Question 1

_____ are exchange rates governing some specific future date foreign exchange transactions.

Accepted Answer

A)  Spot exchange rates 
B)  Forward exchange rates 
C)  Future exchange rates 
D)  Currency swaps 
A)  Spot exchange rates 
B)  Forward exchange rates 
C)  Future exchange rates 
D)  Currency swaps B

Question 2

With the help of an example,explain how a tourist participates in the foreign exchange market.

Accepted Answer

The foreign exchange market is a market for converting the currency of one country into that of another country.When a tourist changes one currency into another,the tourist is participating in the foreign exchange market.If the euro/dollar exchange rate is €1=$1.30,then one euro buys $1.30 U.S.dollars.If the tourist wants to buy a T-shirt in France that costs 20 euros,the tourist can go to a bank and exchange her $26 for €20.

Question 3

The Fisher Effect states that a country's "real" rate of interest is the sum of the "nominal" interest rate and the expected rate of inflation over the period for which the funds are to be lent.

Accepted Answer

A) True 
 B)False  False

Question 4

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.

Accepted Answer

A) True 
 B)False

Question 5

What is the difference between a spot exchange rate and a forward exchange rate?

Accepted Answer

The spot exchange rate is the rate at wh

Question 6

What is a currency swap?

Accepted Answer

A currency swap is the simultaneous purc

Question 7

Which of the following would a follower of the inefficient market school of thought agree with?

Accepted Answer

A)  Companies would be better off investing in foreign exchange forecasting services. 
B)  Forward exchange rates do the best possible job of forecasting future spot exchange rates. 
C)  Companies can optimize their foreign exchange transactions by using forward markets. 
D)  Forward rates reflect all available information about likely future changes in exchange rates. 
A)  Companies would be better off investing in foreign exchange forecasting services. 
B)  Forward exchange rates do the best possible job of forecasting future spot exchange rates. 
C)  Companies can optimize their foreign exchange transactions by using forward markets. 
D)  Forward rates reflect all available information about likely future changes in exchange rates.

Question 8

A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.

Accepted Answer

A) True 
 B)False

Question 9

Technical analysis draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The _____ states that a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent.

Accepted Answer

A)  PPP theory 
B)  efficient market theory 
C)  law of one price 
D)  Fisher Effect 
A)  PPP theory 
B)  efficient market theory 
C)  law of one price 
D)  Fisher Effect

Question 12

How can a firm minimize its foreign exchange exposure?

Accepted Answer

There are several strategies a firm can

Question 13

The _____ suggests that given relatively efficient markets,the price of a "basket of goods" should be roughly equivalent in each country.

Accepted Answer

A)  random walk theory 
B)  theory of competitive advantage 
C)  theory of price inflation 
D)  purchasing power parity theory 
A)  random walk theory 
B)  theory of competitive advantage 
C)  theory of price inflation 
D)  purchasing power parity theory

Question 14

Which of the following involves borrowing in one currency where interest rates are low,and then using the proceeds to invest in another currency where interest rates are high?

Accepted Answer

A)  Carry trade 
B)  Swing trade 
C)  Channel trade 
D)  Price action trade 
A)  Carry trade 
B)  Swing trade 
C)  Channel trade 
D)  Price action trade

Question 15

The _____ school of thought argues that forward exchange rates do the best possible job of forecasting future spot rates and therefore investing in forecasting services would be a waste of money.

Accepted Answer

A)  inefficient market 
B)  efficient market 
C)  random walk 
D)  speculative 
A)  inefficient market 
B)  efficient market 
C)  random walk 
D)  speculative

Question 16

If the spot exchange rate is £1=$1.50 when the market opens,and £1=$1.48 at the end of the day,the pound has appreciated,and the dollar has depreciated.

Accepted Answer

A) True 
 B)False

Question 17

Carry trade is non-speculative in nature.

Accepted Answer

A) True 
 B)False

Question 18

Assuming the 30-day forward exchange rate were $1 = ¥130 and the spot exchange rate were $1 = ¥120,the dollar is selling at a _____ on the 30-day forward market.

Accepted Answer

A)  premium 
B)  margin 
C)  discount 
D)  subsidy 
A)  premium 
B)  margin 
C)  discount 
D)  subsidy

Question 19

International businesses use foreign exchange markets for all of the following reasons except:

Accepted Answer

A)  to receive payments from foreign investments that may be in foreign currencies. 
B)  to pay a foreign company for its products or services in its country's currency. 
C)  to invest for short terms in money markets when they have spare cash. 
D)  to cover themselves from all risks involved in currency speculation. 
A)  to receive payments from foreign investments that may be in foreign currencies. 
B)  to pay a foreign company for its products or services in its country's currency. 
C)  to invest for short terms in money markets when they have spare cash. 
D)  to cover themselves from all risks involved in currency speculation.

