CHAPTER 7

The Foreign Exchange Market

EASY (definitional)

7. one particular Exports of goods and solutions by the United states of america by 08 total a lot more than _________ of gross domestic product. a) 10%

b) 20%

c) 50%

d) 75%

Ans: a

Section: Introduction

Level: Easy

several. 2 Many currency ventures are channeled through the around the world ________ marketplace which accounts for _______ of foreign exchange ventures. a) inventory, 50%

b) interbank, 50 percent

c) interbank, 95%

d) internet, 30%

Ans: c

Section: Corporation of the foreign currency market

Level: Easy

six. 3 The overwhelming most foreign exchange ventures involve a) multinational businesses buying and selling forex b) importers and exporters buying and selling foreign exchange c) financial institutions buying and selling forex trading

d) government authorities buying and selling foreign exchange

Ans: c

Section: The participants

Level: Easy

six. 4 The world's greatest currency trading market is

a) Nyc

b) Frankfurt

c) Tokyo

d) Birmingham

Ans: g

Section: Size

Level: Easy

7. 5 American terms refers to the

a) number of U. S i9000. dollars every unit of foreign currency

b) number of foreign‑currency units per U. T. dollar

c) quotation system found in the usa

d) bid‑ask spread on the U. S. dollar

Ans: a

Section: Location quotations

Level: Easy

7. 6 Trading on the foreign currency market is

a) located in a physical headquarters working in london

b) happens within an arranged exchange

c) conducted by licensed agents from the Birmingham stock exchange d) an digitally linked network of financial institutions, brokers, and dealers

Ans: d

Section: Organization

Level: Easy

several. 7 Dealers on the forex market employ ___________ to get rid of or cover the risk of reduction on foreign trade or transfer orders denominated in foreign currencies. a) forex options

b) forward agreements

c) money-market hedges

d) currency options contracts contracts

Ans: b

Section: The members

Level: Convenient

7. eight Hedgers, generally _____________, participate in forward agreements on the forex markets to safeguard the home forex value of numerous foreign currency-denominated assets and liabilities issues balance bedding. a) industrial banks

b) public resources

c) multinational corporations

d) speculators

Ans: c

Section: The individuals

Level: Convenient

7. being unfaithful A ___________ between a bank and a customer requires a fixed delivery date, for a fixed exchange rate for the specified amount of one currency against another currency repayment. a) place quotation

b) currency choice

c) currency swap

d) forward agreement

Ans: m

Section: The forward industry

Level: Convenient

7. 10 The risk which a central bank will not make the necessary copy of money to complete a currency pay out is known as ________ risk. a) exchange charge

b) Herstatt

c) Interest-rate

d) settlement

Ans: b

Section: The mechanics of spot transactions

Level: Easy

METHOD (applied)

several. 11 The spot and 30‑day forward prices for the Dutch european are $1. 4757 and $1. twenty four, respectively. The guilder has to be selling in a forwards a) premium of 1. 2%

b) premium of 3. 5%

c) low cost of 3. five per cent

d) price cut of 1. 2%

Ans: n

Section: Ahead quotations

Level: Medium

7. 12 Imagine the spot immediate quotes for the pound sterling and euro will be $1. 3981‑89 and $. 1230‑33, respectively. What is the direct quotation for the pound in Paris? a) €1. 1339-73/£

b) €. 8793-. 8819/£

c) £. 0808‑12/€

d) £. 0976‑87/€

Ans: a

Section: Location quotations

Level: Medium

several. 13 Assume it is 95 and the following direct quotations are received for area and one‑ month France francs in New York:. 1160‑684‑6. Then the overall 30‑ time forward estimate for the French franc was: a). 1156‑62

b). 1164‑74

c). 1166‑72

d). 1154‑64

Ans: n

Section: Forward quotations

Level: Medium

six. 14 Assume it is 1990 and the place direct estimates...