Question 1

Intervention in the foreign exchange market is the process of:

Accepted Answer

A)  A central bank requiring the commercial banks of that country to trade at a set price Difficulty. 
B)  Commercial banks in different countries coordinating efforts in order to stabilize one or more currencies. 
C)  A central bank buying or selling its currency in order to influence its value. 
D)  The government of a country prohibiting transactions in one or more currencies. 
A)  A central bank requiring the commercial banks of that country to trade at a set price Difficulty. 
B)  Commercial banks in different countries coordinating efforts in order to stabilize one or more currencies. 
C)  A central bank buying or selling its currency in order to influence its value. 
D)  The government of a country prohibiting transactions in one or more currencies.

Question 2

If the speculator's predictions prove correct,the speculator will make a profit of

Accepted Answer

A)  £10,000 
B)  £20,048 
C)  SF 10,000 
D)  SF 20,048 
A)  £10,000 
B)  £20,048 
C)  SF 10,000 
D)  SF 20,048

Question 3

Which of the following is true if one year forward rate is F = 1.81$/£; current spot rate is S = 1.83$/£; and interest rates are i = 3%,and i* = 3.5% (where exchange rates are quoted in $/£,i is the interest rate in the U.S.and i* is the interest rate in the U.K.)?

Accepted Answer

A)  Arbitrage is not possible 
B)  Arbitrage is possible and arbitrage strategy involves borrowing $ 
C)  Arbitrage is possible and arbitrage strategy involves borrowing £ 
D)  Arbitrage is possible; however, there is not enough information to pick one of the answers above. 
A)  Arbitrage is not possible 
B)  Arbitrage is possible and arbitrage strategy involves borrowing $ 
C)  Arbitrage is possible and arbitrage strategy involves borrowing £ 
D)  Arbitrage is possible; however, there is not enough information to pick one of the answers above.

Question 4

The AUD/$ spot exchange rate is 1.60 and the SF/$ is 1.25.The AUD/SF cross exchange rate is:

Accepted Answer

A)  0.7813 
B)  2.0000 
C)  1.2800 
D)  0.3500 
A)  0.7813 
B)  2.0000 
C)  1.2800 
D)  0.3500

Question 5

All of the following are key elements of a forward contract except:

Accepted Answer

A)  forward rate 
B)  maturity 
C)  settlement date 
D)  settlement function 
A)  forward rate 
B)  maturity 
C)  settlement date 
D)  settlement function

Question 6

If the speculator's predictions prove wrong and the actual spot rate in 3 months is £0.52 speculator will make a loss of

Accepted Answer

A)  £20,000 
B)  £38,461 
C)  SF 20,000 
D)  SF 38,461 
A)  £20,000 
B)  £38,461 
C)  SF 20,000 
D)  SF 38,461

Question 7

The following rates are given:
 $$\begin{array} { l l l } 
& \text { Bid } & \text { Ask } \
\text { SF/EUR } & 1.5117 & 1.5127 \
\text { EUR/USD } & 0.8910 & 0.8920
\end{array}$$ Determine the bid and ask rate and the spread on the SF against the dollar.

Accepted Answer

BID: 0.8910/(1/1.5117)= SF1.34

Question 8

The SF/$ spot exchange rate is 1.25 and the 180 forward exchange rate is 1.30.Assuming 360 days in a year,the forward premium (discount)is:

Accepted Answer

A)  The dollar is trading at an 8% premium to the Swiss franc for delivery in 180 days. 
B)  The dollar is trading at a 4% premium to the Swiss franc for delivery in 180 days. 
C)  The dollar is trading at an 8% discount to the Swiss franc for delivery in 180 days. 
D)  The dollar is trading at a 4% discount to the Swiss franc for delivery in 180 days. 
A)  The dollar is trading at an 8% premium to the Swiss franc for delivery in 180 days. 
B)  The dollar is trading at a 4% premium to the Swiss franc for delivery in 180 days. 
C)  The dollar is trading at an 8% discount to the Swiss franc for delivery in 180 days. 
D)  The dollar is trading at a 4% discount to the Swiss franc for delivery in 180 days.

Question 9

The 3 month forward rate between British pound and the Swiss franc is £0.5.A speculator predicts the spot rate in three months to be £0.51 and has £1,000,000 for speculation.The speculator should not

Accepted Answer

A)  get a long position on British pounds 
B)  get a short position on Swiss francs 
C)  speculate 
D)  get a long position on Swiss francs 
A)  get a long position on British pounds 
B)  get a short position on Swiss francs 
C)  speculate 
D)  get a long position on Swiss francs

Question 10

The 3 month forward rate between British pound and the Swiss franc is £0.5/SF.The current spot rate is £0.51/SF.Assuming 360 days in a year,what is the correct statement from the below?

Accepted Answer

A)  The Swiss franc is trading at a 1.96% premium to the British pound for delivery in 90 days. 
B)  The Swiss franc is trading at a 7.84% premium to the British pound for delivery in 90 days. 
C)  The Swiss franc is trading at a 1.96% discount to the British pound for delivery in 90 days. 
D)  The Swiss franc is trading at a 7.84% discount to the British pound for delivery in 90 days. 
A)  The Swiss franc is trading at a 1.96% premium to the British pound for delivery in 90 days. 
B)  The Swiss franc is trading at a 7.84% premium to the British pound for delivery in 90 days. 
C)  The Swiss franc is trading at a 1.96% discount to the British pound for delivery in 90 days. 
D)  The Swiss franc is trading at a 7.84% discount to the British pound for delivery in 90 days.

