Question 1

If the $/€ bid and ask prices are $1.50/€ and $1.51/€, respectively, the corresponding €/$ bid and ask prices are

Accepted Answer

A) €0.6667 and €0.6623. 
B) $1.51 and $1.50. 
C) €0.6623 and €0.6667. 
D) cannot be determined with the information given. 
A) €0.6667 and €0.6623. 
B) $1.51 and $1.50. 
C) €0.6623 and €0.6667. 
D) cannot be determined with the information given.

Question 2

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 3

What is the BID cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy 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 4

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.

Question 5

Suppose a bank customer wishes to trade out of British pounds and into Swiss francs.

Accepted Answer

A) In dealer jargon, this is a currency against currency trade. 
B) The bank will frequently handle such a trade by selling British pounds for U.S. dollars and then buying Swiss francs with U.S. dollars. 
C) The bank would typically sell the British pounds directly for Swiss francs. 
D) Both a and b 
A) In dealer jargon, this is a currency against currency trade. 
B) The bank will frequently handle such a trade by selling British pounds for U.S. dollars and then buying Swiss francs with U.S. dollars. 
C) The bank would typically sell the British pounds directly for Swiss francs. 
D) Both a and b

Question 6

Which of the following are correct?

Accepted Answer

A)    
B)    
C)    
D) All of the above are correct 
A)    
B)    
C)    
D) All of the above are correct

Question 7

As a rule, when the interest rate of the foreign currency is greater than the interest rate of the quoting currency,

Accepted Answer

A) the outright forward rate is less than the spot exchange rate. 
B) the outright forward rate is more than the spot exchange rate. 
C) the currency will trade at a premium in the forward contract. 
D) none of the above 
A) the outright forward rate is less than the spot exchange rate. 
B) the outright forward rate is more than the spot exchange rate. 
C) the currency will trade at a premium in the forward contract. 
D) none of the above

Question 8

Consider the following spot and forward rate quotations for the Swiss franc:   Calculate the 3-month forward premium in American terms. Assume 30-360 pricing convention.

Accepted Answer

A) 0.353. 
B) 0.4235. 
C) 0.1364. 
D) 0.1412. 
A) 0.353. 
B) 0.4235. 
C) 0.1364. 
D) 0.1412.

Question 9

Which of the following are correct?

Accepted Answer

A)    
B)    
C)    
D) All of the above are correct 
A)    
B)    
C)    
D) All of the above are correct

Question 10

Restate the following one-, three-, and six-month outright forward American term bid-ask quotes in forward points:

Accepted Answer

A)    
B)    
C)    
D) None of the above 
A)    
B)    
C)    
D) None of the above

Question 11

Bank dealers in conversations among themselves use a shorthand notation to quote bid and ask forward prices in terms of forward points. This is convenient because

Accepted Answer

A) forward points may change faster than spot and forward quotes. 
B) forward points may remain constant for long periods of time, even if the spot rates change frequently. 
C) traders who are looking for violations of covered interest arbitrage are less interested in the actual spot and forward exchange rates, but are interested in the premium or discount differential measured in forward points. 
D) both c and d are correct 
A) forward points may change faster than spot and forward quotes. 
B) forward points may remain constant for long periods of time, even if the spot rates change frequently. 
C) traders who are looking for violations of covered interest arbitrage are less interested in the actual spot and forward exchange rates, but are interested in the premium or discount differential measured in forward points. 
D) both c and d are correct

Question 12

In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/£ bid-ask quote of $1.9072-$1.9077. The "big figure", assumed to be known to all traders is _____.

Accepted Answer

A) 1.9077 
B) 1 
C) 1.90 
D) 77 
A) 1.9077 
B) 1 
C) 1.90 
D) 77

Question 13

Which of the following are correct?

Accepted Answer

A)    
B)    
C)    
D) All of the above are correct 
A)    
B)    
C)    
D) All of the above are correct

Question 14

Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120.

Accepted Answer

A) ¥192/€1.00 
B) €1.92/¥100 
C) €1.25/¥1.00 
D) €1.00/¥1.92 
A) ¥192/€1.00 
B) €1.92/¥100 
C) €1.25/¥1.00 
D) €1.00/¥1.92

Question 15

-Using the table, what is the Canadian dollar-euro spot cross-exchange rate?

Accepted Answer

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

Question 16

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 17

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 level. 
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 level. 
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 18

The difference between a broker and a dealer is

Accepted Answer

A) dealers sell drugs; brokers sell houses. 
B) brokers bring together buyers and sellers, but carry no inventory; dealers stand ready to buy and sell from their inventory. 
C) brokers transact in stocks and bonds; currency is bought and sold through dealers. 
D) none of the above 
A) dealers sell drugs; brokers sell houses. 
B) brokers bring together buyers and sellers, but carry no inventory; dealers stand ready to buy and sell from their inventory. 
C) brokers transact in stocks and bonds; currency is bought and sold through dealers. 
D) none of the above

Question 19

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

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 20

For a U.S. trader working in American quotes, if the forward price is higher than the spot price

Accepted Answer

A) the currency is trading at a premium in the forward market. 
B) the currency is trading at a discount in the forward market. 
C) then you should buy at the spot, hold on to it and sell at the forward-it's a built-in arbitrage. 
D) all of the above-it really depends if you're talking American or European quotes. 
A) the currency is trading at a premium in the forward market. 
B) the currency is trading at a discount in the forward market. 
C) then you should buy at the spot, hold on to it and sell at the forward-it's a built-in arbitrage. 
D) all of the above-it really depends if you're talking American or European quotes.

Exam 5: The Market for Foreign Exchange

If the $/€ bid and ask prices are $1.50/€ and $1.51/€, respectively, the corresponding €/$ bid and ask prices are

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

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

The spot market

Suppose a bank customer wishes to trade out of British pounds and into Swiss francs.

Which of the following are correct?

As a rule, when the interest rate of the foreign currency is greater than the interest rate of the quoting currency,

Consider the following spot and forward rate quotations for the Swiss franc: Calculate the 3-month forward premium in American terms. Assume 30-360 pricing convention.

Which of the following are correct?

Restate the following one-, three-, and six-month outright forward American term bid-ask quotes in forward points:

Bank dealers in conversations among themselves use a shorthand notation to quote bid and ask forward prices in terms of forward points. This is convenient because

In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/£ bid-ask quote of $1.9072-$1.9077. The "big figure", assumed to be known to all traders is _____.

Which of the following are correct?

Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120.

-Using the table, what is the Canadian dollar-euro spot cross-exchange rate?

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.

Intervention in the foreign exchange market is the process of

The difference between a broker and a dealer is

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

For a U.S. trader working in American quotes, if the forward price is higher than the spot price

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

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