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 stock-USD relationship - when arrow is going up means that stock is becoming more ______ against dollar
1USD
valuable
The currency of the primary economic environment in which the legal entity operates
1.60 - Because you can buy more dollars

2. GBP-USD account for ____ of trading FX volume
12%
21%
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
actual weighted average contract rate

3. In a stock-USD relationship - when arrow is going down means that stock is becoming ____ valuable against dollar
less
21%
Forward contracts and Options
Currency in which the entity reports results externally

4. We do not speculate on Foreign Exchange - 10-K says it is to reduce the impact of...
5%
SFAS 52
Mitigates risks by using hedging techniques
adverse fluctuations

5. Australian currency code is...
AUD
End of Period Rate (SCO-4 rate)
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
exchange one currency for another

6. What currencies use Direct method of quoting?
British Pound - Australian Dollar - New Zealand Dollar - Euro
financial risk
Indirect quote
SFAS 52

7. The currency ticker for the Sweden Kroner is?
SEK
F&O account 87503
Government regulation and cost of hedging
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging

8. In a GBP-USD relationship - if pound is strengthening it means that you can get _____ US Dollars for one pound
There are FOUR
more
AUD
The difference between hedge rate and final effective hedge rate

9. Functional currency of an entity is determined by Treasury Accounting based on ______ requirements
is getting bigger
British Pound - Australian Dollar - New Zealand Dollar - Euro
SFAS 52
B/S rate

10. Direct quote- _____________=USD
5%
financial strategy and financial policy
foreign currency* rate
There are FOUR

11. What dictates minimum and maximum hedge percentages?
Indirect quote
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging
FX policy
Spot price

12. What is Revaluation?

Warning: Invalid argument supplied for foreach() in /var/www/html/basicversity.com/show_quiz.php on line 183

13. How many currencies use Direct method of quoting?
BRL
B/S rate
There are FOUR
actual weighted average contract rate

14. In general EUR-USD is involved in roughly ___ of all FX volume
interest rate differential
Indirect quote
British Pound - Australian Dollar - New Zealand Dollar - Euro
90%

15. EUR-USD currency pair accounts for about ____ of all FX volume
direct
APL rate
CNY
30%

16. All other currency trading with USD accounts for ____ of FX volume
21%
There are FOUR
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
Spot price

17. Hedging instrument used in cash flow program is...
valuable
largest - It is open 24 hours a day - except weekends
currency options and forward
Mitigates risks by using hedging techniques

18. An ___________ expresses the value of one currency relative to another
30%
1USD
two business days
exchange rate

19. 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...
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
is getting bigger
lost
Buy a stock in an Oil Company. Stock price increases when oil goes up and offset for your expenses in filling up tank

20. Effective Hedge Rate is ________________ of all outstanding FX contracts for the quarter being hedged
3 -210 billion (3 trillion)
lost
is getting bigger
actual weighted average contract rate

21. How do you read EUR-USD = 1.40
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
Buy a stock in an Oil Company. Stock price increases when oil goes up and offset for your expenses in filling up tank
This means 1 Euro measured against US Dollars is worth $1.40
valuable

22. What rate is used on the P&L?
exchange one currency for another
weakens
lost
The average P&L rate (APL) which is the weighted average of Treasury Daily Spot rates for the month

23. What is cash flow used for?
more
Treasury Daily Spot Rate
The currency of the primary economic environment in which the legal entity operates
Used to hedge against variability in expected future cash flows

24. Give an example of one way to hedge a price increase in gas prices...
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
This means 1 Euro measured against US Dollars is worth $1.40
Forward contracts and Options

25. Treasury ensures that companies have ____________ to meet its obligations
Forward Points
Pound strengthens
liquidity and cash
13%

26. What does it mean to hedge?
Hedging protects the value of a future event by executing a trade that changes value in the opposite direction as the future event.
three digit ticker symbol ex: USD - United States Dollar
Forward contracts and Options
6 weeks prior to Q/E

27. What are the four major FX accounting guidances?
Effective Hedge rate
P&L activity
weakens
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging

28. How is the hedge rate variance calculated?
valuable
foreign currency* rate
Forward contracts and Options
The difference between hedge rate and final effective hedge rate

29. USD-JPY account for ____ of trading FX volume
valuable
13%
Spot price
CNY

30. If you execute an FX trade to _______________ using the current market price - the trade will typically settle in two business days
30%
Currency in which the entity reports results externally
actual weighted average contract rate
exchange one currency for another

31. The timing of when we execute hedges drastically impacts the ____________ we achieve
average rate
B/S rate
5%
exchange rate

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

33. The difference in interest rate is referred to as...
currency options and forward
Forward Points
300 billion
Treasury Daily Spot Rate

34. If 1 Share = 10 USD and 1 CASE = 30 USD - then 1 share =?
interest rate differential
foreign exchange forward contract
average rate
1 share = 1/3 case

35. 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
B/S rate
fx forward
There are FOUR
downward slope

36. 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?
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
liquidity and cash
5%
30%

37. What are non-monetary accounts?
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
currency options and forward
financial strength

38. A ____________________ is an exchange of two currencies at a fixed rate for any date other than spot delivery
Spot price
BS account balances
foreign exchange forward contract
Indirect quote

39. Whether the quote was indirect or direct - they are all stored as ______ in Oracle
Effective Hedge rate
Hedging allows us to provide stable earnings - makes planning simpler - and allows for longer lead time for marketing
direct
21%

40. How far in advance do we hedge?
1 Case = 2 pizzas
15 months in advance - layering on hedges through time
30%
BS account balances

41. The rules for adding or subtracting forward points depend on whether it is quoted...
Mitigates risks by using hedging techniques
directly or indirectly
1 unit
Treasury Daily Spot Rate

42. The ticker symbol for the Chinese Yuan
CNY
6 weeks prior to Q/E
British Pound - Australian Dollar - New Zealand Dollar - Euro
1 share = 1/3 case

43. Give some examples of countries where its hard to hedge?
foreign exchange forward contract
CNY
12%
China - Malaysia - Colombia - Chile - Argentina

44. Hedge rate is constant throughout quarter while _______________ changes throughout quarter
actual weighted average contract rate
The calculation is the same - but instead of adding forward points you subtract
SFAS 52 - FX Translation - SFAS 133 - Accounting for Derivative Instruments & Hedging - SFAS 157 - Fair Value Measurement - SFAS 161 - Disclosures about Derivative Instruments & Hedging
Effective Hedge rate

45. What are the exceptions to the ticker naming convention?
Effective Hedge rate
financial strategy and financial policy
MXN - EUR - CHF
fx forward

46. ____________ booked a hedge rate is trued up to the EHR each month during the quarter
P&L activity
currency options and forward
Currency in which the entity reports results externally
Effective Hedge rate

47. A forward happens in...
3 business days and beyond
financial risk
Spot price
1 share = 1/3 case

48. What is currency Translation?

Warning: Invalid argument supplied for foreach() in /var/www/html/basicversity.com/show_quiz.php on line 183

49. What rate is used to book daily transactions?
Treasury Daily Spot Rate
Used to hedge against the change in fair value (revaluation) of monetary assets & liabilities
foreign exchange forward contract
The currency of the primary economic environment in which the legal entity operates

50. Treasury is responsible for managing companies funds and determining the firms'...
Currency of the respective operating unit's country
3 business days and beyond
financial strategy and financial policy
translation