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Foreign Exchange Market

Subjects : business-skills, industries

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Answer 50 questions in 15 minutes.
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1. What is the fourth roles of the U.S. dollar outside the U.S.?
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
Paying foreign currency payable before dues as a result expected currency appreciation
Vehicle currency(transaction between 2 less commonly used currencies)
up to date

2. What are the purposes of fiscal policies?
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Collecting & spending of money by the government
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
An attempt to collect currency receivables early as result of expected depreciation

3. What is the second role of the U.S. dollar outside the U.S. ?
Intervention currency (peg country currency)
Exchange rates are determined by the demand and supply for different currencies
Lead and lag strategies
Affected by fluctuation in foreign exchange values

4. Currently margins require more cash reserves - What is the best method of doing this **** in the Euro Zone?
Exchange rate policies
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Large number of individuals and cos exchange of domestic currencies for a foreign currency
Issue mo good loans so that profits from new business can eat away the losses form the bad

5. What is the purpose of not concentrating assets in countries?
Measurement of past events
Affected by fluctuation in foreign exchange values
Increase currency values and protect against increases in foreign prices of goods and services
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency

6. According to economic theories of exchage rate determination?
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
The income form individual transacations
Measurement of past events
Exchange rates are determined by the demand and supply for different currencies

7. What are the two ways to reduce economic exposure?
Issue mo good loans so that profits from new business can eat away the losses form the bad
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
Large number of individuals and cos exchange of domestic currencies for a foreign currency

8. What is externally convertible currency
Delay payables if currency is expected to depreciate
State driven recapitalization are now needed
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Establish central control and attempts to forecast future exchange rates

9. What are the characteristics of economic exposure?
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
Group of investors movement in the same direction and same time or government intervention
Collecting & spending of money by the government
Increase their exposure to banking -'s banking center

10. What is the second characteristic of transaction exposure?
Paying foreign currency payable before dues as a result expected currency appreciation
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
Obligations for the purchase or sale of goods and services at previously agreed prices

11. When do countries use foreign exchange market?
Delay collection of foreign currency receivables if currency is exception to appreciate
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
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
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

12. What are some factors that influence exchange 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
Measurement of past events
Transaction - translation and economic exposure
Supply & demand of the currency -Interest rates -Inflation -Investor expectations

13. 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; delivery within two days (conversion on a particular day)
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Firms future international earning power

14. Burger economics!!! Why do we use it?
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
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
It is used to measure how far the nominal exchange rate deviate from the one that would create PPP

15. What is the second characteristic of lead strategy?
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
Paying foreign currency payable before dues as a result expected currency appreciation
agreed upon austerity

16. What are the types of Exchange Rate Fluctuations?
Transaction - translation and economic exposure
Monetary and fiscal policies
An attempt to collect currency receivables early as result of expected depreciation
London - New York - Tokyo - and Singapore

17. Most Transaction inovolve...
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
u.s. dollar
True
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

18. No single theory can explain explain the causes the value of currencies to change. True or False?
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Supply & demand of the currency -Interest rates -Inflation -Investor expectations
Government allows both residents and non residents to purchase unlimited amounts of foreign currency with domestic currency
True

19. What are the three different types of foreign exchange rate risks?
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
Transaction - translation and economic exposure
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

20. What is the fourth thing that determines the forex rates?
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency
Exchange rate policies
Affected by fluctuation in foreign exchange values
Firms future international earning power

21. What is capital fight when looking at it form investor psychology?
State driven recapitalization are now needed
Large number of individuals and cos exchange of domestic currencies for a foreign currency
London - New York - Tokyo - and Singapore
Delay collection of foreign currency receivables if currency is exception to appreciate

22. What is arbitrage?
Goods and services of one country can be exchanged for the goods and services of another country
Interest rates and money supply
Monetary and fiscal policies
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)

23. Defaulting on debt has a __________ that intertwines all countries in Europe.
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
A common reference
domino effect
True

24. What is the first characteristic of transaction exposure ?
Collecting & spending of money by the government
An attempt to collect currency receivables early as result of expected depreciation
Affected by fluctuation in foreign exchange values
1. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.

