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. In a downward slope that represents USD-JPY relationship a _____________ means that if you bough Japanese Yen at point A you made money at point B
an estimate of aggregate rate
directly or indirectly
spot price x interest differential
downward slope

2. What is currency Translation?

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3. All other currency trading with USD accounts for ____ of FX volume
valuable
The difference between hedge rate and final effective hedge rate
21%
MXN - EUR - CHF

4. A forward happens in...
average rate
Forward Points
3 business days and beyond
1 Case = 2 pizzas

5. If 1 pizza = 15 USD then ____ = 1/15 pizza
Currency in which the entity reports results externally
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging
1USD
Oracle

6. In general EUR-USD is involved in roughly ___ of all FX volume
an estimate of aggregate rate
90%
3 -210 billion (3 trillion)
British Pound - Australian Dollar - New Zealand Dollar - Euro

7. In a EUR-USD relationship - when arrow is going up means Euro is strengthening and Dollar...
Government regulation and cost of hedging
weakens
F&O account 87503
direct

8. What are non-monetary accounts?
is getting bigger
Mitigates risks by using hedging techniques
300 billion
Accounts that are carried at historical rates at which they were booked (fixed assets - inventory)

9. What rate is used to book daily transactions?
foreign exchange forward contract
currency options and forward
Treasury Daily Spot Rate
Current market price - spot - plus or minus the difference between the interest rates of the two countries

10. How is the hedge rate variance calculated?
is getting bigger
The difference between hedge rate and final effective hedge rate
actual weighted average contract rate
3 business days and beyond

11. US Treasuries is the second highest trading volume accounting for...
AUD
foreign exchange forward contract
Oracle
300 billion

12. What are some of the reason not hedge at all or partially hedge in a few countries?
F&O account 87503
90%
two business days
Government regulation and cost of hedging

13. The rules for adding or subtracting forward points depend on whether it is quoted...
adverse fluctuations
Current market price - spot - plus or minus the difference between the interest rates of the two countries
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
directly or indirectly

14. In a stock-USD relationship - when arrow is going down means that stock is becoming ____ valuable against dollar
Oracle
three digit ticker symbol ex: USD - United States Dollar
fx forward
less

15. EUR-USD currency pair accounts for about ____ of all FX volume
30%
Accounts that are carried at historical rates at which they were booked (fixed assets - inventory)
6 weeks prior to Q/E
largest - It is open 24 hours a day - except weekends

16. In a GBP-USD relationship - if pound is strengthening it means that you can get _____ US Dollars for one pound
The currency of the primary economic environment in which the legal entity operates
SFAS 52
more
weakens

17. A downward slope that represents AUD-USD relationship means that if you bought Australian dollars at point A - you have _____ money at point B
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
more
1 unit
lost

18. Direct quote- _____________=USD
exchange one currency for another
two business days
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
foreign currency* rate

19. GBP-USD account for ____ of trading FX volume
Treasury Daily Spot Rate
300 billion
12%
exchange rate

20. Treasury ensures that companies have ____________ to meet its obligations
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
5%
CNY
liquidity and cash

21. In a USD-JPY relationship - when the line in a graph is upward slope it means the yen is weakening and dollar is strenghtening because exchange rate...
is getting bigger
China - Malaysia - Colombia - Chile - Argentina
End of Period Rate (SCO-4 rate)
1 unit

22. In a GBP-USD relationship - when the line in a graph is upward slope it means the __________ overtime because the exchange rate is getting bigger
Pound strengthens
allow FX rate
weakens
Currency of the respective operating unit's country

23. __________ is used for translation of foreign currency B/S to reporting currency
allow FX rate
Spot price
B/S rate
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging

24. The currency ticker for the Sweden Kroner is?
Treasury Daily Spot Rate
direct
SEK
Oracle

25. Give some examples of countries where its hard to hedge?
Used to hedge against variability in expected future cash flows
two business days
Current market price - spot - plus or minus the difference between the interest rates of the two countries
China - Malaysia - Colombia - Chile - Argentina

