Question 1

Which of the following is true of the efficient market school of thought toward exchange rate forecasting?

Accepted Answer

A) Forward rates are not unbiased predictors of future spot rates. 
B) Accurate predictions of future spot rates can be calculated from publicly available information. 
C) Prices do not reflect all available information about the market. 
D) Inaccuracies in predictions will not be consistently above or below future spot rates; they will be random. 
E) Forecasts might provide better predictions of future spot rates than forward exchange rates do. 
A) Forward rates are not unbiased predictors of future spot rates. 
B) Accurate predictions of future spot rates can be calculated from publicly available information. 
C) Prices do not reflect all available information about the market. 
D) Inaccuracies in predictions will not be consistently above or below future spot rates; they will be random. 
E) Forecasts might provide better predictions of future spot rates than forward exchange rates do.

Question 2

Although a foreign exchange transaction can involve any two currencies,most transactions involve dollars on one side.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following refers to the extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in foreign exchange values?

Accepted Answer

A) economic exposure 
B) transaction exposure 
C) translation exposure 
D) countertrade 
E) carry trade 
A) economic exposure 
B) transaction exposure 
C) translation exposure 
D) countertrade 
E) carry trade

Question 4

When companies wish to convert currencies,they typically enter the foreign exchange market directly.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is true when a government is strongly committed to controlling the rate of growth in money?

Accepted Answer

A) The country's future inflation rate may be low. 
B) The country's currency will steadily depreciate significantly and instantly in the foreign exchange market. 
C) The country's economy will be marked by an abundance of liquidity. 
D) The country will see a good number of populist measures not funded by taxation. 
E) The country will struggle to match money supply with adequate supply of goods and services. 
A) The country's future inflation rate may be low. 
B) The country's currency will steadily depreciate significantly and instantly in the foreign exchange market. 
C) The country's economy will be marked by an abundance of liquidity. 
D) The country will see a good number of populist measures not funded by taxation. 
E) The country will struggle to match money supply with adequate supply of goods and services.

Question 6

How do foreign exchange markets benefit international businesses?

Accepted Answer

International businesses have four main

Question 7

The government of Beryllia tightly controls the ability of its residents to convert its currency into other currencies.However,all foreign businesses with deposits in banks of Beryllia may,at any time,convert all their currency into foreign currency and take them out of the country.Beryllia's currency is said to be

Accepted Answer

A) leading. 
B) nonconvertible. 
C) externally convertible. 
D) freely convertible. 
E) lagging. 
A) leading. 
B) nonconvertible. 
C) externally convertible. 
D) freely convertible. 
E) lagging.

Question 8

Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m.is 125 yen = 1 dollar.Sylvia finds out that the rate quoted in New York at 10:00 a.m.New York time (3:00 p.m.in London)is 130 yen = 1 dollar.Sylvia decides to buy yen in New York and sell it in London.Sylvia is engaging in

Accepted Answer

A) currency swapping. 
B) currency speculation. 
C) carry trade. 
D) arbitrage. 
E) hedging. 
A) currency swapping. 
B) currency speculation. 
C) carry trade. 
D) arbitrage. 
E) hedging.

Question 9

Which of the following has no impediments to the free flow of goods and services,such as trade barriers?

Accepted Answer

A) economic union 
B) currency board 
C) efficient market 
D) carry trade 
E) European Monetary System 
A) economic union 
B) currency board 
C) efficient market 
D) carry trade 
E) European Monetary System

Question 10

Which of the following refers to currency speculation?

Accepted Answer

A) short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates 
B) exchange rate at which a foreign exchange dealer will convert one currency into another that particular day 
C) simultaneous purchase and sale of a given amount of foreign exchange for two different value dates 
D) purchase of securities in one market for immediate resale in another to profit from a price discrepancy 
E) growth in a country's money supply exceeding the growth in its output,leading to price inflation 
A) short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates 
B) exchange rate at which a foreign exchange dealer will convert one currency into another that particular day 
C) simultaneous purchase and sale of a given amount of foreign exchange for two different value dates 
D) purchase of securities in one market for immediate resale in another to profit from a price discrepancy 
E) growth in a country's money supply exceeding the growth in its output,leading to price inflation

Question 11

The forward exchange rate refers to the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

Accepted Answer

A) True 
 B)False

Question 12

Transaction exposure,a category of foreign exchange risk,refers to the impact of currency exchange rate changes on the reported financial statements of a company.

Accepted Answer

A) True 
 B)False

Question 13

What is the Fisher effect?

Accepted Answer

Economic theory tells us that interest r

Question 14

Which of the following is the reason for the failure of purchasing power parity theory and international Fisher effect in predicting short-term movements in exchange rates?

Accepted Answer

A) impact of investor psychology on short-run exchange rate movements 
B) strong relationship between inflation rates and interest rates 
C) impact of interest rates and short-term exchange rate movements 
D) strong relationship between interest rate differentials and subsequent changes in spot exchange rates 
E) government intervention in cross-border trade that violates the assumption of efficient markets 
A) impact of investor psychology on short-run exchange rate movements 
B) strong relationship between inflation rates and interest rates 
C) impact of interest rates and short-term exchange rate movements 
D) strong relationship between interest rate differentials and subsequent changes in spot exchange rates 
E) government intervention in cross-border trade that violates the assumption of efficient markets

Question 15

How does an increase in money supply in an economy lead to inflation?

Accepted Answer

A government increasing the money supply

Question 16

To jumpstart its slow economy,the government of Mesoma increased the money supply.Which of the following is a likely consequence of Mesoma's action?

