Question 1

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).

Question 2

Which of the following is correct?

Accepted Answer

A)  $F _ { N } ( j / k ) = \frac { F _ { N } ( \$ / k ) } { F _ { N } ( \$ / j ) }$ 
B)  $F _ { N } ( j / k ) = \frac { F _ { N } ( j / \$ ) } { F _ { N } ( k / \$ ) }$ 
C)  $F _ { N } ( k / j ) = \frac { F _ { N } ( \$ / j ) } { F _ { N } ( \$ / k ) }$ 
D) All of the above are correct 
A)  $F _ { N } ( j / k ) = \frac { F _ { N } ( \$ / k ) } { F _ { N } ( \$ / j ) }$ 
B)  $F _ { N } ( j / k ) = \frac { F _ { N } ( j / \$ ) } { F _ { N } ( k / \$ ) }$ 
C)  $F _ { N } ( k / j ) = \frac { F _ { N } ( \$ / j ) } { F _ { N } ( \$ / k ) }$ 
D) All of the above are correct

Question 3

It is common practice among currency traders worldwide to both price and trade currencies against the U.S.dollar.Consider a currency dealer who makes a market in 5 currencies against the dollar.If he were to supply quotes for each currency in terms of all of the others,how many quotes would he have to provide?

Accepted Answer

A) 36 
B) 30 
C) 60 
D) 120 
E) None of the above 
A) 36 
B) 30 
C) 60 
D) 120 
E) None of the above

Question 4

The largest and most active financial market in the world is

Accepted Answer

A) the Fleet Street Exchange in London. 
B) the NYSE in New York. 
C) the FX market. 
D) none of the above. 
A) the Fleet Street Exchange in London. 
B) the NYSE in New York. 
C) the FX market. 
D) none of the above.

Question 5

When a currency trades at a premium in the forward market

Accepted Answer

A) the exchange rate is more than one dollar . 
B) the exchange rate is less than one dollar. 
C) the forward rate is less than the spot rate. 
D) the forward rate is more than the spot rate. 
A) the exchange rate is more than one dollar . 
B) the exchange rate is less than one dollar. 
C) the forward rate is less than the spot rate. 
D) the forward rate is more than the spot rate.

Question 6

You are a U.S.-based treasurer with $1,000,000 to invest.The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00.If a bank quotes you a cross rate of £1.00 = €1.20 how much money can an astute trader make?

Accepted Answer

A) No arbitrage is possible 
B) $1,160,000 
C) $41,667 
D) $40,000 
A) No arbitrage is possible 
B) $1,160,000 
C) $41,667 
D) $40,000

Question 7

Suppose you observe the following exchange rates: €1 = $1.50; £1 = $2.00.Calculate the euro-pound exchange rate.

Accepted Answer

A) €1.3333 = £1.00 
B) £1.3333 = €1.00 
C) €3.00 = £1 
D) €1.25 = £1.00 
A) €1.3333 = £1.00 
B) £1.3333 = €1.00 
C) €3.00 = £1 
D) €1.25 = £1.00

Question 8

The standard size foreign exchange transactions are for

Accepted Answer

A) $10 million U.S. 
B) $1 million U.S. 
C) €1 million. 
A) $10 million U.S. 
B) $1 million U.S. 
C) €1 million.

Question 9

Suppose you observe the following exchange rates: €1 = $1.50; ¥120 = $1.00.Calculate the euro-pound exchange rate.

Accepted Answer

A) ¥133.33 = €1.00 
B) €1.00 = ¥180 
C) ¥80 = €1.00 
D) €1 = £2.50 
A) ¥133.33 = €1.00 
B) €1.00 = ¥180 
C) ¥80 = €1.00 
D) €1 = £2.50

Question 10

It is common practice among currency traders worldwide to both price and trade currencies against the U.S.dollar.In fact,2007 BIS statistics indicate that about _________ of currency trading in the world involves the U.S.dollar on one side of the transaction.

Accepted Answer

A) 86 percent 
B) 75 percent 
C) 45 percent 
D) 15 percent 
A) 86 percent 
B) 75 percent 
C) 45 percent 
D) 15 percent

Question 11

Nondollar currency transactions

Accepted Answer

A) are priced by looking at the price that must exist to eliminate arbitrage. 
B) allow for triangular arbitrage opportunities to keep the currency dealers employed. 
C) are only for poor people who don't have dollars. 
D) none of the above 
A) are priced by looking at the price that must exist to eliminate arbitrage. 
B) allow for triangular arbitrage opportunities to keep the currency dealers employed. 
C) are only for poor people who don't have dollars. 
D) none of the above

Question 12

A dealer in British pounds who thinks that the pound is about to appreciate

Accepted Answer

A) may want to widen his bid-ask spread by raising his ask price. 
B) may want to lower his bid price. 
C) may want to lower his ask price. 
D) none of the above 
A) may want to widen his bid-ask spread by raising his ask price. 
B) may want to lower his bid price. 
C) may want to lower his ask price. 
D) none of the above

Question 13

Using the table above,what is the ask price of pounds in terms of euro?

Accepted Answer

A) €1.3371/£ 
B) €1.3378/£ 
C) £0.7475/€ 
D) £0.7479/€ 
A) €1.3371/£ 
B) €1.3378/£ 
C) £0.7475/€ 
D) £0.7479/€

Question 14

What is the BID cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Canadian dollars.

