Question 1

Which of the following is an example of interest arbitrage?

Accepted Answer

A) investing in debt instruments in different currencies or different countries 
B) selling U.S. dollars for Swiss francs, then selling Swiss francs for British pounds, then selling British pounds for U.S. dollars 
C) investigating different commercial banks to find the best exchange rate 
D) an American investing in a London-based company 
A) investing in debt instruments in different currencies or different countries 
B) selling U.S. dollars for Swiss francs, then selling Swiss francs for British pounds, then selling British pounds for U.S. dollars 
C) investigating different commercial banks to find the best exchange rate 
D) an American investing in a London-based company

Question 2

If a foreign currency is quoted in American terms (the direct quote)and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________.

Accepted Answer

A) forward premium 
B) backward discount 
C) backward premium 
D) forward discount 
A) forward premium 
B) backward discount 
C) backward premium 
D) forward discount

Question 3

An American investing in a London-based company is an example of interest arbitrage.

Accepted Answer

A) True 
 B)False

Question 4

Western Union's role in foreign-exchange trading is best described as ________.

Accepted Answer

A) setting a fair exchange rate in multiple currencies 
B) transferring currency from one country to another 
C) transferring Mexican pesos from the United States to Mexico 
D) handling all money transfers that occur between North and South America 
A) setting a fair exchange rate in multiple currencies 
B) transferring currency from one country to another 
C) transferring Mexican pesos from the United States to Mexico 
D) handling all money transfers that occur between North and South America

Question 5

An exchange rate is the number of units that buys one unit of another currency.

Accepted Answer

A) True 
 B)False

Question 6

An example of an electronic brokerage system used to trade foreign exchange is ________.

Accepted Answer

A) Reuters 
B) Interbank Traders Ltd. 
C) Bank for International Settlements 
D) the reporting dealers clearing house 
A) Reuters 
B) Interbank Traders Ltd. 
C) Bank for International Settlements 
D) the reporting dealers clearing house

Question 7

Which of the following is an example of cryptocurrency?

Accepted Answer

A) U.S. dollar 
B) Japanese yen 
C) Euro 
D) Bitcoin 
A) U.S. dollar 
B) Japanese yen 
C) Euro 
D) Bitcoin

Question 8

Compared with a forward contract, a futures contract ________.

Accepted Answer

A) is more flexible 
B) is normally available through commercial banks 
C) does not guarantee a future exchange rate 
D) is only traded on an exchange 
A) is more flexible 
B) is normally available through commercial banks 
C) does not guarantee a future exchange rate 
D) is only traded on an exchange

Question 9

Outright forward transactions involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Accepted Answer

A) True 
 B)False

Question 10

Stella, who works and lives in San Diego, wants to send money to her mother who lives in a small village south of Puerto Vallarta, Mexico.Stella typically uses Western Union to handle the transaction.Which of the following is the most likely reason that Stella uses Western Union?

Accepted Answer

A) no fees 
B) convenience 
C) low exchange rates 
D) cross rate capability 
A) no fees 
B) convenience 
C) low exchange rates 
D) cross rate capability

Question 11

According to 2010 surveys, the most frequently traded currency pair is the U.S.dollar and Japanese yen.

Accepted Answer

A) True 
 B)False

Question 12

How is foreign exchange traded? What methods are available?

Accepted Answer

Foreign exchange is traded using electro

Question 13

Which of the following best describes arbitrage?

Accepted Answer

A) using foreign exchange to fund new foreign direct investments 
B) purchasing foreign currency in anticipation of long-term trends 
C) using foreign-exchange instruments to speculate for profit 
D) purchasing foreign currency on one market for immediate resale on another market 
A) using foreign exchange to fund new foreign direct investments 
B) purchasing foreign currency in anticipation of long-term trends 
C) using foreign-exchange instruments to speculate for profit 
D) purchasing foreign currency on one market for immediate resale on another market

Question 14

________ involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Accepted Answer

A) Spot transactions 
B) Outright forward transactions 
C) FX swaps 
D) Reverse transactions 
A) Spot transactions 
B) Outright forward transactions 
C) FX swaps 
D) Reverse transactions

Question 15

Companies most likely use the foreign-exchange market to ________.

Accepted Answer

A) establish fair currency trading policies 
B) facilitate regular business transactions 
C) establish a global market presence 
D) diversify their hedge funds 
A) establish fair currency trading policies 
B) facilitate regular business transactions 
C) establish a global market presence 
D) diversify their hedge funds

Question 16

A letter of credit that provides an exporter with the guarantee of another bank in addition to the importer's bank is called ________.

Accepted Answer

A) a confirmed letter of credit 
B) a time draft letter of credit 
C) an amendable letter of credit 
D) a cash in advance letter of credit 
A) a confirmed letter of credit 
B) a time draft letter of credit 
C) an amendable letter of credit 
D) a cash in advance letter of credit

Question 17

In which of the following transactions is one currency swapped for another on one date and then swapped back on a future date?

