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. Because many banks (2/3) are below the capital adequacy ratio of 9% many can not recapitalize on their own as a result
State driven recapitalization are now needed
The income form individual transacations
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Relative price differences and ppp

2. How and What is the purpose of distributing assets?
Lending of funds in foreign currencies
Currency of one country can be exchanged for the currency of another country
Delay payables if currency is expected to depreciate
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates

3. What are two methods of reducing translation and transaction exposure?
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Lead and lag strategies
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Collecting & spending of money by the government

4. What is the fourth characteristic of transaction exposure?
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
Productivity and balance payments
Affected by fluctuation in foreign exchange values
Lending of funds in foreign currencies

5. What are the two ways to quote currency?
True
Spot rates and forward rates
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
Increase their exposure to banking -'s banking center

6. When do countries use foreign exchange market?
It helps them understand the influence of exchange rates on profitability of trade investment deals
Vehicle currency(transaction between 2 less commonly used currencies)
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
agreed upon austerity

7. What are some factors that influence exchange rates?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
State driven recapitalization are now needed
Productivity and balance payments
Delay collection of foreign currency receivables if currency is exception to appreciate

8. What is the first characteristic of lead strategy?
An attempt to collect currency receivables early as result of expected depreciation
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Obligations for the purchase or sale of goods and services at previously agreed prices
Spot rates - forward rates - and swaps

9. The euro faces risks fo recapitalization?
Banks stability was measure at a 5% capital adequacy ratio
Transaction - translation and economic exposure
1. distribute productive assets 2. ensure assets are not concentrated in countries
Group of investors movement in the same direction and same time or government intervention

10. What is the law of one price?
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
Delay payables if currency is expected to depreciate
24/7
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

11. What are the types of Exchange Rate Fluctuations?
The income form individual transacations
Monetary and fiscal policies
An attempt to collect currency receivables early as result of expected depreciation
Increase their exposure to banking -'s banking center

12. What is the fifth thing that determines the forex 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
Reserve currency
Paying foreign currency payable before dues as a result expected currency appreciation
Investor psychology

13. In the long run empirical testing has of the PPP Theory has proven to be accurate in the long run. True or False
Monetary and fiscal policies
Establish central control and attempts to forecast future exchange rates
True
London - New York - Tokyo - and Singapore

14. What is free convertible currency?
Relative price differences and ppp
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Control the amount of money in circulation - enforced by government policies - focus on growth rate

15. What is the first roels of the U.S. dollar outside the U.S.?
up to date
London - New York - Tokyo - and Singapore
A common reference
True

16. What is the bandwagon effect when looking at form investor psychology ?
London - New York - Tokyo - and Singapore
Collecting & spending of money by the government
Group of investors movement in the same direction and same time or government intervention
Establish central control and attempts to forecast future exchange rates

17. What is the nature of the forex market?
Investor psychology
It helps them understand the influence of exchange rates on profitability of trade investment deals
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

18. What is capital fight when looking at it form investor psychology?
Goods and services of one country can be exchanged for the goods and services of another country
Delay collection of foreign currency receivables if currency is exception to appreciate
An attempt to collect currency receivables early as result of expected depreciation
Large number of individuals and cos exchange of domestic currencies for a foreign currency

19. What is hedging?

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

20. What is the nominal exchange rate?
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
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
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency

21. What are the first two things that determine Forex rates?
True
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
Firms future international earning power

22. What are the three different types of foreign exchange rate risks?
Vehicle currency(transaction between 2 less commonly used currencies)
Transaction - translation and economic exposure
24/7
State driven recapitalization are now needed

23. Burger economics!!! Why do we use it?
True
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Increase currency values and protect against increases in foreign prices of goods and services
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP

24. What is the third characteristic of transaction exposure?
Borrowing of funds in foreign currency
Large number of individuals and cos exchange of domestic currencies for a foreign currency
Banks stability was measure at a 5% capital adequacy ratio
Inflation - interest rate - and market psychology

25. Greece has not defaulted because it has not been able to fully implement its...
agreed upon austerity
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
True
up to date

