Question 1

Mutual funds are involved in foreign exchange markets because:

Accepted Answer

A) they need to convert funds into other currencies so that they can buy investments denominated in those other currencies. 
B) foreign currencies are used by mutual funds to hedge or protect their other investments against losses. 
C) mutual fund regulations require that mutual funds diversify their investments by owning a variety of currencies. 
D) they are the largest interbanks and seek to speculate in buying and selling foreign currencies. 
A) they need to convert funds into other currencies so that they can buy investments denominated in those other currencies. 
B) foreign currencies are used by mutual funds to hedge or protect their other investments against losses. 
C) mutual fund regulations require that mutual funds diversify their investments by owning a variety of currencies. 
D) they are the largest interbanks and seek to speculate in buying and selling foreign currencies.

Question 2

__________________________ are markets where medium term and long term international debt instruments are issued and traded.

Accepted Answer

A) International debt markets 
B) Global exchange markets 
C) MNC debt markets 
D) Foreign debt markets 
A) International debt markets 
B) Global exchange markets 
C) MNC debt markets 
D) Foreign debt markets

Question 3

Eurocurrency markets developed in the 1950's primarily because:

Accepted Answer

A) the US limited foreign investments that could be made by US-based corporations. 
B) banks in Europe joined together to compete with US banks for foreign deposits. 
C) the US encouraged MNCs to invest in foreign assets. 
D) regulations in the US limited interest rates that US banks could pay on deposits. 
A) the US limited foreign investments that could be made by US-based corporations. 
B) banks in Europe joined together to compete with US banks for foreign deposits. 
C) the US encouraged MNCs to invest in foreign assets. 
D) regulations in the US limited interest rates that US banks could pay on deposits.

Question 4

If a currency quote is given in EUR to USD and USD to JPY,and those quotes can be used to determine EUR to JPY,the quotes are known as:

Accepted Answer

A) parallel rates. 
B) complex rates. 
C) cumulative rates. 
D) cross rates. 
A) parallel rates. 
B) complex rates. 
C) cumulative rates. 
D) cross rates.

Question 5

A direct quote given in the United States as "USD 0.0109053 per JPY" means:

Accepted Answer

A) 1 JPY is worth .0109053 USD. 
B) 1 USD is worth .0109053 JPY. 
C) the value of JPY relative to USD is increasing. 
D) the value of USD relative to JPY is increasing. 
A) 1 JPY is worth .0109053 USD. 
B) 1 USD is worth .0109053 JPY. 
C) the value of JPY relative to USD is increasing. 
D) the value of USD relative to JPY is increasing.

Question 6

In foreign exchange markets,_________________ do not assume responsibilities for making a market in a foreign currency and buy and sell a foreign currency only when they think it will be profitable for them.

Accepted Answer

A) market makers 
B) dealers 
C) brokers 
D) regulators 
A) market makers 
B) dealers 
C) brokers 
D) regulators

Question 7

In a currency quote,the first three letters identify the __________________ and the last three letters identify the _____________________.

Accepted Answer

A) domestic currency;term currency 
B) base currency;term currency 
C) foreign currency;base currency 
D) domestic currency;foreign currency 
A) domestic currency;term currency 
B) base currency;term currency 
C) foreign currency;base currency 
D) domestic currency;foreign currency

Question 8

An indirect quote expresses the value of the domestic currency in terms of the:

Accepted Answer

A) the average exchange rate between two currencies over the last week. 
B) domestic currency. 
C) foreign currency. 
D) a market basket of foreign currencies. 
A) the average exchange rate between two currencies over the last week. 
B) domestic currency. 
C) foreign currency. 
D) a market basket of foreign currencies.

Question 9

The leading indicator for the Eurocurrency markets is the London Inter Bank Offered Rate (LIBOR),which:

Accepted Answer

A) is the prime rate that is then charged in the European Community. 
B) is the average rate charged on loans by the central banks in all European nations. 
C) reflects the rate at which Eurobanks are willing to loan money to other institutions. 
D) indicate the liquidity that is currently found in the foreign exchange market. 
A) is the prime rate that is then charged in the European Community. 
B) is the average rate charged on loans by the central banks in all European nations. 
C) reflects the rate at which Eurobanks are willing to loan money to other institutions. 
D) indicate the liquidity that is currently found in the foreign exchange market.

Question 10

____________________ seek to exploit discrepancies in currency values in different markets by buying currencies at one value in one market and then selling them quickly at a higher value in another market.

