Question 1

The rising value of the Canadian dollar relative to the U.S. dollar makes American goods cheaper to consumers in Canada.

Accepted Answer

A) True 
 B)False

Question 2

A(n) ________ is a large, liquid financial asset that can be traded anywhere at any time.

Accepted Answer

A)  international stock 
B)  global bond 
C)  global equity 
D)  Eurodollar 
A)  international stock 
B)  global bond 
C)  global equity 
D)  Eurodollar

Question 3

Carry trade was popular in the early 1990s, but has largely been replaced by covered interest arbitrage today.

Accepted Answer

A) True 
 B)False

Question 4

In a flexible exchange rate system, the price of foreign exchange is established by central banks.

Accepted Answer

A) True 
 B)False

Question 5

If a currency is selling at a forward discount it means that the foreign-exchange market most likely believes that the ________.

Accepted Answer

A)  currency will depreciate over time 
B)  country's economy is weak 
C)  currency will appreciate over time 
D)  country's economy is strong 
A)  currency will depreciate over time 
B)  country's economy is weak 
C)  currency will appreciate over time 
D)  country's economy is strong

Question 6

What percentage of all foreign-exchange trading involves the U.S. dollar?

Accepted Answer

A)  25% 
B)  47% 
C)  70% 
D)  85% 
A)  25% 
B)  47% 
C)  70% 
D)  85%

Question 7

What is the difference between a call option and a put option?

Accepted Answer

A call option grants the right

Question 8

Which of the following is NOT an example of a participant in the foreign exchange market?

Accepted Answer

A)  Pakistani tourists exchanging rupees for British pounds at a bank in London 
B)  British retailer Marks and Spenser purchasing appliances from a British supplier 
C)  The U.S. government arranging a multimillion-dollar loan to Mexico 
D)  Toyota exporting cars to Canada from factories in Japan 
A)  Pakistani tourists exchanging rupees for British pounds at a bank in London 
B)  British retailer Marks and Spenser purchasing appliances from a British supplier 
C)  The U.S. government arranging a multimillion-dollar loan to Mexico 
D)  Toyota exporting cars to Canada from factories in Japan

Question 9

What is a currency selling at if the forward price is higher than the spot price?

Accepted Answer

A)  forward premium 
B)  forward discount 
C)  par value 
D)  swap value 
A)  forward premium 
B)  forward discount 
C)  par value 
D)  swap value

Question 10

What is the difference between a Eurocurrency and a Eurobond?

Accepted Answer

A Eurocurrency is defined as a

Question 11

________ is profitable whenever the cost of buying a currency directly differs from the cross rate of exchange.

Accepted Answer

A)  Two-point arbitrage 
B)  Three-point arbitrage 
C)  Covered interest 
D)  Arbitrage of goods 
A)  Two-point arbitrage 
B)  Three-point arbitrage 
C)  Covered interest 
D)  Arbitrage of goods

Question 12

________ suggests that arbitrage activities will continue until the price of the good is identical in both markets.

Accepted Answer

A)  Purchasing power parity 
B)  The law of one price 
C)  Equilibrium pricing 
D)  Two-point arbitrage 
A)  Purchasing power parity 
B)  The law of one price 
C)  Equilibrium pricing 
D)  Two-point arbitrage

Question 13

Tyler, a U.S. citizen, received a quote on the dollar/yen relationship of ¥108.21/$1. Tyler most likely received a(n) ________ quote.

Accepted Answer

A)  indirect 
B)  direct 
C)  yen 
D)  dollar 
A)  indirect 
B)  direct 
C)  yen 
D)  dollar

Question 14

According to the Big Mac Index, ________.

Accepted Answer

A)  the euro is undervalued 
B)  Russia's rouble is overvalued 
C)  China's yuan is undervalued 
D)  the peso is overvalued 
A)  the euro is undervalued 
B)  Russia's rouble is overvalued 
C)  China's yuan is undervalued 
D)  the peso is overvalued

Question 15

Which form of arbitrage is considered the most important in the foreign-exchange market?

Accepted Answer

A)  two-point arbitrage 
B)  three-point arbitrage 
C)  covered interest 
D)  arbitrage of goods 
A)  two-point arbitrage 
B)  three-point arbitrage 
C)  covered interest 
D)  arbitrage of goods

Question 16

In the world of spot markets, what is the meaning of immediately?

Accepted Answer

A)  two days after the trade date 
B)  four business days after the trade date 
C)  on the trade date 
D)  simultaneous due to electronic transfers 
A)  two days after the trade date 
B)  four business days after the trade date 
C)  on the trade date 
D)  simultaneous due to electronic transfers

Question 17

Apex Enterprises wants the right to buy a foreign currency at a specified price at any time up to a specified date. Apex most likely needs a ________.

