Question 1

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.

Question 2

Foreign exchange markets are a relatively recent phenomenon,beginning with the agreement at Bretton Woods.

Accepted Answer

A) True 
 B)False

Question 3

The authors identify two tiers of foreign exchange markets:

Accepted Answer

A)  bank and nonbank foreign exchange. 
B)  commercial and investment transactions. 
C)  interbank and client markets. 
D)  client and retail market. 
A)  bank and nonbank foreign exchange. 
B)  commercial and investment transactions. 
C)  interbank and client markets. 
D)  client and retail market.

Question 4

Since in the U.S.the home currency is the dollar and the foreign currency is the euro,in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

TABLE 5.1
Use the table to answer following question(s).  
-Refer to Table 5.1.The ask price for the two-year swap for a British pound is:

Accepted Answer

A)  $1.4250/£. 
B)  $1.4257/£. 
C)  -$230. 
D)  -$238. 
A)  $1.4250/£. 
B)  $1.4257/£. 
C)  -$230. 
D)  -$238.

Question 7

The European and American terms for foreign currency exchange are square roots of one another.

Accepted Answer

A) True 
 B)False

Question 8

A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency.

Accepted Answer

A)  Eurodollar transaction 
B)  import/export exchange 
C)  foreign exchange transaction 
D)  interbank market transaction 
A)  Eurodollar transaction 
B)  import/export exchange 
C)  foreign exchange transaction 
D)  interbank market transaction

Question 9

Nondeliverable Forwards were originally envisioned as a method of currency speculation,but it is now estimated that 70% of NDFs are trading for hedging purposes.

Accepted Answer

A) True 
 B)False

Question 10

For individuals and firms involved in the import and export of goods and services ,using the foreign exchange market is necessary,but incidental,to their underlying commercial or investment purpose.

Accepted Answer

A) True 
 B)False

Question 11

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

Accepted Answer

A)  spot 
B)  forward 
C)  swap 
D)  currency 
A)  spot 
B)  forward 
C)  swap 
D)  currency

Question 12

TABLE 5.1
Use the table to answer following question(s).  
-Refer to Table 5.1.The current spot rate of dollars per pound as quoted in a newspaper is ________ or ________.

Accepted Answer

A)  £1.4484/$; $0.6904/£ 
B)  $1.4481/£; £0.6906/$ 
C)  $1.4484/£; £0.6904/$ 
D)  £1.4487/$; $0.6903/£ 
A)  £1.4484/$; $0.6904/£ 
B)  $1.4481/£; £0.6906/$ 
C)  $1.4484/£; £0.6904/$ 
D)  £1.4487/$; $0.6903/£

Question 13

Daily trading volume in the foreign exchange market was about ________ per ________ in 2013.

Accepted Answer

A)  $5,300 billion; month 
B)  $3,300 billion; month 
C)  $5,300 billion; day 
D)  $3,300 billion; day 
A)  $5,300 billion; month 
B)  $3,300 billion; month 
C)  $5,300 billion; day 
D)  $3,300 billion; day

Question 14

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

Accepted Answer

A) True 
 B)False

Question 15

In the foreign exchange market,________ seek all of their profit from exchange rate changes while ________ seek to profit from simultaneous exchange rate differences in different markets.

Accepted Answer

A)  wholesalers; retailers 
B)  central banks; treasuries 
C)  speculators; arbitrageurs 
D)  dealers; brokers 
A)  wholesalers; retailers 
B)  central banks; treasuries 
C)  speculators; arbitrageurs 
D)  dealers; brokers

Question 16

As you might expect,the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

Accepted Answer

A) True 
 B)False

Question 17

The top three currency pairs traded with the U.S.dollar are:

Accepted Answer

A)  U.K. pound, Chinese Yuan, Japanese yen. 
B)  Swiss franc, euro, Japanese yen. 
C)  U.K. pound, euro, Japanese yen. 
D)  euro, Chinese Yuan, Japanese yen. 
A)  U.K. pound, Chinese Yuan, Japanese yen. 
B)  Swiss franc, euro, Japanese yen. 
C)  U.K. pound, euro, Japanese yen. 
D)  euro, Chinese Yuan, Japanese yen.

Question 18

Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.

Accepted Answer

A) True 
 B)False

Question 19

A forward contract to deliver British pounds for U.S.dollars could be described either as ________ or ________.

