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. What are the exceptions to the ticker naming convention?
MXN - EUR - CHF
BRL
3 -210 billion (3 trillion)
more

2. What is local currency?

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3. What does it mean to hedge?
BS account balances
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging
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.

4. All other currency trading with USD accounts for ____ of FX volume
average rate
valuable
21%
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging

5. Direct quote- _____________=USD
21%
What is happening
spot price x interest differential
foreign currency* rate

6. Treasury is responsible for managing companies funds and determining the firms'...
financial strategy and financial policy
China - Malaysia - Colombia - Chile - Argentina
F&O account 87503
30%

7. Treasury ensures that companies have ____________ to meet its obligations
Spot price
1USD
Mitigates risks by using hedging techniques
liquidity and cash

8. US Treasuries is the second highest trading volume accounting for...
300 billion
financial risk
MXN - EUR - CHF
fx forward

9. ____________ should be denominated in the currency they will either be paid or received in...
BS account balances
three digit ticker symbol ex: USD - United States Dollar
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
SEK

10. Australian currency code is...
British Pound - Australian Dollar - New Zealand Dollar - Euro
AUD
End of Period Rate (SCO-4 rate)
translation

11. __________ is used for translation of foreign currency B/S to reporting currency
directly or indirectly
B/S rate
Mitigates risks by using hedging techniques
is getting bigger

12. Forward points is equal to...
financial strength
actual weighted average contract rate
spot price x interest differential
Currency of the respective operating unit's country

13. If the Mexico rate is 5.25%/year and the US is 0.25%/year - What is the rate that would be used to calculate the forward rate?
5%
13%
The difference between hedge rate and final effective hedge rate
weakens

14. The difference in interest rate is referred to as...
spot price x interest differential
BRL
Forward Points
B/S rate

15. The Foreign Exchange market is the __________ market in the world
largest - It is open 24 hours a day - except weekends
allow FX rate
British Pound - Australian Dollar - New Zealand Dollar - Euro
3 business days and beyond

16. Hedge Rate is _______________ that will be achieved on a specific quarter's cash flow
End of Period Rate (SCO-4 rate)
China - Malaysia - Colombia - Chile - Argentina
an estimate of aggregate rate
foreign exchange forward contract

17. How does treasury accomplish its purpose?
Mitigates risks by using hedging techniques
90%
adverse fluctuations
three digit ticker symbol ex: USD - United States Dollar

18. If you are an American planning a trip to Europe - which exchange rate would you rather have to convert your US Dollars to Euro? 1.40 or 1.60?
three digit ticker symbol ex: USD - United States Dollar
Current market price - spot - plus or minus the difference between the interest rates of the two countries
Accounts that are carried at historical rates at which they were booked (fixed assets - inventory)
1.40 - Because I would be able to buy more euros

19. ____________ is used for translation of foreign currency P&L to Reporting currency?
6 weeks prior to Q/E
APL rate
30%
The difference between hedge rate and final effective hedge rate

20. The ticker symbol for the Chinese Yuan
BRL
valuable
liquidity and cash
CNY

21. B/S rate is used for revaluation of foreign currency transaction to...
functional currency
30%
translation
Oracle

22. Treasury is responsible for banking requirements - funding for the business and managing...
financial risk
Used to hedge against variability in expected future cash flows
liquidity and cash
currency options and forward

23. Treasury's role is to identify risk - control to prevent erosion of...
more
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
financial strength
12%

24. 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
MXN - EUR - CHF
BRL
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

25. In a EUR-USD relationship - when arrow is going up means Euro is strengthening and Dollar...
MXN - EUR - CHF
weakens
1 unit
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

26. Forward points multiply the exchange rate by the...
interest rate differential
Oracle
liquidity and cash
direct

27. If you execute an FX trade to _______________ using the current market price - the trade will typically settle in two business days
Effective Hedge rate
exchange one currency for another
30%
Used to hedge against variability in expected future cash flows

28. The offset of revaluation is recorded to...
F&O account 87503
foreign exchange forward contract
exchange one currency for another
1USD

29. How far in advance do we hedge?
15 months in advance - layering on hedges through time
Forward Points
F&O account 87503
What is happening

30. Whether the quote was indirect or direct - they are all stored as ______ in Oracle
liquidity and cash
3 -210 billion (3 trillion)
SEK
direct

31. Hedging instrument used in cash flow program is...
currency options and forward
Currency in which the entity reports results externally
30%
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing

32. How is the hedge rate variance calculated?
The difference between hedge rate and final effective hedge rate
an estimate of aggregate rate
12%
valuable

33. The current market price for any currency pair is referred to as ?
Indirect quote
Spot price
fx forward
less

34. USD-JPY account for ____ of trading FX volume
13%
P&L activity
Indirect quote
an estimate of aggregate rate

35. What rate is used on the balance sheet?
End of Period Rate (SCO-4 rate)
two business days
foreign currency* rate
Currency in which the entity reports results externally

36. A forward happens in...
Forward Points
3 business days and beyond
allow FX rate
End of Period Rate (SCO-4 rate)

37. How do you read EUR-USD = 1.40
1USD
weakens
Used to hedge against variability in expected future cash flows
This means 1 Euro measured against US Dollars is worth $1.40

38. If 1 pizza = 15 USD then ____ = 1/15 pizza
12%
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging
Buy a stock in an Oil Company. Stock price increases when oil goes up and offset for your expenses in filling up tank
1USD

39. 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
This means 1 Euro measured against US Dollars is worth $1.40
downward slope
foreign currency* rate
What is happening

40. ____________ - foreign currency/rate = USD
less
foreign exchange forward contract
1 share = 1/3 case
Indirect quote

41. What is currency Translation?

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42. If you are an European planning a trip to America - which rate do you want? 1.40 or 1.60?
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging
1.60 - Because you can buy more dollars
CNY
more

43. What rate is used to book daily transactions?
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
Treasury Daily Spot Rate
largest - It is open 24 hours a day - except weekends
three digit ticker symbol ex: USD - United States Dollar

44. EUR-USD currency pair accounts for about ____ of all FX volume
Treasury Daily Spot Rate
foreign exchange forward contract
The currency of the primary economic environment in which the legal entity operates
30%

45. What is the ticker symbol for Brazilian Real?
adverse fluctuations
BRL
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
Treasury Daily Spot Rate

46. An ___________ expresses the value of one currency relative to another
exchange rate
currency options and forward
Government regulation and cost of hedging
MXN - EUR - CHF

47. Functional currency of an entity is determined by Treasury Accounting based on ______ requirements
China - Malaysia - Colombia - Chile - Argentina
actual weighted average contract rate
financial strength
SFAS 52

48. What are non-monetary accounts?
Accounts that are carried at historical rates at which they were booked (fixed assets - inventory)
is getting bigger
valuable
1USD

49. A ____________________ is an exchange of two currencies at a fixed rate for any date other than spot delivery
Mitigates risks by using hedging techniques
FX policy
foreign exchange forward contract
1 share = 1/3 case

50. A downward slope that represents AUD-USD relationship means that if you bought Australian dollars at point A - you have _____ money at point B
Oracle
financial strength
lost
weakens