Test your basic knowledge |

Foreign Exchange Essentials

Subjects : business-skills, industries

Instructions:

Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can study here.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.

1. GBP-USD account for ____ of trading FX volume
12%
financial strength
90%
Used to hedge against variability in expected future cash flows

2. If 1 case = 30 USD and 1 pizza = 15 USD - then What is 1 case = ?
The calculation is the same - but instead of adding forward points you subtract
What is happening
1 Case = 2 pizzas
FX policy

3. Treasury's role is to identify risk - control to prevent erosion of...
21%
foreign exchange forward contract
financial strength
currency options and forward

4. What rate is used to book daily transactions?
1.60 - Because you can buy more dollars
Mitigates risks by using hedging techniques
Currency of the respective operating unit's country
Treasury Daily Spot Rate

5. ____________ booked a hedge rate is trued up to the EHR each month during the quarter
largest - It is open 24 hours a day - except weekends
an estimate of aggregate rate
P&L activity
1 share = 1/3 case

6. One of the objectives of the hedge rate is to __________ that is used for pricing - planning - and accounting thus maximizing the efficiency of our hedge program
exchange one currency for another
downward slope
allow FX rate
three digit ticker symbol ex: USD - United States Dollar

7. Hedge rate is constant throughout quarter while _______________ changes throughout quarter
direct
Used to hedge against variability in expected future cash flows
FX policy
Effective Hedge rate

8. How is the price of the forward contract determined?
Current market price - spot - plus or minus the difference between the interest rates of the two countries
exchange one currency for another
What is happening
APL rate

9. The timing of when we execute hedges drastically impacts the ____________ we achieve
China - Malaysia - Colombia - Chile - Argentina
average rate
21%
Accounts that revalue every month to the balance sheet rate. (cash - A/are)

10. What is the purpose of hedging?
three digit ticker symbol ex: USD - United States Dollar
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
Forward Points
Oracle

11. How is the hedge rate variance calculated?
The difference between hedge rate and final effective hedge rate
Spot price
is getting bigger
F&O account 87503

12. In general EUR-USD is involved in roughly ___ of all FX volume
interest rate differential
adverse fluctuations
90%
directly or indirectly

13. What is local currency?

14. Forward points multiply the exchange rate by the...
adverse fluctuations
interest rate differential
The average P&L rate (APL) which is the weighted average of Treasury Daily Spot rates for the month
exchange one currency for another

15. In a stock-USD relationship - when arrow is going down means that stock is becoming ____ valuable against dollar
FX policy
Accounts that are carried at historical rates at which they were booked (fixed assets - inventory)
BRL
less

16. What currencies use Direct method of quoting?
British Pound - Australian Dollar - New Zealand Dollar - Euro
is getting bigger
1.40 - Because I would be able to buy more euros
interest rate differential

17. What is the trading in volume for FX?
The currency of the primary economic environment in which the legal entity operates
3 -210 billion (3 trillion)
CNY
financial strategy and financial policy

18. If you execute an FX trade to _______________ using the current market price - the trade will typically settle in two business days
exchange one currency for another
largest - It is open 24 hours a day - except weekends
currency options and forward
End of Period Rate (SCO-4 rate)

19. How do you read EUR-USD = 1.40
This means 1 Euro measured against US Dollars is worth $1.40
300 billion
There are FOUR
90%

20. What does it mean to hedge?
directly or indirectly
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
downward slope
5%

21. The Foreign Exchange market is the __________ market in the world
liquidity and cash
largest - It is open 24 hours a day - except weekends
Oracle
1 share = 1/3 case

22. What is cash flow used for?
1.60 - Because you can buy more dollars
interest rate differential
Mitigates risks by using hedging techniques
Used to hedge against variability in expected future cash flows

23. A Spot happens in...
The currency of the primary economic environment in which the legal entity operates
two business days
Currency in which the entity reports results externally
translation

