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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. Bailout Fund of EFSF - What is this shiz nitz?
up to date
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
A common reference

2. What is the first roels of the U.S. dollar outside the U.S.?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Collecting & spending of money by the government
London - New York - Tokyo - and Singapore
A common reference

3. 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
Increase currency values and protect against increases in foreign prices of goods and services
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Inflation - interest rate - and market psychology

4. What is the second thing that determines the Forex rates?
Increase currency values and protect against increases in foreign prices of goods and services
1. distribute productive assets 2. ensure assets are not concentrated in countries
Paying foreign currency payable before dues as a result expected currency appreciation
Interest rates and money supply

5. What is a currency swamp?
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
Increase currency values and protect against increases in foreign prices of goods and services
Delay payables if currency is expected to depreciate
Productivity and balance payments

6. What are the types of Exchange Rate Fluctuations?
Monetary and fiscal policies
Spot rates - forward rates - and swaps
It helps them understand the influence of exchange rates on profitability of trade investment deals
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

7. Because many banks (2/3) are below the capital adequacy ratio of 9% many can not recapitalize on their own as a result
1. distribute productive assets 2. ensure assets are not concentrated in countries
Intervention currency (peg country currency)
State driven recapitalization are now needed
The income form individual transacations

8. It is important to stay __________ with your current events
Affected by fluctuation in foreign exchange values
24/7
up to date
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

9. What are some factors that influence exchange rates?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
An attempt to collect currency receivables early as result of expected depreciation
Group of investors movement in the same direction and same time or government intervention

10. What do monetary policies do?
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
Exchange rate policies

11. When do countries use the foreign exchange market?
Banks stability was measure at a 5% capital adequacy ratio
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
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
Inflation - interest rate - and market psychology

12. Burger economics!!! Why do we use it?
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Large number of individuals and cos exchange of domestic currencies for a foreign currency
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

13. What is the first characteristic of transaction exposure ?
Lead and lag strategies
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Reserve currency
Affected by fluctuation in foreign exchange values

14. Marekts are open...
Reserve currency
24/7
Investor psychology
Group of investors movement in the same direction and same time or government intervention

15. What is the real exchange rate?
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
Goods and services of one country can be exchanged for the goods and services of another country
up to date
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency

16. What are the three ways of insuring against a Forex risk?
It helps them understand the influence of exchange rates on profitability of trade investment deals
The income form individual transacations
True
Spot rates - forward rates - and swaps

17. What is the second characteristic of lead strategy?
Paying foreign currency payable before dues as a result expected currency appreciation
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
Reserve currency
Exchange rates are determined by the demand and supply for different currencies

18. What are three factors that impact a country's future exchange rate movements?
Vehicle currency(transaction between 2 less commonly used currencies)
Inflation - interest rate - and market psychology
Currency of one country can be exchanged for the currency of another country
domino effect

19. What is the second role of the U.S. dollar outside the U.S. ?
Intervention currency (peg country currency)
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
The income form individual transacations
Transportation costs - trade barriers - and not trade inputs such as rents or wages

20. What are the three different types of foreign exchange rate risks?
Spot rates and forward rates
Firms future international earning power
State driven recapitalization are now needed
Transaction - translation and economic exposure

21. What is the third characteristic of transaction exposure?
Reserve currency
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Interest rates and money supply
Borrowing of funds in foreign currency

22. What are the two ways to reduce economic exposure?
Increase currency values and protect against increases in foreign prices of goods and services
Interest rates and money supply
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
1. distribute productive assets 2. ensure assets are not concentrated in countries

23. What is the second issue with EFSF?
London - New York - Tokyo - and Singapore
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
Intervention currency (peg country currency)
Borrowing of funds in foreign currency

24. What are the purposes of fiscal policies?
Lead and lag strategies
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Obligations for the purchase or sale of goods and services at previously agreed prices
Collecting & spending of money by the government

