Question 1

Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

Accepted Answer

A) The transfer of purchasing power between countries. 
B) Obtaining or providing credit for international trade transactions. 
C) Minimizing the risks of exchange rate changes. 
D) All of the above were identified as functions of the foreign exchange market. 
A) The transfer of purchasing power between countries. 
B) Obtaining or providing credit for international trade transactions. 
C) Minimizing the risks of exchange rate changes. 
D) All of the above were identified as functions of the foreign exchange market.

Question 2

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

Accepted Answer

A) European terms; indirect 
B) American terms; direct 
C) American terms; European terms 
D) European terms; American terms 
A) European terms; indirect 
B) American terms; direct 
C) American terms; European terms 
D) European terms; American terms

Question 3

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

Accepted Answer

A) True 
 B)False

Question 4

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

Accepted Answer

A) Speculators and arbitragers 
B) Foreign exchange brokers 
C) Central banks 
D) Treasuries 
A) Speculators and arbitragers 
B) Foreign exchange brokers 
C) Central banks 
D) Treasuries

Question 5

When the cross rate for currencies offered by two banks differs from the exchange rate offered by a third bank, a triangular arbitrage opportunity exists.

Accepted Answer

A) True 
 B)False

Question 6

Daily trading volume in the foreign exchange market was about ________ per ________ in 2007.

Accepted Answer

A) $3,200 billion; month 
B) $1,000 billion; month 
C) $3,200 billion; day 
D) $1,000 billion; day 
A) $3,200 billion; month 
B) $1,000 billion; month 
C) $3,200 billion; day 
D) $1,000 billion; day

Question 7

TABLE 6.1
Use the table to answer following question(s).  
-Refer to Table 6.1. The one-month forward bid price for dollars as denominated in Japanese yen is ________.

Accepted Answer

A) -¥20 
B) -¥18 
C) ¥129.74/$ 
D) ¥129.62/$ 
A) -¥20 
B) -¥18 
C) ¥129.74/$ 
D) ¥129.62/$

Question 8

The four currencies that constitute about 80% of all foreign exchange trading are

Accepted Answer

A) U.K pound, Chinese yuan, euro, and Japanese yen. 
B) U.S. dollar, euro, Chinese yuan, and U.K. pound. 
C) U.S. dollar, Japanese yen, euro, and U.K. pound. 
D) U.S. dollar, U.K. pound, yen, and Chinese yuan. 
A) U.K pound, Chinese yuan, euro, and Japanese yen. 
B) U.S. dollar, euro, Chinese yuan, and U.K. pound. 
C) U.S. dollar, Japanese yen, euro, and U.K. pound. 
D) U.S. dollar, U.K. pound, yen, and Chinese yuan.

Question 9

A spot transaction in the interbank market for foreign exchange would typically involve a two-day delay in the actual delivery of the currencies, while such a transaction between a bank and its commercial customer would not necessarily involve a two-day wait.

Accepted Answer

A) True 
 B)False

Question 10

It is characteristic of foreign exchange dealers to

Accepted Answer

A) bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale. 
B) act as market makers, willing to buy and sell the currencies in which they specialize. 
C) trade only with clients in the retail market and never operate in the wholesale market for foreign exchange. 
D) All of the above are characteristics of foreign exchange dealers. 
A) bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale. 
B) act as market makers, willing to buy and sell the currencies in which they specialize. 
C) trade only with clients in the retail market and never operate in the wholesale market for foreign exchange. 
D) All of the above are characteristics of foreign exchange dealers.

Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as whereas are expressed as dollars per foreign unit.

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

When the cross rate for currencies offered by two banks differs from the exchange rate offered by a third bank, a triangular arbitrage opportunity exists.

Daily trading volume in the foreign exchange market was about per in 2007.

TABLE 6.1 Use the table to answer following question(s). -Refer to Table 6.1. The one-month forward bid price for dollars as denominated in Japanese yen is ________.

The four currencies that constitute about 80% of all foreign exchange trading are

A spot transaction in the interbank market for foreign exchange would typically involve a two-day delay in the actual delivery of the currencies, while such a transaction between a bank and its commercial customer would not necessarily involve a two-day wait.

It is characteristic of foreign exchange dealers to

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

Filters

Exam 6: The Foreign Exchange Market

Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize.

________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction.

When the cross rate for currencies offered by two banks differs from the exchange rate offered by a third bank, a triangular arbitrage opportunity exists.

Daily trading volume in the foreign exchange market was about ________ per ________ in 2007.

TABLE 6.1 Use the table to answer following question(s). -Refer to Table 6.1. The one-month forward bid price for dollars as denominated in Japanese yen is ________.

The four currencies that constitute about 80% of all foreign exchange trading are

A spot transaction in the interbank market for foreign exchange would typically involve a two-day delay in the actual delivery of the currencies, while such a transaction between a bank and its commercial customer would not necessarily involve a two-day wait.

It is characteristic of foreign exchange dealers to

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

Working Capital Management

International Trade Finance

Filters

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as whereas are expressed as dollars per foreign unit.

Daily trading volume in the foreign exchange market was about per in 2007.