Accepted Answer

A) €0.6094/CAD 
B) €0.6104/CAD 
C) €0.6181/CAD 
D) €0.6191/CAD 
A) €0.6094/CAD 
B) €0.6104/CAD 
C) €0.6181/CAD 
D) €0.6191/CAD

Question 15

The dollar-euro exchange rate is $1.25 = €1.00 and the dollar-yen exchange rate is ¥100 = $1.00.What is the euro-yen cross rate?

Accepted Answer

A) ¥125 = €1.00 
B) ¥1.00 = €125 
C) ¥1.00 = €0.80 
D) None of the above 
A) ¥125 = €1.00 
B) ¥1.00 = €125 
C) ¥1.00 = €0.80 
D) None of the above

Question 16

Using the table above,what is the bid price of pounds in terms of euro?

Accepted Answer

A) €1.3371/£ 
B) €1.3378/£ 
C) £0.7475/€ 
D) £0.7479/€ 
A) €1.3371/£ 
B) €1.3378/£ 
C) £0.7475/€ 
D) £0.7479/€

Question 17

Indirect exchange rate quotations from the U.S.perspective are

Accepted Answer

A) the price of one unit of the foreign currency in terms of the U.S.dollar. 
B) the price of one U.S.dollar in the foreign currency. 
A) the price of one unit of the foreign currency in terms of the U.S.dollar. 
B) the price of one U.S.dollar in the foreign currency.

Question 18

At the wholesale level

Accepted Answer

A) most trading takes place OTC between individuals on the floor of the exchange. 
B) most trading takes place over the phone. 
C) most trading flows over Reuters and EBS platforms. 
D) most trading flows through specialized "broking" firms. 
A) most trading takes place OTC between individuals on the floor of the exchange. 
B) most trading takes place over the phone. 
C) most trading flows over Reuters and EBS platforms. 
D) most trading flows through specialized "broking" firms.

Question 19

What is the ASK cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Swiss francs.

Accepted Answer

A) €0.5386/CHF 
B) €0.5389/CHF 
C) €0.5463/CHF 
D) €0.5466/CHF 
A) €0.5386/CHF 
B) €0.5389/CHF 
C) €0.5463/CHF 
D) €0.5466/CHF

Question 20

The spot market

Accepted Answer

A) involves the almost-immediate purchase or sale of foreign exchange. 
B) involves the sale of futures, forwards, and options on foreign exchange. 
C) takes place only on the floor of a physical exchange. 
D) all of the above. 
A) involves the almost-immediate purchase or sale of foreign exchange. 
B) involves the sale of futures, forwards, and options on foreign exchange. 
C) takes place only on the floor of a physical exchange. 
D) all of the above.

The foreign exchange market closes

Which of the following is correct?

The largest and most active financial market in the world is

When a currency trades at a premium in the forward market

You are a U.S.-based treasurer with $1,000,000 to invest.The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00.If a bank quotes you a cross rate of £1.00 = €1.20 how much money can an astute trader make?

Suppose you observe the following exchange rates: €1 = $1.50; £1 = $2.00.Calculate the euro-pound exchange rate.

The standard size foreign exchange transactions are for

Suppose you observe the following exchange rates: €1 = $1.50; ¥120 = $1.00.Calculate the euro-pound exchange rate.

It is common practice among currency traders worldwide to both price and trade currencies against the U.S.dollar.In fact,2007 BIS statistics indicate that about _________ of currency trading in the world involves the U.S.dollar on one side of the transaction.

Nondollar currency transactions

A dealer in British pounds who thinks that the pound is about to appreciate

Using the table above,what is the ask price of pounds in terms of euro?

What is the BID cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Canadian dollars.

The dollar-euro exchange rate is $1.25 = €1.00 and the dollar-yen exchange rate is ¥100 = $1.00.What is the euro-yen cross rate?

Using the table above,what is the bid price of pounds in terms of euro?

Indirect exchange rate quotations from the U.S.perspective are

At the wholesale level

What is the ASK cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Swiss francs.

The spot market

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters

Exam 5: The Market for Foreign Exchange

The foreign exchange market closes

Which of the following is correct?

The largest and most active financial market in the world is

When a currency trades at a premium in the forward market

You are a U.S.-based treasurer with $1,000,000 to invest.The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00.If a bank quotes you a cross rate of £1.00 = €1.20 how much money can an astute trader make?

Suppose you observe the following exchange rates: €1 = $1.50; £1 = $2.00.Calculate the euro-pound exchange rate.

The standard size foreign exchange transactions are for

Suppose you observe the following exchange rates: €1 = $1.50; ¥120 = $1.00.Calculate the euro-pound exchange rate.

It is common practice among currency traders worldwide to both price and trade currencies against the U.S.dollar.In fact,2007 BIS statistics indicate that about _________ of currency trading in the world involves the U.S.dollar on one side of the transaction.

Nondollar currency transactions

A dealer in British pounds who thinks that the pound is about to appreciate

Using the table above,what is the ask price of pounds in terms of euro?

What is the BID cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Canadian dollars.

The dollar-euro exchange rate is $1.25 = €1.00 and the dollar-yen exchange rate is ¥100 = $1.00.What is the euro-yen cross rate?

Using the table above,what is the bid price of pounds in terms of euro?

Indirect exchange rate quotations from the U.S.perspective are

At the wholesale level

What is the ASK cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Swiss francs.

The spot market

Globalization and the Multinational Firm

International Monetary System

Balance of Payments

Corporate Governance Around the World

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

Management of Translation Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

Filters