Exam 9: Global Foreign-Exchange Markets

A confirmed letter of credit may obligate the exporter's bank to honor a draft presented to it.

A(n)________ is the right but not the obligation to buy or sell a foreign currency within a certain time period or on a specific date at a specific exchange rate.

A major challenge faced by Western Union in transferring money between the United States and Mexico is that Mexican citizens trust the banks but do not trust Western Union due to its reliance on global banks.

In a short essay, discuss how companies use foreign exchange.

An irrevocable letter of credit ________.

Jason works in finance at an MNE.Part of his job is to invest large sums of money in various markets.His latest transaction was investing $10,000 in British pounds for 120 days, then taking the British pounds and investing them in euros for 90 days, and then converting it all back to U.S.dollars.Jason is most likely participating in ________.

When selecting a commercial and/or investment bank to deal in foreign exchange, corporations are most likely to use ________.

Melissa, a foreign-exchange trader, wants to buy euros from Stephanie.Which of the following is the price at which Melissa is willing to buy euros?

Outright forward transactions involve the exchange of currency on a future date beyond two business days at a fixed exchange rate, known as the ________.

In foreign-exchange markets, reporting dealers are ________.

In an FX swap, one currency is swapped for another on one date and then swapped back on a future date.

Which of the following is NOT a reason a company would deal in foreign exchange?

In the spot market, the spread is the difference between the bid and offer rates and is the trader's profit margin.

A document requesting payment 30 days after delivery is known as a ________.

Most foreign exchange is handled through voice brokers.

A major challenge faced by Western Union in wiring money between the United States and Mexico is that ________.

A foreign-exchange contract that is an agreement between two parties to buy or sell a particular currency at a particular price at a particular date as specified in a standardized contract to all participants in the specified market is known as a(n)________.

Which of the following is the price at which the trader is willing to sell foreign currency?

An offer is the right but not the obligation to buy or sell foreign currency.

The U.S.dollar is widely traded because it is a transaction currency in many international commodity markets.