Question 1

Suppose you observe the following exchange rates: €1 = $1.45; £1 = $1.90. Calculate the euro-pound exchange rate.

Accepted Answer

A) €1.3103 = £1.00 
B) £1.3333 = €1.00 
C) €2.00 = £1 
D) €3 = £1 
A) €1.3103 = £1.00 
B) £1.3333 = €1.00 
C) €2.00 = £1 
D) €3 = £1 A

Question 2

The Bid price

Accepted Answer

A) is the price that the dealer has just paid for something, his historical cost of the most recent trade. 
B) is the price that a dealer stands ready to pay. 
C) refers only to auctions like eBay, not over the counter transactions with dealers. 
D) is the price that a dealer stands ready to sell at. 
A) is the price that the dealer has just paid for something, his historical cost of the most recent trade. 
B) is the price that a dealer stands ready to pay. 
C) refers only to auctions like eBay, not over the counter transactions with dealers. 
D) is the price that a dealer stands ready to sell at. B

Question 3

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. C

Question 4

The €/$ spot exchange rate is $1.50/€ and the 120 day forward exchange rate is 1.45/€. The forward premium (discount) is

Accepted Answer

A) the dollar is trading at an 8% premium to the euro for delivery in 120 days. 
B) the dollar is trading at a 5% premium to the Swiss franc for delivery in 120 days. 
C) the dollar is trading at a 10% discount to the euro for delivery in 120 days. 
D) the dollar is trading at a 5% discount to the euro for delivery in 120 days. 
A) the dollar is trading at an 8% premium to the euro for delivery in 120 days. 
B) the dollar is trading at a 5% premium to the Swiss franc for delivery in 120 days. 
C) the dollar is trading at a 10% discount to the euro for delivery in 120 days. 
D) the dollar is trading at a 5% discount to the euro for delivery in 120 days.

Question 5

On average, worldwide daily trading of foreign exchange is closest to

Accepted Answer

A) impossible to estimate. 
B) $15 billion. 
C) $504 billion. 
D) $3.21 trillion. 
A) impossible to estimate. 
B) $15 billion. 
C) $504 billion. 
D) $3.21 trillion.

Question 6

The world's largest foreign exchange trading center is

Accepted Answer

A) New York. 
B) Tokyo. 
C) London. 
D) Hong Kong. 
A) New York. 
B) Tokyo. 
C) London. 
D) Hong Kong.

Question 7

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 8

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 9

Most foreign exchange transactions are for

Accepted Answer

A) intervention by central banks. 
B) interbank trades between international banks or nonbank dealers. 
C) retail trade. 
D) purchase of hard currencies. 
A) intervention by central banks. 
B) interbank trades between international banks or nonbank dealers. 
C) retail trade. 
D) purchase of hard currencies.

Question 10

A recent survey of U.S. foreign exchange traders measured traders perceptions about how fast news events that cause movements in exchange rates actually change the exchange rate. The survey respondents claim that the bulk of the adjustment to economic announcements regarding unemployment, trade deficits, inflation, GDP, and the Federal funds rate takes place within

Accepted Answer

A) ten seconds. 
B) one minute. 
C) five minutes. 
D) one hour. 
A) ten seconds. 
B) one minute. 
C) five minutes. 
D) one hour.

Question 11

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 12

The euro-pound cross exchange rate can be computed as:

Accepted Answer

A) S(€/£) = S($/£) × S(€/$) 
B)    
C)    
D) all of the above 
A) S(€/£) = S($/£) × S(€/$) 
B)    
C)    
D) all of the above

Question 13

The €/$ spot exchange rate is $1.50/€ and the 90-day forward premium is 10 percent. Find the 90-day forward price.

Accepted Answer

A) $1.65/€ 
B) $1.5375/€ 
C) $1.9125/€ 
D) None of the above 
A) $1.65/€ 
B) $1.5375/€ 
C) $1.9125/€ 
D) None of the above

Question 14

The $/CD spot bid-ask rates are $0.7560-$0.7625. The 3-month forward points are 12-16. Determine the $/CD 3-month forward bid-ask rates.