Question 20

According to the law of one price,if the exchange rate between the British pound and the dollar is £1 = $1.50,a shirt that retails for $120 in New York should sell for _____ in London.

Accepted Answer

A)  £180 
B)  £50 
C)  £60 
D)  £80 
A)  £180 
B)  £50 
C)  £60 
D)  £80

_____ are exchange rates governing some specific future date foreign exchange transactions.

With the help of an example,explain how a tourist participates in the foreign exchange market.

The Fisher Effect states that a country's "real" rate of interest is the sum of the "nominal" interest rate and the expected rate of inflation over the period for which the funds are to be lent.

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.

What is the difference between a spot exchange rate and a forward exchange rate?

What is a currency swap?

Which of the following would a follower of the inefficient market school of thought agree with?

A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.

Technical analysis draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

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

The _____ states that a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent.

How can a firm minimize its foreign exchange exposure?

The _____ suggests that given relatively efficient markets,the price of a "basket of goods" should be roughly equivalent in each country.

Which of the following involves borrowing in one currency where interest rates are low,and then using the proceeds to invest in another currency where interest rates are high?

The _____ school of thought argues that forward exchange rates do the best possible job of forecasting future spot rates and therefore investing in forecasting services would be a waste of money.

If the spot exchange rate is £1=$1.50 when the market opens,and £1=$1.48 at the end of the day,the pound has appreciated,and the dollar has depreciated.

Carry trade is non-speculative in nature.

Assuming the 30-day forward exchange rate were $1 = ¥130 and the spot exchange rate were $1 = ¥120,the dollar is selling at a _____ on the 30-day forward market.

International businesses use foreign exchange markets for all of the following reasons except:

According to the law of one price,if the exchange rate between the British pound and the dollar is £1 = $1.50,a shirt that retails for $120 in New York should sell for _____ in London.

Globalization

National Differences in Political Economy, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, corporate Social Responsibility, and Sustainability

International Trade Theory

Government Policy and International Trade

Foreign Direct Investment

Regional Trade Pacts Give the Mexican Auto Industry an Edge

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and Rd

Global Human Resource Management

Accounting and Finance in the International Business

Filters

Exam 10: The Foreign Exchange Market

_____ are exchange rates governing some specific future date foreign exchange transactions.

With the help of an example,explain how a tourist participates in the foreign exchange market.

The Fisher Effect states that a country's "real" rate of interest is the sum of the "nominal" interest rate and the expected rate of inflation over the period for which the funds are to be lent.

Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.

What is the difference between a spot exchange rate and a forward exchange rate?

What is a currency swap?

Which of the following would a follower of the inefficient market school of thought agree with?

A currency swap is the rate at which a foreign exchange dealer converts one currency into another on a particular day.

Technical analysis draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

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

The _____ states that a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent.

How can a firm minimize its foreign exchange exposure?

The _____ suggests that given relatively efficient markets,the price of a "basket of goods" should be roughly equivalent in each country.

Which of the following involves borrowing in one currency where interest rates are low,and then using the proceeds to invest in another currency where interest rates are high?

The _____ school of thought argues that forward exchange rates do the best possible job of forecasting future spot rates and therefore investing in forecasting services would be a waste of money.

If the spot exchange rate is £1=$1.50 when the market opens,and £1=$1.48 at the end of the day,the pound has appreciated,and the dollar has depreciated.

Carry trade is non-speculative in nature.

Assuming the 30-day forward exchange rate were $1 = ¥130 and the spot exchange rate were $1 = ¥120,the dollar is selling at a _____ on the 30-day forward market.

International businesses use foreign exchange markets for all of the following reasons except:

According to the law of one price,if the exchange rate between the British pound and the dollar is £1 = $1.50,a shirt that retails for $120 in New York should sell for _____ in London.

Globalization

National Differences in Political Economy, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, corporate Social Responsibility, and Sustainability

International Trade Theory

Government Policy and International Trade

Foreign Direct Investment

Regional Trade Pacts Give the Mexican Auto Industry an Edge

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and Rd

Global Human Resource Management

Accounting and Finance in the International Business

Filters