Test your basic knowledge |

Foreign Exchange Market

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 is the first issue with EFSF?
Transaction - translation and economic exposure
Collecting & spending of money by the government
1. no process 2. no agreement as to who should hold the process 3. Germans want eco reforms following bailout 4. remediation and supervisory structures must be built
Supply & demand of the currency -Interest rates -Inflation -Investor expectations

2. What are the characteristics of economic exposure?
Borrowing of funds in foreign currency
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
Collecting & spending of money by the government
True

3. Burger economics!!! Why do we use it?
The income form individual transacations
Increase their exposure to banking -'s banking center
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
Impact of currency exchange rate changes on reported financial statements

4. What do monetary policies do?
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Currency of one country can be exchanged for the currency of another country
Interest rates and money supply

5. What is the characteristic of translation expose?
Measurement of past events
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
1. distribute productive assets 2. ensure assets are not concentrated in countries
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP

6. What is non convertible currency?
State driven recapitalization are now needed
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
Obligations for the purchase or sale of goods and services at previously agreed prices
Lead and lag strategies

7. How do you establish central control?
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Forward exchange or spot exchange
There is absence of trade barriers - each country price in commodity basket are at an equal ration - not accurate in predicting exchange rates in the short run
1. protect resources efficiently 2. ensure correct mix of tactics and strategies

8. It is important to stay __________ with your current events
True
Affected by fluctuation in foreign exchange values
Banks stability was measure at a 5% capital adequacy ratio
up to date

9. Defaulting on debt has a __________ that intertwines all countries in Europe.
domino effect
Paying foreign currency payable before dues as a result expected currency appreciation
The income form individual transacations
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)

10. What are the types of Exchange Rate Fluctuations?
Monetary and fiscal policies
In competitive markets free of transportation costs and barriers to trade identical products sold in different countries must sell for the same price is expressed in terms of the same currency
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
An attempt to collect currency receivables early as result of expected depreciation

11. What is externally convertible currency
Delay collection of foreign currency receivables if currency is exception to appreciate
Forward exchange or spot exchange
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency

12. What is the first characteristic of transaction exposure ?
Currency of one country can be exchanged for the currency of another country
True
Affected by fluctuation in foreign exchange values
True

13. What is the nature of the forex market?
Transportation costs - trade barriers - and not trade inputs such as rents or wages
High-speed computer linkages between trading centers around the globe - have created 1 market - resulted in no significant difference between exchange rate quotes - different exchange quoted result in arbitrage opportunities
An attempt to collect currency receivables early as result of expected depreciation
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates

14. Because of the recessionary environment euro banks have failed to do what?

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

15. What are some strategies for managing forex risk?
Establish central control and attempts to forecast future exchange rates
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Lead and lag strategies
agreed upon austerity

16. What is economic exposure?
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
Firms future international earning power
Borrowing of funds in foreign currency
True

17. In the long run empirical testing has of the PPP Theory has proven to be accurate in the long run. True or False
1. pay a foreign co for its products or services in a countries currency 2. spare cash for short term money market investments 3. involved in currency speculation
London - New York - Tokyo - and Singapore
True
agreed upon austerity

18. What are the three different types of foreign exchange rate risks?
Transaction - translation and economic exposure
Productivity and balance payments
It helps them understand the influence of exchange rates on profitability of trade investment deals
Currency of one country can be exchanged for the currency of another country

19. What is the fourth roles of the U.S. dollar outside the U.S.?
Increase currency values and protect against increases in foreign prices of goods and services
Vehicle currency(transaction between 2 less commonly used currencies)
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
Goods and services of one country can be exchanged for the goods and services of another country

20. What is a spot rate?
High-speed computer linkages between trading centers around the globe - have created 1 market - resulted in no significant difference between exchange rate quotes - different exchange quoted result in arbitrage opportunities
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
The income form individual transacations

21. What is the bandwagon effect when looking at form investor psychology ?
State driven recapitalization are now needed
Group of investors movement in the same direction and same time or government intervention
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
The income form individual transacations

22. What are two methods of reducing translation and transaction exposure?
Lead and lag strategies
Intervention currency (peg country currency)
u.s. dollar
Control the amount of money in circulation - enforced by government policies - focus on growth rate

23. What is the second characteristic of lead strategy?
Paying foreign currency payable before dues as a result expected currency appreciation
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
Relative price differences and ppp

24. How do you insure or hedge against a Forex risk?
Forward exchange or spot exchange
Delay payables if currency is expected to depreciate
Measurement of past events
Monetary and fiscal policies

25. Greece has not defaulted because it has not been able to fully implement its...
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Monetary and fiscal policies
agreed upon austerity
1. protect resources efficiently 2. ensure correct mix of tactics and strategies