Accepted Answer

A)  buying dollars forward; buying pounds forward 
B)  selling pounds forward; selling dollars forward 
C)  selling pounds forward; buying dollars forward 
D)  selling dollars forward; buying pounds forward 
A)  buying dollars forward; buying pounds forward 
B)  selling pounds forward; selling dollars forward 
C)  selling pounds forward; buying dollars forward 
D)  selling dollars forward; buying pounds forward

Question 20

While trading in foreign exchange takes place worldwide,the major currency trading centers are located in:

Accepted Answer

A)  London, New York, and Tokyo. 
B)  New York, Zurich, and Bahrain. 
C)  Paris, Frankfurt, and London. 
D)  Los Angeles, New York, and London. 
A)  London, New York, and Tokyo. 
B)  New York, Zurich, and Bahrain. 
C)  Paris, Frankfurt, and London. 
D)  Los Angeles, New York, and London.

It is characteristic of foreign exchange dealers to:

Foreign exchange markets are a relatively recent phenomenon,beginning with the agreement at Bretton Woods.

The authors identify two tiers of foreign exchange markets:

Since in the U.S.the home currency is the dollar and the foreign currency is the euro,in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

________ 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.

TABLE 5.1 Use the table to answer following question(s). -Refer to Table 5.1.The ask price for the two-year swap for a British pound is:

The European and American terms for foreign currency exchange are square roots of one another.

A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency.

Nondeliverable Forwards were originally envisioned as a method of currency speculation,but it is now estimated that 70% of NDFs are trading for hedging purposes.

For individuals and firms involved in the import and export of goods and services ,using the foreign exchange market is necessary,but incidental,to their underlying commercial or investment purpose.

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

TABLE 5.1 Use the table to answer following question(s). -Refer to Table 5.1.The current spot rate of dollars per pound as quoted in a newspaper is or .

Daily trading volume in the foreign exchange market was about per in 2013.

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

In the foreign exchange market, seek all of their profit from exchange rate changes while seek to profit from simultaneous exchange rate differences in different markets.

As you might expect,the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

The top three currency pairs traded with the U.S.dollar are:

Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.

A forward contract to deliver British pounds for U.S.dollars could be described either as or .

While trading in foreign exchange takes place worldwide,the major currency trading centers are located in:

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 5: The Foreign Exchange Market

It is characteristic of foreign exchange dealers to:

Foreign exchange markets are a relatively recent phenomenon,beginning with the agreement at Bretton Woods.

The authors identify two tiers of foreign exchange markets:

Since in the U.S.the home currency is the dollar and the foreign currency is the euro,in New York USD 1.2174 = EUR 1.00 would be a direct quote on the euro and an indirect quote on the dollar.

________ 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.

TABLE 5.1 Use the table to answer following question(s). -Refer to Table 5.1.The ask price for the two-year swap for a British pound is:

The European and American terms for foreign currency exchange are square roots of one another.

A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency.

Nondeliverable Forwards were originally envisioned as a method of currency speculation,but it is now estimated that 70% of NDFs are trading for hedging purposes.

For individuals and firms involved in the import and export of goods and services ,using the foreign exchange market is necessary,but incidental,to their underlying commercial or investment purpose.

A ________ transaction in the foreign exchange market requires delivery of foreign exchange at some future date.

TABLE 5.1 Use the table to answer following question(s). -Refer to Table 5.1.The current spot rate of dollars per pound as quoted in a newspaper is ________ or ________.

Daily trading volume in the foreign exchange market was about ________ per ________ in 2013.

A contract to deliver dollars for euros in six months is both "buying euros forward for dollars" and "selling dollars forward for euros."

In the foreign exchange market,________ seek all of their profit from exchange rate changes while ________ seek to profit from simultaneous exchange rate differences in different markets.

As you might expect,the foreign exchange daily trading volume in in New York City is roughly twice as large as the daily trading volume in London.

The top three currency pairs traded with the U.S.dollar are:

Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers.

A forward contract to deliver British pounds for U.S.dollars could be described either as ________ or ________.

While trading in foreign exchange takes place worldwide,the major currency trading centers are located in:

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

International Parity Conditions

Foreign Currency Derivatives: Futures and Options

Interest Risk and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

TABLE 5.1 Use the table to answer following question(s). -Refer to Table 5.1.The current spot rate of dollars per pound as quoted in a newspaper is or .

Daily trading volume in the foreign exchange market was about per in 2013.

In the foreign exchange market, seek all of their profit from exchange rate changes while seek to profit from simultaneous exchange rate differences in different markets.

A forward contract to deliver British pounds for U.S.dollars could be described either as or .