Accepted Answer

A) reverse transaction 
B) spot transaction 
C) FX swap 
D) outright forward transaction 
A) reverse transaction 
B) spot transaction 
C) FX swap 
D) outright forward transaction

Question 18

Albert, an employee at Morgan Stanley, has been given the task of handling the foreign exchange for a customer who is moving from Brazil to Switzerland in one week.Which of the following should Albert most likely use when exchanging the client's Brazilian reais for Swiss francs?

Accepted Answer

A) spot rate 
B) cross rate 
C) currency option 
D) current U.S. rate 
A) spot rate 
B) cross rate 
C) currency option 
D) current U.S. rate

Question 19

What are the characteristics of the spot market? What institutions handle spot exchanges?

Accepted Answer

Most foreign currency transactions take

Question 20

Why would companies become involved in arbitrage? What is the difference between arbitrage and interest arbitrage?

Accepted Answer

As with most types of foreign exchange a

Which of the following is an example of interest arbitrage?

If a foreign currency is quoted in American terms (the direct quote)and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________.

An American investing in a London-based company is an example of interest arbitrage.

Western Union's role in foreign-exchange trading is best described as ________.

An exchange rate is the number of units that buys one unit of another currency.

An example of an electronic brokerage system used to trade foreign exchange is ________.

Which of the following is an example of cryptocurrency?

Compared with a forward contract, a futures contract ________.

Outright forward transactions involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Stella, who works and lives in San Diego, wants to send money to her mother who lives in a small village south of Puerto Vallarta, Mexico.Stella typically uses Western Union to handle the transaction.Which of the following is the most likely reason that Stella uses Western Union?

According to 2010 surveys, the most frequently traded currency pair is the U.S.dollar and Japanese yen.

How is foreign exchange traded? What methods are available?

Which of the following best describes arbitrage?

________ involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Companies most likely use the foreign-exchange market to ________.

A letter of credit that provides an exporter with the guarantee of another bank in addition to the importer's bank is called ________.

In which of the following transactions is one currency swapped for another on one date and then swapped back on a future date?

Albert, an employee at Morgan Stanley, has been given the task of handling the foreign exchange for a customer who is moving from Brazil to Switzerland in one week.Which of the following should Albert most likely use when exchanging the client's Brazilian reais for Swiss francs?

What are the characteristics of the spot market? What institutions handle spot exchanges?

Why would companies become involved in arbitrage? What is the difference between arbitrage and interest arbitrage?

Globalization and International Business

The Cultural Environments Facing Business

The Political and Legal Environments Facing Business

The Economic Environments Facing Businesses

Globalization and Society

International Trade and Factor-Mobility Theory

Governmental Influence on Trade

Cross-National Cooperation and Agreements

The Determination of Exchange Rates

Global Capital Markets

The Strategy of International Business

Country Evaluation and Selection

Export and Import

Direct Investment and Collaborative Strategies

The Organization of International Business

Marketing Globally

Global Manufacturing and Supply Chain Management

International Accounting and Finance Issues

International Human Resource Management

Filters

Exam 9: Global Foreign-Exchange Markets

Which of the following is an example of interest arbitrage?

If a foreign currency is quoted in American terms (the direct quote)and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________.

An American investing in a London-based company is an example of interest arbitrage.

Western Union's role in foreign-exchange trading is best described as ________.

An exchange rate is the number of units that buys one unit of another currency.

An example of an electronic brokerage system used to trade foreign exchange is ________.

Which of the following is an example of cryptocurrency?

Compared with a forward contract, a futures contract ________.

Outright forward transactions involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Stella, who works and lives in San Diego, wants to send money to her mother who lives in a small village south of Puerto Vallarta, Mexico.Stella typically uses Western Union to handle the transaction.Which of the following is the most likely reason that Stella uses Western Union?

According to 2010 surveys, the most frequently traded currency pair is the U.S.dollar and Japanese yen.

How is foreign exchange traded? What methods are available?

Which of the following best describes arbitrage?

________ involve the exchange of currency the second day after the date on which the two foreign-exchange traders agree to the transaction.

Companies most likely use the foreign-exchange market to ________.

A letter of credit that provides an exporter with the guarantee of another bank in addition to the importer's bank is called ________.

In which of the following transactions is one currency swapped for another on one date and then swapped back on a future date?

Albert, an employee at Morgan Stanley, has been given the task of handling the foreign exchange for a customer who is moving from Brazil to Switzerland in one week.Which of the following should Albert most likely use when exchanging the client's Brazilian reais for Swiss francs?

What are the characteristics of the spot market? What institutions handle spot exchanges?

Why would companies become involved in arbitrage? What is the difference between arbitrage and interest arbitrage?

Globalization and International Business

The Cultural Environments Facing Business

The Political and Legal Environments Facing Business

The Economic Environments Facing Businesses

Globalization and Society

International Trade and Factor-Mobility Theory

Governmental Influence on Trade

Cross-National Cooperation and Agreements

The Determination of Exchange Rates

Global Capital Markets

The Strategy of International Business

Country Evaluation and Selection

Export and Import

Direct Investment and Collaborative Strategies

The Organization of International Business

Marketing Globally

Global Manufacturing and Supply Chain Management

International Accounting and Finance Issues

International Human Resource Management

Filters