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. The Foreign Exchange market is the __________ market in the world
largest - It is open 24 hours a day - except weekends
average rate
1USD
Currency in which the entity reports results externally

2. 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
exchange rate
downward slope
Pound strengthens
End of Period Rate (SCO-4 rate)

3. What are the exceptions to the ticker naming convention?
adverse fluctuations
Oracle
less
MXN - EUR - CHF

4. GBP-USD account for ____ of trading FX volume
an estimate of aggregate rate
12%
weakens
adverse fluctuations

5. A downward slope that represents stock-USD relationship means that stock price is losing ______ - so you are losing money
Buy a stock in an Oil Company. Stock price increases when oil goes up and offset for your expenses in filling up tank
valuable
exchange rate
value

6. The currency ticker for the Sweden Kroner is?
B/S rate
3 business days and beyond
SEK
strengthens

7. If you are an European planning a trip to America - which rate do you want? 1.40 or 1.60?
1.60 - Because you can buy more dollars
FX policy
largest - It is open 24 hours a day - except weekends
currency options and forward

8. A downward slope that represents AUD-USD relationship means that if you bought Australian dollars at point A - you have _____ money at point B
P&L activity
lost
BS account balances
MXN - EUR - CHF

9. What is local currency?

10. US Treasuries is the second highest trading volume accounting for...
300 billion
functional currency
F&O account 87503
value

11. How is the hedge rate variance calculated?
financial risk
The difference between hedge rate and final effective hedge rate
Government regulation and cost of hedging
direct

12. What instruments do we use to hedge?
financial risk
Forward contracts and Options
SEK
financial strategy and financial policy

13. Hedge Rate is _______________ that will be achieved on a specific quarter's cash flow
China - Malaysia - Colombia - Chile - Argentina
lost
There are FOUR
an estimate of aggregate rate

14. In a stock-USD relationship - when arrow is going up means that stock is becoming more ______ against dollar
value
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
valuable
fx forward

15. The current market price for any currency pair is referred to as ?
15 months in advance - layering on hedges through time
liquidity and cash
Spot price
3 -210 billion (3 trillion)

16. What is currency Translation?

17. B/S rate is used for revaluation of foreign currency transaction to...
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
This means 1 Euro measured against US Dollars is worth $1.40
B/S rate
functional currency

18. A Spot happens in...
1.60 - Because you can buy more dollars
End of Period Rate (SCO-4 rate)
Treasury Daily Spot Rate
two business days

19. 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
downward slope
BRL
6 weeks prior to Q/E
largest - It is open 24 hours a day - except weekends

20. 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
currency options and forward
APL rate
30%

21. Hedging instrument used in Fair Value Hedge program is...
Buy a stock in an Oil Company. Stock price increases when oil goes up and offset for your expenses in filling up tank
fx forward
weakens
1USD

22. What rate is used on the P&L?
strengthens
The average P&L rate (APL) which is the weighted average of Treasury Daily Spot rates for the month
Used to hedge against variability in expected future cash flows
British Pound - Australian Dollar - New Zealand Dollar - Euro

23. We do not speculate on Foreign Exchange - 10-K says it is to reduce the impact of...
6 weeks prior to Q/E
adverse fluctuations
Mitigates risks by using hedging techniques
There are FOUR

24. Direct quote- _____________=USD
foreign currency* rate
actual weighted average contract rate
Treasury Daily Spot Rate
APL rate

25. What rate is used on the balance sheet?
largest - It is open 24 hours a day - except weekends
British Pound - Australian Dollar - New Zealand Dollar - Euro
End of Period Rate (SCO-4 rate)
downward slope

26. When looking at a currency chart - you need to know if the currency is quoted Directly or Indirectly to be able to describe...
downward slope
What is happening
1 unit
exchange one currency for another

27. 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
financial risk
Used to hedge against variability in expected future cash flows
China - Malaysia - Colombia - Chile - Argentina

28. __________ is used for translation of foreign currency B/S to reporting currency
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
two business days
fx forward
B/S rate

29. Treasury ensures that companies have ____________ to meet its obligations
interest rate differential
liquidity and cash
End of Period Rate (SCO-4 rate)
less

30. An ___________ expresses the value of one currency relative to another
exchange rate
is getting bigger
downward slope
SFAS 52

31. 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
two business days
300 billion
allow FX rate
What is happening

32. Treasury's role is to identify risk - control to prevent erosion of...
three digit ticker symbol ex: USD - United States Dollar
more
financial strength
allow FX rate

33. ____________ - foreign currency/rate = USD
translation
Accounts that revalue every month to the balance sheet rate. (cash - A/are)
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
Indirect quote

34. The ticker symbol for the Chinese Yuan
two business days
strengthens
CNY
average rate

35. Forward points is equal to...
AUD
spot price x interest differential
financial strategy and financial policy
1.40 - Because I would be able to buy more euros

36. What are some of the reason not hedge at all or partially hedge in a few countries?
Used to hedge against variability in expected future cash flows
foreign exchange forward contract
6 weeks prior to Q/E
Government regulation and cost of hedging

37. Treasury is responsible for managing companies funds and determining the firms'...
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
21%
financial strategy and financial policy
APL rate

38. If 1 pizza = 15 USD then ____ = 1/15 pizza
direct
The currency of the primary economic environment in which the legal entity operates
21%
1USD

39. Hedging instrument used in cash flow program is...
Forward Points
currency options and forward
Used to hedge against variability in expected future cash flows
spot price x interest differential

40. What rate is used to book daily transactions?
Treasury Daily Spot Rate
more
three digit ticker symbol ex: USD - United States Dollar
translation

41. If you execute an FX trade to _______________ using the current market price - the trade will typically settle in two business days
There are FOUR
6 weeks prior to Q/E
exchange one currency for another
value

42. In a EUR-USD relationship - when arrow is going down - means Euro weakens and US Dollar...
There are FOUR
interest rate differential
End of Period Rate (SCO-4 rate)
strengthens

43. How do you read EUR-USD = 1.40
This means 1 Euro measured against US Dollars is worth $1.40
Used to hedge against variability in expected future cash flows
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
foreign exchange forward contract

44. If 1 Share = 10 USD and 1 CASE = 30 USD - then 1 share =?
1.40 - Because I would be able to buy more euros
1 share = 1/3 case
functional currency
Spot price

45. All other currency trading with USD accounts for ____ of FX volume
15 months in advance - layering on hedges through time
actual weighted average contract rate
directly or indirectly
21%

46. A ____________________ is an exchange of two currencies at a fixed rate for any date other than spot delivery
The calculation is the same - but instead of adding forward points you subtract
financial strategy and financial policy
interest rate differential
foreign exchange forward contract

47. Give some examples of countries where its hard to hedge?
There are FOUR
China - Malaysia - Colombia - Chile - Argentina
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
valuable

48. In a GBP-USD relationship - if pound is strengthening it means that you can get _____ US Dollars for one pound
two business days
1 share = 1/3 case
more
21%

49. How far in advance do we hedge?
300 billion
15 months in advance - layering on hedges through time
valuable
Effective Hedge rate

50. Effective Hedge Rate is ________________ of all outstanding FX contracts for the quarter being hedged
APL rate
30%
adverse fluctuations
actual weighted average contract rate