Accepted Answer

A) Interbanks 
B) MNCs 
C) Governments 
D) Hedge funds 
A) Interbanks 
B) MNCs 
C) Governments 
D) Hedge funds

Question 11

The bid-ask spread is computed using the following formula:

Accepted Answer

A) (Ask price - Bid price)/Bid price. 
B) (Bid price - Ask price)/Bid price. 
C) (Bid price - Ask price)/Ask price. 
D) (Ask price - Bid price)/Ask price. 
A) (Ask price - Bid price)/Bid price. 
B) (Bid price - Ask price)/Bid price. 
C) (Bid price - Ask price)/Ask price. 
D) (Ask price - Bid price)/Ask price.

Question 12

Foreign exchange markets work most efficiently when:

Accepted Answer

A) they are closely regulated so that speculation is limited. 
B) MNCs have difficulty borrowing money domestically. 
C) there are market makers who are willing to buy or sell currencies and,therefore,provide liquidity in the market. 
D) when the volume of international transactions is high and the demand for foreign currency is increasing. 
A) they are closely regulated so that speculation is limited. 
B) MNCs have difficulty borrowing money domestically. 
C) there are market makers who are willing to buy or sell currencies and,therefore,provide liquidity in the market. 
D) when the volume of international transactions is high and the demand for foreign currency is increasing.

Question 13

Eurobonds are bonds that are:

Accepted Answer

A) the same as foreign bonds. 
B) issued in European countries. 
C) issued in a country but are denominated in a currency other than the currency of the country where they are issued. 
D) issued in a European currency. 
A) the same as foreign bonds. 
B) issued in European countries. 
C) issued in a country but are denominated in a currency other than the currency of the country where they are issued. 
D) issued in a European currency.

Question 14

The currency quote "JPYUSD = 0.0109053" means:

Accepted Answer

A) 0.0109053 USD can be used to buy 1 JPY. 
B) 0.0109053 JPY can be used to buy 1 USD. 
C) 0.0109053 JPY can be used to buy 1 of any currency traded in the foreign exchange market where the quote is given. 
D) 0.0109053 USD can be used to buy 1 of any currency traded in the foreign exchange market where the quote is given. 
A) 0.0109053 USD can be used to buy 1 JPY. 
B) 0.0109053 JPY can be used to buy 1 USD. 
C) 0.0109053 JPY can be used to buy 1 of any currency traded in the foreign exchange market where the quote is given. 
D) 0.0109053 USD can be used to buy 1 of any currency traded in the foreign exchange market where the quote is given.

Question 15

The London Inter Bank Offered Rate (LIBOR):

Accepted Answer

A) is the interest rate set by the central bank in Great Britain. 
B) reflects a set of interest rates based on a variety of currencies and maturities at which Eurobanks are willing to lend to each other. 
C) the interest rate set by the European Investment Bank. 
D) reflects an average of the prime interests rates prevailing in a variety of developed nations. 
A) is the interest rate set by the central bank in Great Britain. 
B) reflects a set of interest rates based on a variety of currencies and maturities at which Eurobanks are willing to lend to each other. 
C) the interest rate set by the European Investment Bank. 
D) reflects an average of the prime interests rates prevailing in a variety of developed nations.

Question 16

The volume of transactions in foreign exchange markets is ________________ due in part to ___________________________

Accepted Answer

A) increasing gradually;reduced risks in the foreign exchange markets. 
B) holding steady;new regulations that make the transactions more difficult. 
C) decreasing;the development of new financing instruments that do not depend on foreign exchange. 
D) increasing rapidly;the participation of non-bank institutions in the foreign exchange markets. 
A) increasing gradually;reduced risks in the foreign exchange markets. 
B) holding steady;new regulations that make the transactions more difficult. 
C) decreasing;the development of new financing instruments that do not depend on foreign exchange. 
D) increasing rapidly;the participation of non-bank institutions in the foreign exchange markets.

Question 17

________________ in foreign exchange markets do not carry inventories of foreign currencies,but,instead,match buyers and sellers of foreign currencies and earn commissions when they arrange a transaction.

Accepted Answer

A) Brokers 
B) Dealers 
C) Market makers 
D) Investors 
A) Brokers 
B) Dealers 
C) Market makers 
D) Investors

Question 18

When lending or borrowing occurs in a currency that is not the domestic currency of the country where the transaction takes place,the transaction is said to have taken place in the:

Accepted Answer

A) eurocurrency market. 
B) foreign market. 
C) domestic market. 
D) foreign exchange market. 
A) eurocurrency market. 
B) foreign market. 
C) domestic market. 
D) foreign exchange market.

