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 hedging?

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

2. What is the second characteristic of transaction exposure?
Forward exchange or spot exchange
An attempt to collect currency receivables early as result of expected depreciation
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
Obligations for the purchase or sale of goods and services at previously agreed prices

3. 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
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
The income form individual transacations

4. 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

5. What is the second characteristic of lead strategy?
Exchange rates are determined by the demand and supply for different currencies
Collecting & spending of money by the government
Paying foreign currency payable before dues as a result expected currency appreciation
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency

6. What are the two ways to quote currency?
Borrowing of funds in foreign currency
Increase their exposure to banking -'s banking center
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
Spot rates and forward rates

7. What is a spot rate?
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
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
State driven recapitalization are now needed
1. protect resources efficiently 2. ensure correct mix of tactics and strategies

8. According to economic theories of exchage rate determination?
Impact of currency exchange rate changes on reported financial statements
Exchange rates are determined by the demand and supply for different currencies
Firms future international earning power
State driven recapitalization are now needed

9. Greece has not defaulted because it has not been able to fully implement its...
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
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
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
agreed upon austerity

10. What is the first characteristic of transaction exposure ?
Group of investors movement in the same direction and same time or government intervention
Affected by fluctuation in foreign exchange values
Investor psychology
Forward exchange or spot exchange

11. It is important to stay __________ with your current events
Borrowing of funds in foreign currency
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
Exchange rates are determined by the demand and supply for different currencies
up to date

12. What are three factors that impact a country's future exchange rate movements?
Banks stability was measure at a 5% capital adequacy ratio
Inflation - interest rate - and market psychology
An attempt to collect currency receivables early as result of expected depreciation
Establish central control and attempts to forecast future exchange rates

13. What are the types of Exchange Rate Fluctuations?
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
Delay payables if currency is expected to depreciate
Monetary and fiscal policies
The income form individual transacations

14. What is a forward rate?
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Spot rates - forward rates - and swaps
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Monetary and fiscal policies

15. When do countries use the foreign exchange market?
Increase their exposure to banking -'s banking center
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
Interest rates and money supply
The income form individual transacations

16. Because many banks (2/3) are below the capital adequacy ratio of 9% many can not recapitalize on their own as a result
agreed upon austerity
Collecting & spending of money by the government
State driven recapitalization are now needed
Goods and services of one country can be exchanged for the goods and services of another country

17. What are some characteristics of swaps?
Borrowing of funds in foreign currency
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
Exchange rate policies
Establish central control and attempts to forecast future exchange rates

18. What is the first characteristic of lead strategy?
An attempt to collect currency receivables early as result of expected depreciation
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
agreed upon austerity
Transportation costs - trade barriers - and not trade inputs such as rents or wages

19. What is the fifth thing that determines the forex rates?
Banks stability was measure at a 5% capital adequacy ratio
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
London - New York - Tokyo - and Singapore
Investor psychology

20. What are some strategies for managing forex risk?
Establish central control and attempts to forecast future exchange rates
Increase currency values and protect against increases in foreign prices of goods and services
Impact of currency exchange rate changes on reported financial statements
Borrowing of funds in foreign currency

21. What implications does understanding foreign exchange rates have on managers?
Spot rates and forward rates
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 helps them understand the influence of exchange rates on profitability of trade investment deals
Monetary and fiscal policies

22. What is the second thing that determines the Forex rates?
Lending of funds in foreign currencies
Interest rates and money supply
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
Exchange rate policies

23. What are the two ways to reduce economic exposure?
1. distribute productive assets 2. ensure assets are not concentrated in countries
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
up to date
True

24. How and What is the purpose of distributing assets?
u.s. dollar
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
24/7
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates

25. What is the third thing that determines the forex rates?
Delay payables if currency is expected to depreciate
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
Relative price differences and ppp
Productivity and balance payments

26. What is the fourth characteristic of transaction exposure?
Borrowing of funds in foreign currency
Lending of funds in foreign currencies
Intervention currency (peg country currency)
domino effect

27. What are some factors that influence exchange rates?
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 income form individual transacations
True
Supply & demand of the currency -Interest rates -Inflation -Investor expectations

28. What are two methods of reducing translation and transaction exposure?
Borrowing of funds in foreign currency
Lead and lag strategies
Collecting & spending of money by the government
Control the amount of money in circulation - enforced by government policies - focus on growth rate

29. Burger economics!!! Why do we use it?
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Spot rates and forward rates
Obligations for the purchase or sale of goods and services at previously agreed prices
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP

30. When do countries use foreign exchange market?
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
Lending of funds in foreign currencies
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
up to date

31. What are the three different types of foreign exchange rate risks?
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
domino effect
Group of investors movement in the same direction and same time or government intervention
Transaction - translation and economic exposure

32. What causes big mac prices to vary?
1. distribute productive assets 2. ensure assets are not concentrated in countries
Transaction - translation and economic exposure
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Spot rates and forward rates

33. How can transaction exposure be described?
The income form individual transacations
Paying foreign currency payable before dues as a result expected currency appreciation
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
Forward exchange or spot exchange

34. What is the real exchange rate?
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
1. distribute productive assets 2. ensure assets are not concentrated in countries
Goods and services of one country can be exchanged for the goods and services of another country
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

35. What is economic exposure?
Firms future international earning power
Reserve currency
Impact of currency exchange rate changes on reported financial statements
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates

36. Defaulting on debt has a __________ that intertwines all countries in Europe.
domino effect
Reserve currency
Lead and lag strategies
It helps them understand the influence of exchange rates on profitability of trade investment deals

37. How do you establish central control?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Measurement of past events
Interest rates and money supply
Exchange rates are determined by the demand and supply for different currencies

38. What is the third role of the U.S. dollar outside the U.S.?
Banks stability was measure at a 5% capital adequacy ratio
Interest rates and money supply
Reserve currency
Measurement of past events

39. In the long run empirical testing has of the PPP Theory has proven to be accurate in the long run. True or False
Spot rates and forward rates
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Impact of currency exchange rate changes on reported financial statements
True

40. Most Transaction inovolve...
Reserve currency
agreed upon austerity
u.s. dollar
Inflation - interest rate - and market psychology

41. What are the characteristics of economic exposure?
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
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
Productivity and balance payments
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs

42. What is the nominal exchange rate?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
Currency of one country can be exchanged for the currency of another country

43. What is the first characteristic of lag strategy?
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
True
A common reference

44. No single theory can explain explain the causes the value of currencies to change. True or False?
domino effect
Spot rates - forward rates - and swaps
Paying foreign currency payable before dues as a result expected currency appreciation
True

45. What is the third characteristic of transaction exposure?
Borrowing of funds in foreign currency
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
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

46. What is the characteristic of translation expose?
Productivity and balance payments
Measurement of past events
Relative price differences and ppp
Interest rates and money supply

47. What do monetary policies do?
Increase currency values and protect against increases in foreign prices of goods and services
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Banks stability was measure at a 5% capital adequacy ratio
Exchange rates are determined by the demand and supply for different currencies

48. What is the fourth roles of the U.S. dollar outside the U.S.?
The income form individual transacations
Vehicle currency(transaction between 2 less commonly used currencies)
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates

49. Currently margins require more cash reserves - What is the best method of doing this **** in the Euro Zone?
domino effect
up to date
Investor psychology
Issue mo good loans so that profits from new business can eat away the losses form the bad

50. What is the first roels of the U.S. dollar outside the U.S.?
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
A common reference
Obligations for the purchase or sale of goods and services at previously agreed prices