26. What is the first characteristic of transaction exposure ?
Relative price differences and ppp
Affected by fluctuation in foreign exchange values
Inflation - interest rate - and market psychology
True

27. What is the second issue with EFSF?
Large number of individuals and cos exchange of domestic currencies for a foreign 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
Lead and lag strategies
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

28. What are the purposes of fiscal policies?
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Collecting & spending of money by the government
Supply & demand of the currency -Interest rates -Inflation -Investor expectations

29. What are some characteristics of swaps?
Increase currency values and protect against increases in foreign prices of goods and services
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
Exchange rate policies
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

30. It is important to stay __________ with your current events
Paying foreign currency payable before dues as a result expected currency appreciation
Increase their exposure to banking -'s banking center
Measurement of past events
up to date

31. How can translation exposure be described?
Spot rates and forward rates
Transaction - translation and economic exposure
Delay payables if currency is expected to depreciate
Impact of currency exchange rate changes on reported financial statements

32. 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)
Productivity and balance payments
1. distribute productive assets 2. ensure assets are not concentrated in countries

33. What is the third thing that determines the forex rates?
Measurement of past events
Affected by fluctuation in foreign exchange values
Delay payables if currency is expected to depreciate
Productivity and balance payments

34. What is the second thing that determines the Forex rates?
domino effect
Banks stability was measure at a 5% capital adequacy ratio
Interest rates and money supply
A common reference

35. No single theory can explain explain the causes the value of currencies to change. True or False?
Transaction - translation and economic exposure
Vehicle currency(transaction between 2 less commonly used currencies)
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
True

36. What are the important trading centers?
Relative price differences and ppp
London - New York - Tokyo - and Singapore
Collecting & spending of money by the government
Transportation costs - trade barriers - and not trade inputs such as rents or wages

37. What is the first characteristic of lag strategy?
Inflation - interest rate - and market psychology
Group of investors movement in the same direction and same time or government intervention
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
Delay collection of foreign currency receivables if currency is exception to appreciate

38. What is the first issue with EFSF?
Increase their exposure to banking -'s banking center
Productivity and balance payments
An attempt to collect currency receivables early as result of expected depreciation
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

39. What are three factors that impact a country's future exchange rate movements?
Inflation - interest rate - and market psychology
A common reference
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Monetary and fiscal policies

40. What is the third role of the U.S. dollar outside the U.S.?
Spot rates - forward rates - and swaps
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
Banks stability was measure at a 5% capital adequacy ratio
Reserve currency

41. What is the fourth roles of the U.S. dollar outside the U.S.?
Vehicle currency(transaction between 2 less commonly used currencies)
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
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Transportation costs - trade barriers - and not trade inputs such as rents or wages

42. What is the second characteristic of lead strategy?
Productivity and balance payments
Affected by fluctuation in foreign exchange values
London - New York - Tokyo - and Singapore
Paying foreign currency payable before dues as a result expected currency appreciation

43. What do monetary policies do?
domino effect
Goods and services of one country can be exchanged for the goods and services of another country
London - New York - Tokyo - and Singapore
Control the amount of money in circulation - enforced by government policies - focus on growth rate

44. What implications does understanding foreign exchange rates have on managers?
Spot rates - forward rates - and swaps
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
It helps them understand the influence of exchange rates on profitability of trade investment deals

45. What are some strategies for managing forex risk?
Monetary and fiscal policies
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
Establish central control and attempts to forecast future exchange rates
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency

46. What is externally convertible currency
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
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Goods and services of one country can be exchanged for the goods and services of another country

47. What is non convertible currency?
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
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
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
1. protect resources efficiently 2. ensure correct mix of tactics and strategies

48. How can transaction exposure be described?
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
The income form individual transacations
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Group of investors movement in the same direction and same time or government intervention

49. What is the second characteristic of lag strategy?
Delay payables if currency is expected to depreciate
Control the amount of money in circulation - enforced by government policies - focus on growth 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
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

50. What is a spot rate?
Banks stability was measure at a 5% capital adequacy ratio
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
Spot rates and forward rates
24/7