Question 19

Every currency quote contains two components:

Accepted Answer

A) the price and the time during which that price is valid. 
B) the price and the maximum value that will be available at that price. 
C) the currency pair and the time during which the quoted price will be valid. 
D) the currency pair and the numerical quote. 
A) the price and the time during which that price is valid. 
B) the price and the maximum value that will be available at that price. 
C) the currency pair and the time during which the quoted price will be valid. 
D) the currency pair and the numerical quote.

Question 20

Governments are involved in the foreign currency markets for two primary reasons:

Accepted Answer

A) because foreign currency can be used as a store of value and to manipulate the value of their own currency. 
B) to protect against inflation and to control domestic interest rates. 
C) so that they can take advantage of discrepancies in currency values in different markets and to protect the value of their currency. 
D) to monitor the value of their currency and to control their balance of trade. 
A) because foreign currency can be used as a store of value and to manipulate the value of their own currency. 
B) to protect against inflation and to control domestic interest rates. 
C) so that they can take advantage of discrepancies in currency values in different markets and to protect the value of their currency. 
D) to monitor the value of their currency and to control their balance of trade.

Mutual funds are involved in foreign exchange markets because:

__________________________ are markets where medium term and long term international debt instruments are issued and traded.

Eurocurrency markets developed in the 1950's primarily because:

If a currency quote is given in EUR to USD and USD to JPY,and those quotes can be used to determine EUR to JPY,the quotes are known as:

A direct quote given in the United States as "USD 0.0109053 per JPY" means:

In foreign exchange markets,_________________ do not assume responsibilities for making a market in a foreign currency and buy and sell a foreign currency only when they think it will be profitable for them.

In a currency quote,the first three letters identify the and the last three letters identify the ___.

An indirect quote expresses the value of the domestic currency in terms of the:

The leading indicator for the Eurocurrency markets is the London Inter Bank Offered Rate (LIBOR),which:

____________________ seek to exploit discrepancies in currency values in different markets by buying currencies at one value in one market and then selling them quickly at a higher value in another market.

The bid-ask spread is computed using the following formula:

Foreign exchange markets work most efficiently when:

Eurobonds are bonds that are:

The currency quote "JPYUSD = 0.0109053" means:

The London Inter Bank Offered Rate (LIBOR):

The volume of transactions in foreign exchange markets is due in part to ___________

________________ in foreign exchange markets do not carry inventories of foreign currencies,but,instead,match buyers and sellers of foreign currencies and earn commissions when they arrange a transaction.

When lending or borrowing occurs in a currency that is not the domestic currency of the country where the transaction takes place,the transaction is said to have taken place in the:

Every currency quote contains two components:

Governments are involved in the foreign currency markets for two primary reasons:

Introduction

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

Exam 2: International Financial Markets: Structure and Innovation

Mutual funds are involved in foreign exchange markets because:

__________________________ are markets where medium term and long term international debt instruments are issued and traded.

Eurocurrency markets developed in the 1950's primarily because:

If a currency quote is given in EUR to USD and USD to JPY,and those quotes can be used to determine EUR to JPY,the quotes are known as:

A direct quote given in the United States as "USD 0.0109053 per JPY" means:

In foreign exchange markets,_________________ do not assume responsibilities for making a market in a foreign currency and buy and sell a foreign currency only when they think it will be profitable for them.

In a currency quote,the first three letters identify the __________________ and the last three letters identify the _____________________.

An indirect quote expresses the value of the domestic currency in terms of the:

The leading indicator for the Eurocurrency markets is the London Inter Bank Offered Rate (LIBOR),which:

____________________ seek to exploit discrepancies in currency values in different markets by buying currencies at one value in one market and then selling them quickly at a higher value in another market.

The bid-ask spread is computed using the following formula:

Foreign exchange markets work most efficiently when:

Eurobonds are bonds that are:

The currency quote "JPYUSD = 0.0109053" means:

The London Inter Bank Offered Rate (LIBOR):

The volume of transactions in foreign exchange markets is ________________ due in part to ___________________________

________________ in foreign exchange markets do not carry inventories of foreign currencies,but,instead,match buyers and sellers of foreign currencies and earn commissions when they arrange a transaction.

When lending or borrowing occurs in a currency that is not the domestic currency of the country where the transaction takes place,the transaction is said to have taken place in the:

Every currency quote contains two components:

Governments are involved in the foreign currency markets for two primary reasons:

Introduction

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

In a currency quote,the first three letters identify the and the last three letters identify the ___.

The volume of transactions in foreign exchange markets is due in part to ___________