Exam 8: Global Foreign-Exchange Markets

What are the characteristics of the forward market? Why do companies participate in the forward market? Provide an example to illustrate your answer.

Commercial banks look at foreign-exchange trading as a service extended primarily to important customers,not as a major business activity of its own.

An investor sells Japanese yen which is yielding a low interest rate and uses the proceeds to buy Swiss francs that yield a higher interest rate.Which term best describes the investor's actions?

As a trading currency,the euro is ________.

Stella,who works and lives in San Diego,wants to send money to her mother who lives in a small village south of Puerto Vallarta,Mexico.Stella typically uses Western Union to handle the transaction.Which of the following is the most likely reason that Stella uses Western Union?

An irrevocable letter of credit ________.

If the forward rate for a foreign currency is less than the spot rate,the foreign currency is selling at a forward premium.

Companies use the foreign-exchange market to convert money for use in financial transactions.

What is remittance income? What institutions in Mexico can handle remittance accounts? Why are some institutions used more frequently than others?

Compared with a forward contract,a futures contract ________.

Melissa,a foreign-exchange trader,wants to buy euros from Stephanie.Which of the following is the price at which Melissa is willing to buy euros?

Which of the following is NOT one of the top exchanges that trade in foreign currency futures and options?

The top location for trading foreign exchange is ________.

The U.S.dollar is important as a vehicle for foreign-exchange transactions between two countries other than the United States.

A letter of credit that provides an exporter with the guarantee of another bank in addition to the importer's bank is called ________.

If a foreign currency is quoted in American terms (the direct quote)and the forward rate is greater than the spot rate,the foreign currency is selling at a ________.

An offer is the right but not the obligation to buy or sell foreign currency.

A major challenge faced by Western Union in transferring money between the United States and Mexico is that Mexican citizens trust the banks but do not trust Western Union due to its reliance on global banks.

Which of the following is most likely true regarding options?

The largest market in foreign exchange is in London.