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. How do you establish central control?
True
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
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
domino effect

2. Defaulting on debt has a __________ that intertwines all countries in Europe.
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
Exchange rate policies
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
domino effect

3. What are the three ways of insuring against a Forex risk?
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
An attempt to collect currency receivables early as result of expected depreciation
Spot rates - forward rates - and swaps
Transaction - translation and economic exposure

4. What are some strategies for managing forex risk?
Banks stability was measure at a 5% capital adequacy ratio
Establish central control and attempts to forecast future exchange rates
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Investor psychology

5. What causes big mac prices to vary?
Lending of funds in foreign currencies
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Intervention currency (peg country currency)
u.s. dollar

6. What is the second characteristic of transaction exposure?
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
Obligations for the purchase or sale of goods and services at previously agreed prices
Relative price differences and ppp
Spot rates - forward rates - and swaps

7. What is the nominal exchange rate?
Currency of one country can be exchanged for the currency of another country
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
Issue mo good loans so that profits from new business can eat away the losses form the bad

8. No single theory can explain explain the causes the value of currencies to change. True or False?
True
Reserve currency
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

9. What is arbitrage?
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
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
domino effect

10. What is the first characteristic of lag strategy?
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Delay collection of foreign currency receivables if currency is exception to appreciate
A common reference
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days

11. What are the purposes of fiscal policies?
domino effect
Investor psychology
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
Collecting & spending of money by the government

12. Greece has not defaulted because it has not been able to fully implement its...
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
Control the amount of money in circulation - enforced by government policies - focus on growth rate
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)
agreed upon austerity

13. What are the characteristics of economic exposure?
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
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 payables if currency is expected to depreciate
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs

14. What is the second issue with EFSF?
agreed upon austerity
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
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
Spot rates - forward rates - and swaps

15. 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

16. What is externally convertible currency
The income form individual transacations
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Vehicle currency(transaction between 2 less commonly used currencies)
Large number of individuals and cos exchange of domestic currencies for a foreign currency

17. What is the third characteristic of transaction exposure?
Collecting & spending of money by the government
Borrowing of funds in foreign currency
True
Delay collection of foreign currency receivables if currency is exception to appreciate

18. What are three factors that impact a country's future exchange rate movements?
Inflation - interest rate - and market psychology
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
Interest rates and money supply
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency

19. How can transaction exposure be described?
24/7
domino effect
The income form individual transacations
Goods and services of one country can be exchanged for the goods and services of another country

20. What is a currency swamp?
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
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
London - New York - Tokyo - and Singapore

21. What is the third thing that determines the forex rates?
Inflation - interest rate - and market psychology
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
Paying foreign currency payable before dues as a result expected currency appreciation

22. What are the three different types of foreign exchange rate risks?
Increase their exposure to banking -'s banking center
Transaction - translation and economic exposure
Forward exchange or spot exchange
Borrowing of funds in foreign currency

23. What is the fourth thing that determines the forex rates?
The income form individual transacations
Exchange rate policies
Paying foreign currency payable before dues as a result expected currency appreciation
Transaction - translation and economic exposure

24. What is the purpose of not concentrating assets in countries?
Vehicle currency(transaction between 2 less commonly used currencies)
Group of investors movement in the same direction and same time or government intervention
Obligations for the purchase or sale of goods and services at previously agreed prices
Increase currency values and protect against increases in foreign prices of goods and services

25. What do monetary policies do?
Inflation - interest rate - and market psychology
Spot rates - forward rates - and swaps
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

26. According to economic theories of exchage rate determination?
An attempt to collect currency receivables early as result of expected depreciation
Delay collection of foreign currency receivables if currency is exception to appreciate
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Exchange rates are determined by the demand and supply for different currencies

27. What is the first characteristic of transaction exposure ?
Spot rates - forward rates - and swaps
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert 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
Affected by fluctuation in foreign exchange values

28. 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
Firms future international earning power
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
True

29. What is capital fight when looking at it form investor psychology?
Large number of individuals and cos exchange of domestic currencies for a foreign currency
Establish central control and attempts to forecast future exchange rates
Reserve currency
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

30. How do you insure or hedge against a Forex risk?
Forward exchange or spot exchange
Lending of funds in foreign currencies
Spot rates and forward rates
Exchange rate policies

31. What is free convertible 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
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
Lead and lag strategies
Exchange rate policies

32. 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
An attempt to collect currency receivables early as result of expected depreciation
Lead and lag strategies
True

33. What is the first characteristic of lead strategy?
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure
Issue mo good loans so that profits from new business can eat away the losses form the bad
An attempt to collect currency receivables early as result of expected depreciation

34. What is the fourth roles of the U.S. dollar outside the U.S.?
Vehicle currency(transaction between 2 less commonly used currencies)
Monetary and fiscal policies
Lending of funds in foreign currencies
Banks stability was measure at a 5% capital adequacy ratio

35. How can translation exposure be described?
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
Reserve 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
Impact of currency exchange rate changes on reported financial statements

36. What is the law of one price?
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
Increase currency values and protect against increases in foreign prices of goods and services
Issue mo good loans so that profits from new business can eat away the losses form the bad

37. Currently margins require more cash reserves - What is the best method of doing this **** in the Euro Zone?
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
Issue mo good loans so that profits from new business can eat away the losses form the bad
agreed upon austerity
Currency of one country can be exchanged for the currency of another country

38. What is non convertible currency?
True
Both residents and on residents are prohibited from converting their holdings of domestic currency into a foreign currency
Reserve currency
domino effect

39. What are the first two things that determine Forex rates?
Productivity and balance payments
The income form individual transacations
Relative price differences and ppp
Monetary and fiscal policies

40. What are the two ways to reduce economic exposure?
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
Investor psychology
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

41. Burger economics!!! Why do we use it?
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP
True
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

42. What are some characteristics of swaps?
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. 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
Forward exchange or spot exchange

43. What is the second role of the U.S. dollar outside the U.S. ?
Delay payables if currency is expected to depreciate
Intervention currency (peg country currency)
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
agreed upon austerity

44. Most Transaction inovolve...
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
u.s. dollar
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

45. Bailout Fund of EFSF - What is this shiz nitz?
Group of investors movement in the same direction and same time or government intervention
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
Manages the Greeks - the Irish - and Portuguese bailouts and has passed recent amendments to legally assit euro banks and govs

46. What is the first issue with EFSF?
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
Investor psychology
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
Affected by fluctuation in foreign exchange values

47. What are the two ways to quote currency?
1. distribute productive assets 2. ensure assets are not concentrated in countries
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
The exchange rate between 2 currencies; delivery within two days (conversion on a particular day)

48. When do countries use the foreign exchange market?
Borrowing of funds in foreign currency
True
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
Inflation - interest rate - and market psychology

49. What are some factors that influence exchange rates?
domino effect
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
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

50. What is the real exchange rate?
Paying foreign currency payable before dues as a result expected currency appreciation
Spot rates - forward rates - and swaps
Goods and services of one country can be exchanged for the goods and services of another country
Banks stability was measure at a 5% capital adequacy ratio