25. What is a currency swamp?
It helps them understand the influence of exchange rates on profitability of trade investment deals
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
Investor psychology
True

26. 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
Inflation - interest rate - and market psychology
Relative price differences and ppp
Large number of individuals and cos exchange of domestic currencies for a foreign currency

27. What is the nature of the forex market?
Control the amount of money in circulation - enforced by government policies - focus on growth rate
A common reference
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
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

28. What is the second thing that determines the Forex rates?
Establish central control and attempts to forecast future exchange rates
Exchange rates are determined by the demand and supply for different currencies
Interest rates and money supply
Delay collection of foreign currency receivables if currency is exception to appreciate

29. What is the third role of the U.S. dollar outside the U.S.?
Impact of currency exchange rate changes on reported financial statements
Reserve currency
Delay collection of foreign currency receivables if currency is exception to appreciate
1. distribute productive assets 2. ensure assets are not concentrated in countries

30. What is the first characteristic of lag strategy?
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency swaps
Transaction - translation and economic exposure
Forward exchange or spot exchange
Delay collection of foreign currency receivables if currency is exception to appreciate

31. How can translation exposure be described?
Banks stability was measure at a 5% capital adequacy ratio
Delay payables if currency is expected to depreciate
24/7
Impact of currency exchange rate changes on reported financial statements

32. What are other strategies for managing forex risk?
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. receive payments for exports 2. receive income from FDI 3. Receive income from licensing agreements with foreign firms are in foreign currencies.
Goods and services of one country can be exchanged for the goods and services of another country
Estb. good reporting systems - check monthly foreign exchange reports and distinguish between transaction - economic and translation exposure

33. How and What is the purpose of distributing assets?
Impact of currency exchange rate changes on reported financial statements
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
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
An attempt to collect currency receivables early as result of expected depreciation

34. How do you establish central control?
Monetary and fiscal policies
1. protect resources efficiently 2. ensure correct mix of tactics and strategies
Banks stability was measure at a 5% capital adequacy ratio
24/7

35. Marekts are open...
24/7
Large number of individuals and cos exchange of domestic currencies for a foreign currency
Increase their exposure to banking -'s banking center
Exchange rates are determined by the demand and supply for different currencies

36. What is the first issue with EFSF?
Inflation - interest rate - and market 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
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
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

37. What do monetary policies do?
Control the amount of money in circulation - enforced by government policies - focus on growth rate
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
Monetary and fiscal policies

38. What is the nominal exchange rate?
Monetary and fiscal policies
Collecting & spending of money by the government
Transportation costs - trade barriers - and not trade inputs such as rents or wages
Currency of one country can be exchanged for the currency of another country

39. Greece has not defaulted because it has not been able to fully implement its...
Vehicle currency(transaction between 2 less commonly used currencies)
agreed upon austerity
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

40. What is the fourth characteristic of transaction exposure?
Affected by changes in exchange rates aslo long term effect of changes in exchange rates on future prices - sales - and costs
Lead and lag strategies
Lending of funds in foreign currencies
True

41. What is economic 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
Firms future international earning power
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency

42. What is the characteristic of translation expose?
Spot rates - forward rates - and swaps
An attempt to collect currency receivables early as result of expected depreciation
Measurement of past events
up to date

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

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44. What is the first roels of the U.S. dollar outside the U.S.?
Productivity and balance payments
Vehicle currency(transaction between 2 less commonly used currencies)
The purchase of securities in one market for immediate resale in another to profit from a price discrepancy (no risk)
A common reference

45. 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
Banks stability was measure at a 5% capital adequacy ratio
The process of insuring one's business against foreign exchange risk by using forward exchanges or currency 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

46. What is a forward rate?
Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates
The exchange rate between 2 currencies;future delievery in 30/60/90/180 days
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
Reserve currency

47. In the long run empirical testing has of the PPP Theory has proven to be accurate in the long run. True or False
Firms future international earning power
A common reference
Currency of one country can be exchanged for the currency of another country
True

48. What are some strategies for managing forex risk?
Increase their exposure to banking -'s banking center
Increase currency values and protect against increases in foreign prices of goods and services
Establish central control and attempts to forecast future exchange rates
State driven recapitalization are now needed

49. What is the law of one price?
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
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
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 the second characteristic of lag strategy?
Establish central control and attempts to forecast future exchange rates
Distribute to various locatoij so firms long term financial well being is not severly affected by changes in exchange rates
Delay payables if currency is expected to depreciate
1. non residents can convert their holdings of domestic currency 2. residents are limited in some way to convert currency

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Foreign Exchange Market

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