24. In a GBP-USD relationship - if pound is strengthening it means that you can get _____ US Dollars for one pound
less
90%
more
1.60 - Because you can buy more dollars

25. What dictates minimum and maximum hedge percentages?
spot price x interest differential
Accounts that are carried at historical rates at which they were booked (fixed assets - inventory)
FX policy
interest rate differential

26. All other currency trading with USD accounts for ____ of FX volume
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
1USD
21%
foreign currency* rate

27. The difference in interest rate is referred to as...
valuable
The average P&L rate (APL) which is the weighted average of Treasury Daily Spot rates for the month
Forward Points
21%

28. The rules for adding or subtracting forward points depend on whether it is quoted...
spot price x interest differential
Spot price
P&L activity
directly or indirectly

29. Whether the quote was indirect or direct - they are all stored as ______ in Oracle
Current market price - spot - plus or minus the difference between the interest rates of the two countries
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
direct
5%

30. USD-JPY account for ____ of trading FX volume
China - Malaysia - Colombia - Chile - Argentina
F&O account 87503
13%
90%

31. US Treasuries is the second highest trading volume accounting for...
300 billion
downward slope
three digit ticker symbol ex: USD - United States Dollar
1 unit

32. What rate is used on the balance sheet?
Process to revalue the monetary BS accounts from: entered rate to B/S rate - prior month's B/S rate to current month's BS rates
6 weeks prior to Q/E
12%
End of Period Rate (SCO-4 rate)

33. ____________ should be denominated in the currency they will either be paid or received in...
fx forward
The difference between hedge rate and final effective hedge rate
allow FX rate
BS account balances

34. A ____________________ is an exchange of two currencies at a fixed rate for any date other than spot delivery
What is happening
interest rate differential
FX policy
foreign exchange forward contract

35. In a EUR-USD relationship - when arrow is going up means Euro is strengthening and Dollar...
1.40 - Because I would be able to buy more euros
weakens
value
valuable

36. Treasury ensures that companies have ____________ to meet its obligations
1 share = 1/3 case
Forward Points
liquidity and cash
Process to revalue the monetary BS accounts from: entered rate to B/S rate - prior month's B/S rate to current month's BS rates

37. The currency ticker for the Sweden Kroner is?
SEK
B/S rate
average rate
financial strength

38. Where are revaluations done?
strengthens
exchange rate
Oracle
Effective Hedge rate

39. Effective Hedge Rate is ________________ of all outstanding FX contracts for the quarter being hedged
weakens
There are FOUR
SEK
actual weighted average contract rate

40. EUR-USD currency pair accounts for about ____ of all FX volume
lost
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
F&O account 87503
30%

41. If you are an European planning a trip to America - which rate do you want? 1.40 or 1.60?
translation
lost
Mitigates risks by using hedging techniques
1.60 - Because you can buy more dollars

42. Forward points is equal to...
F&O account 87503
There are FOUR
spot price x interest differential
more

43. The offset of revaluation is recorded to...
15 months in advance - layering on hedges through time
F&O account 87503
AUD
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.

44. What is Fair Value hedge program used for?
interest rate differential
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
The difference between hedge rate and final effective hedge rate
value

45. The ticker symbol for the Chinese Yuan
CNY
functional currency
lost
strengthens

46. The current market price for any currency pair is referred to as ?
is getting bigger
Oracle
Spot price
Mitigates risks by using hedging techniques

47. When looking at a currency chart - you need to know if the currency is quoted Directly or Indirectly to be able to describe...
What is happening
BRL
financial strength
foreign currency* rate

48. Hedge Rate is _______________ that will be achieved on a specific quarter's cash flow
an estimate of aggregate rate
1 share = 1/3 case
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
two business days

49. What are the exceptions to the ticker naming convention?
5%
MXN - EUR - CHF
Effective Hedge rate
interest rate differential

50. ____________ - foreign currency/rate = USD
Oracle
Indirect quote
functional currency
3 -210 billion (3 trillion)