Question 11

Participants in the interbank foreign exchange markets include the following except:

Accepted Answer

A)  international banks 
B)  foreign exchange brokers 
C)  nonbank dealers 
D)  credit unions 
A)  international banks 
B)  foreign exchange brokers 
C)  nonbank dealers 
D)  credit unions

Question 12

If CIBC posts 1.10 CA$/US$ - 1.14 CA$/US$ bid-ask exchange rates,Scotiabank posts 1.12 CA$/US$ - 1.15 CA$/US$,and Bank of America posts 0.88 US$/CA$ - 0.9 US$/CA$ exchange rates,what is the maximum amount of CA$ can you get for 1 US$?

Accepted Answer

A)  1.100 
B)  1.111 
C)  1.120 
D)  1.136 
A)  1.100 
B)  1.111 
C)  1.120 
D)  1.136

Question 13

The foreign exchange market closes:

Accepted Answer

A)  Never 
B)  4:00 p.m. EST (New York time) 
C)  4:00 p.m. GMT (London time) 
D)  4:00 p.m. (Tokyo time) 
A)  Never 
B)  4:00 p.m. EST (New York time) 
C)  4:00 p.m. GMT (London time) 
D)  4:00 p.m. (Tokyo time)

Intervention in the foreign exchange market is the process of:

If the speculator's predictions prove correct,the speculator will make a profit of

Which of the following is true if one year forward rate is F = 1.81$/£; current spot rate is S = 1.83$/£; and interest rates are i = 3%,and i* = 3.5% (where exchange rates are quoted in $/£,i is the interest rate in the U.S.and i* is the interest rate in the U.K.)?

The AUD/$ spot exchange rate is 1.60 and the SF/$ is 1.25.The AUD/SF cross exchange rate is:

All of the following are key elements of a forward contract except:

If the speculator's predictions prove wrong and the actual spot rate in 3 months is £0.52 speculator will make a loss of

The following rates are given: Bid Ask SF/EUR 1.5117 1.5127 EUR/USD 0.8910 0.8920 Determine the bid and ask rate and the spread on the SF against the dollar.

The SF/$ spot exchange rate is 1.25 and the 180 forward exchange rate is 1.30.Assuming 360 days in a year,the forward premium (discount)is:

The 3 month forward rate between British pound and the Swiss franc is £0.5.A speculator predicts the spot rate in three months to be £0.51 and has £1,000,000 for speculation.The speculator should not

The 3 month forward rate between British pound and the Swiss franc is £0.5/SF.The current spot rate is £0.51/SF.Assuming 360 days in a year,what is the correct statement from the below?

Participants in the interbank foreign exchange markets include the following except:

If CIBC posts 1.10 CA$/US$ - 1.14 CA$/US$ bid-ask exchange rates,Scotiabank posts 1.12 CA$/US$ - 1.15 CA$/US$,and Bank of America posts 0.88 US$/CA$ - 0.9 US$/CA$ exchange rates,what is the maximum amount of CA$ can you get for 1 US$?

The foreign exchange market closes:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters

Exam 4: The Market for Foreign Exchange

Intervention in the foreign exchange market is the process of:

If the speculator's predictions prove correct,the speculator will make a profit of

Which of the following is true if one year forward rate is F = 1.81$/£; current spot rate is S = 1.83$/£; and interest rates are i = 3%,and i* = 3.5% (where exchange rates are quoted in $/£,i is the interest rate in the U.S.and i* is the interest rate in the U.K.)?

The AUD/$ spot exchange rate is 1.60 and the SF/$ is 1.25.The AUD/SF cross exchange rate is:

All of the following are key elements of a forward contract except:

If the speculator's predictions prove wrong and the actual spot rate in 3 months is £0.52 speculator will make a loss of

The following rates are given: Bid Ask SF/EUR 1.5117 1.5127 EUR/USD 0.8910 0.8920 Determine the bid and ask rate and the spread on the SF against the dollar.

The SF/$ spot exchange rate is 1.25 and the 180 forward exchange rate is 1.30.Assuming 360 days in a year,the forward premium (discount)is:

The 3 month forward rate between British pound and the Swiss franc is £0.5.A speculator predicts the spot rate in three months to be £0.51 and has £1,000,000 for speculation.The speculator should not

The 3 month forward rate between British pound and the Swiss franc is £0.5/SF.The current spot rate is £0.51/SF.Assuming 360 days in a year,what is the correct statement from the below?

Participants in the interbank foreign exchange markets include the following except:

If CIBC posts 1.10 CA$/US$ - 1.14 CA$/US$ bid-ask exchange rates,Scotiabank posts 1.12 CA$/US$ - 1.15 CA$/US$,and Bank of America posts 0.88 US$/CA$ - 0.9 US$/CA$ exchange rates,what is the maximum amount of CA$ can you get for 1 US$?

The foreign exchange market closes:

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

International Parity Relationships and Forecasting Foreign Exchange Rates

International Banking and Money Market

International Bond Market

International Equity Markets

Futures and Options on Foreign Exchange

Interest Rate and Currency Swaps

International Portfolio Investment

Management of Economic Exposure

Management of Transaction Exposure

Management of Translation Exposure

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

Exports and Imports

International Tax Environment

Corporate Governance Around the World

Filters