Exam 11: Foreign Exchange

Concerning the exchange rate index of the U.S.dollar,suppose that the dollar's real exchange rate index rises from 95 to 115.This means that

Under a system of floating exchange rates,the Swiss franc would depreciate in value if which of the following occurs?

The ______ is the price at which a foreign currency option can be exercised--that is,the price at which the foreign currency is bought or sold

When the U.S.dollar appreciates against the Mexican peso,the peso becomes ______ and the U.S.exchange rate ______.

Foreign-exchange brokers help commercial banks carry out foreign exchange trading and maintain desired balances of foreign exchange.

Arbitrage tends to bring about an identical price for the same currency in different locations and thus results in one market.

A corporation dealing in foreign exchange may desire to obtain an exchange quote between the pound and franc,whose values are both expressed relative to the dollar.____ are used to determine such a relationship.

Trading in foreign currencies can be conducted in the futures market such as the International Monetary Market of the Chicago Mercantile Exchange

Which financial instrument provides a buyer the right to purchase or sell a fixed amount of currency at a prearranged price,within a few days to a couple of years?

Concerning the volume of foreign exchange market trading,forward transactions and foreign-exchange options are the two dominant instruments of foreign exchange.

When a foreign currency is worth more in the forward market than in the spot market,it is said to be at a discount in the forward market.

Table 11.2.Supply and Demand of British Pounds -Refer to Table 11.2.The equilibrium exchange rate equals:

When a bank trades foreign currencies,its offer rate will be less than its bid rate.

"Futures" currency contracts are issued by commercial banks and are tailored in size to the needs of the exporter or importer,while "forward" currency contracts are issued by the International Monetary Market in standardized round lots.

The demand for foreign exchange is derived from credit transactions on the balance of payments.

If a Citibank dealer expects the Swiss franc to depreciate in the future,he will lower bid and offer rates for the franc in order to discourage other dealers from selling francs to Citibank and persuade other dealers to buy francs from Citibank.

Given an upward-sloping supply schedule of pounds and a downward-sloping demand schedule for pounds,a decrease in the supply schedule causes an appreciation of the dollar against the pound.

Concerning the foreign exchange market,which of the following is false?

Suppose you can make profits in the foreign exchange market by buying a foreign currency at a low price,then selling it at a higher price later on.What you are engaging in is a

In recent years,the largest amount of foreign-exchange trading has involved