25. The euro faces risks fo recapitalization?
Interest rates and money supply
Banks stability was measure at a 5% capital adequacy ratio
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
domino effect

26. In the long run empirical testing has of the PPP Theory has proven to be accurate in the long run. True or False
Increase currency values and protect against increases in foreign prices of goods and services
Transaction - translation and economic exposure
Delay payables if currency is expected to depreciate
True

27. How can translation exposure be described?
Lending of funds in foreign currencies
Increase currency values and protect against increases in foreign prices of goods and services
Interest rates and money supply
Impact of currency exchange rate changes on reported financial statements

28. What is the fifth thing that determines the forex rates?
Increase their exposure to banking -'s banking center
Investor psychology
Monetary and fiscal policies
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates

29. What is externally convertible currency
Establish central control and attempts to forecast future exchange rates
up to date
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency

30. What is the nominal exchange rate?
Relative price differences and ppp
Banks stability was measure at a 5% capital adequacy ratio
Currency of one country can be exchanged for the currency of another country
Increase currency values and protect against increases in foreign prices of goods and services

31. How can transaction exposure be described?
The income form individual transacations
24/7
agreed upon austerity
True

32. Defaulting on debt has a __________ that intertwines all countries in Europe.
domino effect
State driven recapitalization are now needed
Inflation - interest rate - and market psychology
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)

33. What are the important trading centers?
London - New York - Tokyo - and Singapore
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Firms future international earning power

34. What are the first two things that determine Forex rates?
24/7
Relative price differences and ppp
Goods and services of one country can be exchanged for the goods and services of another country
Affected by fluctuation in foreign exchange values

35. When do countries use foreign exchange market?
24/7
True
u.s. dollar
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

36. What are the two ways to quote currency?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
It helps them understand the influence of exchange rates on profitability of trade investment deals
Spot rates and forward rates
Banks stability was measure at a 5% capital adequacy ratio

37. What are the characteristics of economic exposure?
up to date
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
A common reference

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

39. What is the second characteristic of lag strategy?
Monetary and fiscal policies
Delay payables if currency is expected to depreciate
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs
Transaction - translation and economic exposure

40. What is the purpose of not concentrating assets in countries?
Investor psychology
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
Increase currency values and protect against increases in foreign prices of goods and services
Goods and services of one country can be exchanged for the goods and services of another country

41. How do you establish central control?
Transaction - translation and economic exposure
State driven recapitalization are now needed
London - New York - Tokyo - and Singapore
1. protect resources efficiently 2. ensure correct mix of tactics and strategies

42. What is the second characteristic of transaction exposure?
Intervention currency (peg country currency)
Obligations for the purchase or sale of goods and services at previously agreed prices
Currency of one country can be exchanged for the currency of another country
Vehicle currency(transaction between 2 less commonly used currencies)

43. According to economic theories of exchage rate determination?
Exchange rates are determined by the demand and supply for different currencies
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
True
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

44. What are some strategies for managing forex risk?
u.s. dollar
Establish central control and attempts to forecast future exchange rates
24/7
Issue mo good loans so that profits from new business can eat away the losses form the bad

45. What are some characteristics of swaps?
Establish central control and attempts to forecast future exchange rates
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
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
u.s. dollar

46. What is the fourth characteristic of transaction exposure?
Investor psychology
Monetary and fiscal policies
Lending of funds in foreign currencies
Relative price differences and ppp

47. Most Transaction inovolve...
The income form individual transacations
u.s. dollar
Paying foreign currency payable before dues as a result expected currency appreciation
An attempt to collect currency receivables early as result of expected depreciation

48. Greece has not defaulted because it has not been able to fully implement its...
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
Inflation - interest rate - and market psychology
agreed upon austerity
Measurement of past events

49. What is a forward rate?
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days

50. What is the first characteristic of lead strategy?
An attempt to collect currency receivables early as result of expected depreciation
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Obligations for the purchase or sale of goods and services at previously agreed prices
London - New York - Tokyo - and Singapore