Accepted Answer

A) $0.7548-$0.7609 
B) $0.7572-$0.7641 
C) $0.7512-$0.7616 
D) cannot be determined with the information given 
A) $0.7548-$0.7609 
B) $0.7572-$0.7641 
C) $0.7512-$0.7616 
D) cannot be determined with the information given

Question 15

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

Accepted Answer

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

Question 16

Swap transactions

Accepted Answer

A) involve the simultaneous sale (or purchase) of spot foreign exchange against a forward purchase (or sale) of approximately an equal amount of the foreign currency. 
B) account for about half of Interbank FX trading. 
C) involve trades of one foreign currency for another without going through the U.S. dollar. 
D) all of the above 
A) involve the simultaneous sale (or purchase) of spot foreign exchange against a forward purchase (or sale) of approximately an equal amount of the foreign currency. 
B) account for about half of Interbank FX trading. 
C) involve trades of one foreign currency for another without going through the U.S. dollar. 
D) all of the above

Question 17

-Using the table, what is 3-month forward premium or discount (expressed as an annual percentage rate) for the British pound in terms of U.S. dollars?

Accepted Answer

The answer of  
-Using the table, what is 3-month...

Question 18

Consider a trader who takes a long position in a six-month forward contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00.

Accepted Answer

A) The trader has lost $625. 
B) The trader has lost $6,250. 
C) The trader has made $6,250. 
D) The trader has lost $66,287.88. 
A) The trader has lost $625. 
B) The trader has lost $6,250. 
C) The trader has made $6,250. 
D) The trader has lost $66,287.88.

Question 19

The SF/$ spot exchange rate is SF1.25/$ and the 180 day forward exchange rate is SF1.30/$. 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 20

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.

Suppose you observe the following exchange rates: €1 = $1.45; £1 = $1.90. Calculate the euro-pound exchange rate.

The Bid price

The largest and most active financial market in the world is

The €/$ spot exchange rate is $1.50/€ and the 120 day forward exchange rate is 1.45/€. The forward premium (discount) is

On average, worldwide daily trading of foreign exchange is closest to

The world's largest foreign exchange trading center is

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

Most foreign exchange transactions are for

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

The euro-pound cross exchange rate can be computed as:

The €/$ spot exchange rate is $1.50/€ and the 90-day forward premium is 10 percent. Find the 90-day forward price.

The $/CD spot bid-ask rates are $0.7560-$0.7625. The 3-month forward points are 12-16. Determine the $/CD 3-month forward bid-ask rates.

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

Swap transactions

-Using the table, what is 3-month forward premium or discount (expressed as an annual percentage rate) for the British pound in terms of U.S. dollars?

Consider a trader who takes a long position in a six-month forward contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00.

The SF/$ spot exchange rate is SF1.25/$ and the 180 day forward exchange rate is SF1.30/$. The forward premium (discount) is

At the wholesale level

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

Suppose you observe the following exchange rates: €1 = $1.45; £1 = $1.90. Calculate the euro-pound exchange rate.

The Bid price

The largest and most active financial market in the world is

The €/$ spot exchange rate is $1.50/€ and the 120 day forward exchange rate is 1.45/€. The forward premium (discount) is

On average, worldwide daily trading of foreign exchange is closest to

The world's largest foreign exchange trading center is

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

Most foreign exchange transactions are for

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

The euro-pound cross exchange rate can be computed as:

The €/$ spot exchange rate is $1.50/€ and the 90-day forward premium is 10 percent. Find the 90-day forward price.

The $/CD spot bid-ask rates are $0.7560-$0.7625. The 3-month forward points are 12-16. Determine the $/CD 3-month forward bid-ask rates.

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

Swap transactions

-Using the table, what is 3-month forward premium or discount (expressed as an annual percentage rate) for the British pound in terms of U.S. dollars?

Consider a trader who takes a long position in a six-month forward contract on the euro. The forward rate is $1.75 = €1.00; the contract size is €62,500. At the maturity of the contract the spot exchange rate is $1.65 = €1.00.

The SF/$ spot exchange rate is SF1.25/$ and the 180 day forward exchange rate is SF1.30/$. The forward premium (discount) is

At the wholesale level

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