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. Most Transaction inovolve...
Lead and lag strategies
Currency of one country can be exchanged for the currency of another country
u.s. dollar
agreed upon austerity

2. When do countries use the foreign exchange market?
London - New York - Tokyo - and Singapore
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
Lending of funds in foreign currencies
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

3. What is the first issue with EFSF?
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
Relative price differences and ppp
Spot rates and forward rates
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs

4. Burger economics!!! Why do we use it?
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
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
Control the amount of money in circulation - enforced by government policies - focus on growth rate

5. It is important to stay __________ with your current events
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
Spot rates and forward rates
Control the amount of money in circulation - enforced by government policies - focus on growth rate
up to date

6. How can translation exposure be described?
Impact of currency exchange rate changes on reported financial statements
Banks stability was measure at a 5% capital adequacy ratio
Forward exchange or spot exchange
Lending of funds in foreign currencies

7. What is the second role of the U.S. dollar outside the U.S. ?
Intervention currency (peg country currency)
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
24/7
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

8. What is a currency swamp?
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
1. distribute productive assets 2. ensure assets are not concentrated in countries
Intervention currency (peg country currency)
u.s. dollar

9. The euro faces risks fo recapitalization?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Banks stability was measure at a 5% capital adequacy ratio
The income form individual transacations
agreed upon austerity

10. What is externally convertible currency
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Firms future international earning power
Lead and lag strategies

11. What is a spot rate?
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
Impact of currency exchange rate changes on reported financial statements
Lead and lag strategies
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure

12. What is the second characteristic of transaction exposure?
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
up to date
Obligations for the purchase or sale of goods and services at previously agreed prices

13. What are three factors that impact a country's future exchange rate movements?
Affected by fluctuation in foreign exchange values
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
Inflation - interest rate - and market psychology
Increase their exposure to banking -'s banking center

14. What is a forward rate?
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
True
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Establish central control and attempts to forecast future exchange rates

15. What is the nature of the forex market?
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
Currency of one country can be exchanged for the currency of another country
Transportation costs - trade barriers - and not trade inputs such as rents or wages
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

16. What is the third characteristic of transaction exposure?
agreed upon austerity
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Borrowing of funds in foreign currency
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

17. Marekts are open...
Banks stability was measure at a 5% capital adequacy ratio
u.s. dollar
24/7
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

18. What is the third role of the U.S. dollar outside the U.S.?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Monetary and fiscal policies
Delay collection of foreign currency receivables if currency is exception to appreciate
Reserve currency

19. In the long run empirical testing has of the PPP Theory has proven to be accurate in the long run. True or False
Lead and lag strategies
True
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days

20. What is the second issue with EFSF?
Productivity and balance payments
domino effect
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
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates

21. Because many banks (2/3) are below the capital adequacy ratio of 9% many can not recapitalize on their own as a result
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
State driven recapitalization are now needed
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Borrowing of funds in foreign currency

22. What is hedging?

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

23. 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

24. What is arbitrage?
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Transaction - translation and economic exposure
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
Control the amount of money in circulation - enforced by government policies - focus on growth rate

25. How do you establish central control?
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Banks stability was measure at a 5% capital adequacy ratio
Lending of funds in foreign currencies
1. protect resources efficiently 2. ensure correct mix of tactics and strategies

26. What is the first characteristic of lead strategy?
An attempt to collect currency receivables early as result of expected depreciation
State driven recapitalization are now needed
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
domino effect

27. When do countries use foreign exchange market?
Delay payables if currency is expected to depreciate
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
Exchange rate policies
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs

28. What is free convertible currency?
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
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
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
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

29. What holds true to Purchase Power Parity Theory?
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
Lending of funds in foreign currencies
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
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

30. Currently margins require more cash reserves - What is the best method of doing this **** in the Euro Zone?
Issue mo good loans so that profits from new business can eat away the losses form the bad
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
An attempt to collect currency receivables early as result of expected depreciation
Impact of currency exchange rate changes on reported financial statements

31. What are the three ways of insuring against a Forex risk?
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Spot rates - forward rates - and swaps
It helps them understand the influence of exchange rates on profitability of trade investment deals
Affected by fluctuation in foreign exchange values

32. No single theory can explain explain the causes the value of currencies to change. True or False?
True
A common reference
London - New York - Tokyo - and Singapore
Obligations for the purchase or sale of goods and services at previously agreed prices

33. Bailout Fund of EFSF - What is this shiz nitz?
It helps them understand the influence of exchange rates on profitability of trade investment deals
domino effect
1. distribute productive assets 2. ensure assets are not concentrated in countries
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

34. What is the second thing that determines the Forex rates?
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Intervention currency (peg country currency)
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
Interest rates and money supply

35. What is economic exposure?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Forward exchange or spot exchange
Reserve currency
Firms future international earning power

36. What are other strategies for managing forex risk?
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
Forward exchange or spot exchange
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

37. How and What is the purpose of distributing assets?
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
Lending of funds in foreign currencies
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
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

38. What is the first roels of the U.S. dollar outside the U.S.?
A common reference
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Monetary and fiscal policies

39. What are the two ways to reduce economic exposure?
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
1. distribute productive assets 2. ensure assets are not concentrated in countries
24/7
Increase their exposure to banking -'s banking center

40. What is the first characteristic of transaction exposure ?
True
Affected by fluctuation in foreign exchange values
Forward exchange or spot exchange
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

41. What are the types of Exchange Rate Fluctuations?
Delay payables if currency is expected to depreciate
Monetary and fiscal policies
Firms future international earning power
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP

42. What is capital fight when looking at it form investor psychology?
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
True
Intervention currency (peg country currency)
Large number of individuals and cos exchange of domestic currencies for a foreign currency

43. What are some factors that influence exchange rates?
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
Delay collection of foreign currency receivables if currency is exception to appreciate
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
Supply & demand of the currency -Interest rates -Inflation -Investor expectations

44. What are two methods of reducing translation and transaction exposure?
Lead and lag strategies
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
Measurement of past events
u.s. dollar

45. What is the fourth characteristic of transaction exposure?
Obligations for the purchase or sale of goods and services at previously agreed prices
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Lending of funds in foreign currencies
Large number of individuals and cos exchange of domestic currencies for a foreign currency

46. What is the purpose of not concentrating assets in countries?
An attempt to collect currency receivables early as result of expected depreciation
Increase currency values and protect against increases in foreign prices of goods and services
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
Reserve currency

47. What is the third thing that determines the forex rates?
Productivity and balance payments
Spot rates and forward rates
True
Vehicle currency(transaction between 2 less commonly used currencies)

48. What is non convertible currency?
Forward exchange or spot exchange
True
The income form individual transacations
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency

49. What is the fifth thing that determines the forex rates?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Delay payables if currency is expected to depreciate
Investor psychology

50. What implications does understanding foreign exchange rates have on managers?
Investor psychology
Lending of funds in foreign currencies
It helps them understand the influence of exchange rates on profitability of trade investment deals
Inflation - interest rate - and market psychology