD to _______,it would _______ AUD and _______ foreign currency.

The FX market is organised as an over-the-counter market in which deposits denominated in foreign currencies are bought and sold.

If a FX dealer buys USD from a client and holds USD on its own account on the expectation of the USD rising in value in the near future,it is taking a:

The largest FX market is based in New York.

For a floating exchange rate,if a central bank does not intervene to influence the currency this is called a :

An exchange rate regime that allows the currency to appreciate gradually over time but within a specified limited band set by government is a:

If it takes 1.25 euros to buy 1 US dollar,the direct quote for the exchange rate is:

Which of the following about global FX markets is NOT correct?

If the value of a currency is influenced by a central bank that intervenes from time to time in the foreign exchange market,this is regarded as a:

When an FX dealer calculates a forward exchange rate for NZD/JPY they must adjust both interest rates to allow for the different quotation rates between Japan and New Zealand.

The physical location of FX dealers,generally within an institution's treasury room is called an FX:

All of the following are considered 'hard' or major currencies,except the:

If the value of a currency moves within a defined band,relative to another major currency this is a:

An indirect exchange rate can be converted to a direct exchange rate by:

The dealer quotes of a buy and a sell price on an FX currency are called:

The financial institutions that quote buy and sell prices and act as principals in the FX markets are called:

When a smaller amount of a foreign currency is required to buy the Australian dollar,the currency is said to have _______ with respect to the dollar.

In the FX markets a/an _____ quote is where the USD is the base currency.

If a FX speculator sells USD that the speculator currently does not hold the speculator has entered into a:

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 Australian central bank wished to cause the AUD to ___,it would _ AUD and _____ foreign currency.