26. What is Fair Value hedge program used for?
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
liquidity and cash
allow FX rate
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities

27. The current market price for any currency pair is referred to as ?
more
90%
Spot price
Mitigates risks by using hedging techniques

28. Where are revaluations done?
Oracle
12%
lost
21%

29. We do not speculate on Foreign Exchange - 10-K says it is to reduce the impact of...
Buy a stock in an Oil Company. Stock price increases when oil goes up and offset for your expenses in filling up tank
30%
adverse fluctuations
21%

30. Revaluation can be hedged - while ___________ cannot be hedged
exchange one currency for another
3 business days and beyond
1 share = 1/3 case
translation

31. What does it mean to hedge?
The difference between hedge rate and final effective hedge rate
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
liquidity and cash
This means 1 Euro measured against US Dollars is worth $1.40

32. If 1 case = 30 USD and 1 pizza = 15 USD - then What is 1 case = ?
Pound strengthens
1 Case = 2 pizzas
Process to convert an entity's BS & P&L from the functional currency to the reporting currency - BS is translated at BS rate - P&L is translated at APL rate
SFAS 52

33. ____________ is used for translation of foreign currency P&L to Reporting currency?
1 Case = 2 pizzas
British Pound - Australian Dollar - New Zealand Dollar - Euro
3 business days and beyond
APL rate

34. With direct quoting _______ of the first item is quoted for a specific price in terms of the second item.
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
30%
British Pound - Australian Dollar - New Zealand Dollar - Euro
1 unit

35. An ___________ expresses the value of one currency relative to another
an estimate of aggregate rate
1USD
15 months in advance - layering on hedges through time
exchange rate

36. How far in advance do we hedge?
15 months in advance - layering on hedges through time
1 Case = 2 pizzas
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
Spot price

37. What is the trading in volume for FX?
FX policy
3 -210 billion (3 trillion)
1USD
lost

38. In a stock-USD relationship - when arrow is going up means that stock is becoming more ______ against dollar
1USD
an estimate of aggregate rate
valuable
End of Period Rate (SCO-4 rate)

39. What rate is used on the P&L?
Process to convert an entity's BS & P&L from the functional currency to the reporting currency - BS is translated at BS rate - P&L is translated at APL rate
The average P&L rate (APL) which is the weighted average of Treasury Daily Spot rates for the month
Current market price - spot - plus or minus the difference between the interest rates of the two countries
exchange one currency for another

40. Hedging instrument used in cash flow program is...
currency options and forward
foreign exchange forward contract
Treasury Daily Spot Rate
This means 1 Euro measured against US Dollars is worth $1.40

41. If 1 Share = 10 USD and 1 CASE = 30 USD - then 1 share =?
3 -210 billion (3 trillion)
Pound strengthens
1 share = 1/3 case
financial strength

42. Whether the quote was indirect or direct - they are all stored as ______ in Oracle
an estimate of aggregate rate
B/S rate
Spot price
direct

43. The difference in interest rate is referred to as...
average rate
direct
interest rate differential
Forward Points

44. What is the purpose of hedging?
China - Malaysia - Colombia - Chile - Argentina
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
financial strategy and financial policy
value

45. What is cash flow used for?
BS account balances
30%
1 unit
Used to hedge against variability in expected future cash flows

46. What instruments do we use to hedge?
BRL
two business days
Forward contracts and Options
financial strategy and financial policy

47. In a EUR-USD relationship - when arrow is going down - means Euro weakens and US Dollar...
Oracle
directly or indirectly
90%
strengthens

48. What are monetary accounts?
weakens
an estimate of aggregate rate
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
5%

49. The ticker symbol for the Chinese Yuan
The calculation is the same - but instead of adding forward points you subtract
valuable
CNY
BRL

50. 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
allow FX rate
financial strategy and financial policy
End of Period Rate (SCO-4 rate)
Used to hedge against variability in expected future cash flows