Accepted Answer

A)  forward premium 
B)  forward discount 
C)  call option 
D)  put option 
A)  forward premium 
B)  forward discount 
C)  call option 
D)  put option

Question 18

A person normally purchases items using the indirect exchange rate.

Accepted Answer

A) True 
 B)False

Question 19

Briefly explain the theory of purchasing power parity and the law of one price.

Accepted Answer

The theory of purchasing power parity st

Question 20

What is a correspondent relationship between banks? What services are performed by correspondent banks?

Accepted Answer

A correspondent relationship is an agent

The rising value of the Canadian dollar relative to the U.S. dollar makes American goods cheaper to consumers in Canada.

A(n) ________ is a large, liquid financial asset that can be traded anywhere at any time.

Carry trade was popular in the early 1990s, but has largely been replaced by covered interest arbitrage today.

In a flexible exchange rate system, the price of foreign exchange is established by central banks.

If a currency is selling at a forward discount it means that the foreign-exchange market most likely believes that the ________.

What percentage of all foreign-exchange trading involves the U.S. dollar?

What is the difference between a call option and a put option?

Which of the following is NOT an example of a participant in the foreign exchange market?

What is a currency selling at if the forward price is higher than the spot price?

What is the difference between a Eurocurrency and a Eurobond?

________ is profitable whenever the cost of buying a currency directly differs from the cross rate of exchange.

________ suggests that arbitrage activities will continue until the price of the good is identical in both markets.

Tyler, a U.S. citizen, received a quote on the dollar/yen relationship of ¥108.21/$1. Tyler most likely received a(n) ________ quote.

According to the Big Mac Index, ________.

Which form of arbitrage is considered the most important in the foreign-exchange market?

In the world of spot markets, what is the meaning of immediately?

Apex Enterprises wants the right to buy a foreign currency at a specified price at any time up to a specified date. Apex most likely needs a ________.

A person normally purchases items using the indirect exchange rate.

Briefly explain the theory of purchasing power parity and the law of one price.

What is a correspondent relationship between banks? What services are performed by correspondent banks?

An Overview of International Business

Global Marketplaces and Business Centers

Legal, Technological, Accounting, and Political Environments

The Role of Culture

Ethics and Social Responsibility in International Business

International Trade and Investment

The International Monetary System and the Balance of Payments

Formulation of National Trade Policies

International Cooperation Among Nations

International Strategic Management

Strategies for Analyzing and Entering Foreign Markets

International Strategic Alliances

International Organization Design and Control

Leadership and Employee Behavior in International Business

International Marketing

International Operations Management

International Financial Management

International Human Resource Management and Labor Relations

Filters

Exam 8: Foreign Exchange and International Financial Markets

The rising value of the Canadian dollar relative to the U.S. dollar makes American goods cheaper to consumers in Canada.

A(n) ________ is a large, liquid financial asset that can be traded anywhere at any time.

Carry trade was popular in the early 1990s, but has largely been replaced by covered interest arbitrage today.

In a flexible exchange rate system, the price of foreign exchange is established by central banks.

If a currency is selling at a forward discount it means that the foreign-exchange market most likely believes that the ________.

What percentage of all foreign-exchange trading involves the U.S. dollar?

What is the difference between a call option and a put option?

Which of the following is NOT an example of a participant in the foreign exchange market?

What is a currency selling at if the forward price is higher than the spot price?

What is the difference between a Eurocurrency and a Eurobond?

________ is profitable whenever the cost of buying a currency directly differs from the cross rate of exchange.

________ suggests that arbitrage activities will continue until the price of the good is identical in both markets.

Tyler, a U.S. citizen, received a quote on the dollar/yen relationship of ¥108.21/$1. Tyler most likely received a(n) ________ quote.

According to the Big Mac Index, ________.

Which form of arbitrage is considered the most important in the foreign-exchange market?

In the world of spot markets, what is the meaning of immediately?

Apex Enterprises wants the right to buy a foreign currency at a specified price at any time up to a specified date. Apex most likely needs a ________.

A person normally purchases items using the indirect exchange rate.

Briefly explain the theory of purchasing power parity and the law of one price.

What is a correspondent relationship between banks? What services are performed by correspondent banks?

An Overview of International Business

Global Marketplaces and Business Centers

Legal, Technological, Accounting, and Political Environments

The Role of Culture

Ethics and Social Responsibility in International Business

International Trade and Investment

The International Monetary System and the Balance of Payments

Formulation of National Trade Policies

International Cooperation Among Nations

International Strategic Management

Strategies for Analyzing and Entering Foreign Markets

International Strategic Alliances

International Organization Design and Control

Leadership and Employee Behavior in International Business

International Marketing

International Operations Management

International Financial Management

International Human Resource Management and Labor Relations

Filters