26. What causes big mac prices to vary?
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Goods and services of one country can be exchanged for the goods and services of another country
Exchange rate policies
Increase currency values and protect against increases in foreign prices of goods and services

27. How can translation exposure be described?
Spot rates and forward rates
Lead and lag strategies
Impact of currency exchange rate changes on reported financial statements
Interest rates and money supply

28. What is the first roels of the U.S. dollar outside the U.S.?
agreed upon austerity
A common reference
Measurement of past events
Interest rates and money supply

29. What holds true to Purchase Power Parity Theory?
Issue mo good loans so that profits from new business can eat away the losses form the bad
Transaction - translation and economic exposure
Firms future international earning power
There is absence of trade barriers - each country price in commodity basket are at an equal ration - not accurate in predicting exchange rates in the short run

30. How can transaction exposure be described?
The income form individual transacations
Increase currency values and protect against increases in foreign prices of goods and services
Delay payables if currency is expected to depreciate
Spot rates and forward rates

31. Currently margins require more cash reserves - What is the best method of doing this **** in the Euro Zone?
Firms future international earning power
These transactions are used when need to move out of one currency into another - they are for a limited period - there is no foreign exchange rate risk
Delay collection of foreign currency receivables if currency is exception to appreciate
Issue mo good loans so that profits from new business can eat away the losses form the bad

32. What is the third role of the U.S. dollar outside the U.S.?
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Establish central control and attempts to forecast future exchange rates
Reserve currency

33. What is arbitrage?
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
It helps them understand the influence of exchange rates on profitability of trade investment deals
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Supply & demand of the currency -Interest rates -Inflation -Investor expectations

34. What are the two ways to reduce economic exposure?
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
There is absence of trade barriers - each country price in commodity basket are at an equal ration - not accurate in predicting exchange rates in the short run
1. distribute productive assets 2. ensure assets are not concentrated in countries
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days

35. What is the nominal exchange rate?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Vehicle currency(transaction between 2 less commonly used currencies)
Currency of one country can be exchanged for the currency of another country
Delay collection of foreign currency receivables if currency is exception to appreciate

36. According to economic theories of exchage rate determination?
State driven recapitalization are now needed
Increase their exposure to banking -'s banking center
Exchange rates are determined by the demand and supply for different currencies
Intervention currency (peg country currency)

37. What is the second thing that determines the Forex rates?
Interest rates and money supply
1. pay a foreign co for its products or services in a countries currency 2. spare cash for short term money market investments 3. involved in currency speculation
A common reference
Paying foreign currency payable before dues as a result expected currency appreciation

38. Marekts are open...
up to date
24/7
Reserve currency
In competitive markets free of transportation costs and barriers to trade identical products sold in different countries must sell for the same price is expressed in terms of the same currency

39. What is the second characteristic of lag strategy?
Reserve currency
Investor psychology
Affected by fluctuation in foreign exchange values
Delay payables if currency is expected to depreciate

40. What is a currency swamp?
Interest rates and money supply
agreed upon austerity
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
Spot rates - forward rates - and swaps

41. When do countries use foreign exchange market?
Intervention currency (peg country currency)
1. pay a foreign co for its products or services in a countries currency 2. spare cash for short term money market investments 3. involved in currency speculation
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
Forward exchange or spot exchange

42. What are some factors that influence exchange rates?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
An attempt to collect currency receivables early as result of expected depreciation
24/7

43. What are the first two things that determine Forex rates?
Spot rates and forward rates
Increase currency values and protect against increases in foreign prices of goods and services
Relative price differences and ppp
Firms future international earning power

44. How and What is the purpose of distributing assets?
1. not that many staffing 2. months away form being implemented 3. esfs new power to restructured banks goes against EU treaties that guarantee all banking authority to the member state level
up to date
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates

45. What is the third thing that determines the forex rates?
Spot rates and forward rates
A common reference
Productivity and balance payments
Inflation - interest rate - and market psychology

46. Most Transaction inovolve...
u.s. dollar
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Intervention currency (peg country currency)
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps

47. What is hedging?

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

48. What is the second characteristic of transaction exposure?
u.s. dollar
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
1. distribute productive assets 2. ensure assets are not concentrated in countries
Obligations for the purchase or sale of goods and services at previously agreed prices

49. What is the first characteristic of lead strategy?
In competitive markets free of transportation costs and barriers to trade identical products sold in different countries must sell for the same price is expressed in terms of the same currency
An attempt to collect currency receivables early as result of expected depreciation
24/7
Firms future international earning power

50. What are the important trading centers?
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
True
London - New York - Tokyo - and Singapore
Large number of individuals and cos exchange of domestic currencies for a foreign currency