Accepted Answer

A) It results in an overall decrease in credit. 
B) It makes it difficult for individuals and companies to borrow from banks. 
C) It makes it easier for banks to borrow from the government. 
D) It causes a decrease in demand for goods and services. 
E) It causes price deflation as the money supply exceeds goods and services output. 
A) It results in an overall decrease in credit. 
B) It makes it difficult for individuals and companies to borrow from banks. 
C) It makes it easier for banks to borrow from the government. 
D) It causes a decrease in demand for goods and services. 
E) It causes price deflation as the money supply exceeds goods and services output.

Question 17

Leading and lagging strategies involve accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Accepted Answer

A) True 
 B)False

Question 18

Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market.Which of the following is true of the foreign exchange dealers' market's expectations about the dollar over the next 30 days?

Accepted Answer

A) The dollar will depreciate against the euro. 
B) The market is undecided about the direction of currency movement. 
C) The dollar will appreciate against the euro. 
D) The dollar/euro exchange rate will be steady. 
E) The dollar will buy more euros with a spot exchange than with a 30-day forward exchange. 
A) The dollar will depreciate against the euro. 
B) The market is undecided about the direction of currency movement. 
C) The dollar will appreciate against the euro. 
D) The dollar/euro exchange rate will be steady. 
E) The dollar will buy more euros with a spot exchange than with a 30-day forward exchange.

Question 19

What is meant by a currency swap?

Accepted Answer

A currency swap is the simultaneous purc

Question 20

What is meant by economic exposure?

Accepted Answer

A) extent to which a firm's future international earning power is affected by changes in exchange rates 
B) impact of currency exchange rate changes on the reported financial statements of a company 
C) extent to which the income from individual transactions is affected by fluctuations in foreign exchange values 
D) extent to which the quantity of money in circulation rises faster than the stock of goods and services 
E) extent of disparity in prices,when expressed in the same currency,of similar products in different countries 
A) extent to which a firm's future international earning power is affected by changes in exchange rates 
B) impact of currency exchange rate changes on the reported financial statements of a company 
C) extent to which the income from individual transactions is affected by fluctuations in foreign exchange values 
D) extent to which the quantity of money in circulation rises faster than the stock of goods and services 
E) extent of disparity in prices,when expressed in the same currency,of similar products in different countries

Which of the following is true of the efficient market school of thought toward exchange rate forecasting?

Although a foreign exchange transaction can involve any two currencies,most transactions involve dollars on one side.

Which of the following refers to the extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in foreign exchange values?

When companies wish to convert currencies,they typically enter the foreign exchange market directly.

Which of the following is true when a government is strongly committed to controlling the rate of growth in money?

How do foreign exchange markets benefit international businesses?

Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m.is 125 yen = 1 dollar.Sylvia finds out that the rate quoted in New York at 10:00 a.m.New York time (3:00 p.m.in London)is 130 yen = 1 dollar.Sylvia decides to buy yen in New York and sell it in London.Sylvia is engaging in

Which of the following has no impediments to the free flow of goods and services,such as trade barriers?

Which of the following refers to currency speculation?

The forward exchange rate refers to the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

Transaction exposure,a category of foreign exchange risk,refers to the impact of currency exchange rate changes on the reported financial statements of a company.

What is the Fisher effect?

Which of the following is the reason for the failure of purchasing power parity theory and international Fisher effect in predicting short-term movements in exchange rates?

How does an increase in money supply in an economy lead to inflation?

To jumpstart its slow economy,the government of Mesoma increased the money supply.Which of the following is a likely consequence of Mesoma's action?

Leading and lagging strategies involve accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market.Which of the following is true of the foreign exchange dealers' market's expectations about the dollar over the next 30 days?

What is meant by a currency swap?

What is meant by economic exposure?

Globalization

National Differences in Political, Economic, 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 Economic Integration

The International Monetary System

The Strategy of International Business

Entering Foreign Markets

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and Research and Development

Global Human Resource Management

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Exam 10: The Foreign Exchange Market

Which of the following is true of the efficient market school of thought toward exchange rate forecasting?

Although a foreign exchange transaction can involve any two currencies,most transactions involve dollars on one side.

Which of the following refers to the extent to which the reported consolidated results and balance sheets of a corporation are affected by fluctuations in foreign exchange values?

When companies wish to convert currencies,they typically enter the foreign exchange market directly.

Which of the following is true when a government is strongly committed to controlling the rate of growth in money?

How do foreign exchange markets benefit international businesses?

Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m.is 125 yen = 1 dollar.Sylvia finds out that the rate quoted in New York at 10:00 a.m.New York time (3:00 p.m.in London)is 130 yen = 1 dollar.Sylvia decides to buy yen in New York and sell it in London.Sylvia is engaging in

Which of the following has no impediments to the free flow of goods and services,such as trade barriers?

Which of the following refers to currency speculation?

The forward exchange rate refers to the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

Transaction exposure,a category of foreign exchange risk,refers to the impact of currency exchange rate changes on the reported financial statements of a company.

What is the Fisher effect?

Which of the following is the reason for the failure of purchasing power parity theory and international Fisher effect in predicting short-term movements in exchange rates?

How does an increase in money supply in an economy lead to inflation?

To jumpstart its slow economy,the government of Mesoma increased the money supply.Which of the following is a likely consequence of Mesoma's action?

Leading and lagging strategies involve accelerating payments from weak-currency to strong-currency countries and delaying inflows from strong-currency to weak-currency countries.

Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market.Which of the following is true of the foreign exchange dealers' market's expectations about the dollar over the next 30 days?

What is meant by a currency swap?

What is meant by economic exposure?

Globalization

National Differences in Political, Economic, 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 Economic Integration

The International Monetary System

The Strategy of International Business

Entering Foreign Markets

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and Research and Development

Global Human Resource Management

Filters