The Market For Foreign Exchange

This question bank verified by Studydeets
All Questions
Filter by:
Question 1
Free
Multiple Choice

The world's largest foreign exchange trading center is

Choose correct answer/s
A

New York.

B

Tokyo.

C

London.

D

Hong Kong.

Check answer
Question 2
Free
Multiple Choice

On average,worldwide daily trading of foreign exchange is

Choose correct answer/s
A

impossible to estimate.

B

$15 billion.

C

$504 billion.

D

$3.21 trillion.

Check answer
Question 3
Free
Multiple Choice

The foreign exchange market closes

Choose correct answer/s
A

Never.

B

4:00 p.m.EST (New York time).

C

4:00 p.m.GMT (London time).

D

4:00 p.m.(Tokyo time).

Check answer
Question 4
Free
Multiple Choice

Most foreign exchange transactions are for

Choose correct answer/s
A

intervention by central banks.

B

interbank trades between international banks or nonbank dealers.

C

retail trade.

D

purchase of hard currencies.

Check answer
Question 5
Free
Multiple Choice

The difference between a broker and a dealer is

Choose correct answer/s
A

dealers sell drugs; brokers sell houses.

B

brokers bring together buyers and sellers, but carry no inventory; dealers stand ready to buy and sell from their inventory.

C

brokers transact in stocks and bonds; currency is bought and sold through dealers.

D

none of the above

Check answer
Question 6
Multiple Choice

Most interbank trades are

Choose correct answer/s
A
speculative or arbitrage transactions.
B
simple order processing for the retail client.
C
overnight loans from one bank to another.
D
brokered by dealers.
To unlock the question
Question 7
Multiple Choice

At the wholesale level

Choose correct answer/s
A
most trading takes place OTC between individuals on the floor of the exchange.
B
most trading takes place over the phone.
C
most trading flows over Reuters and EBS platforms.
D
most trading flows through specialized "broking" firms.
To unlock the question
Question 8
Multiple Choice

Intervention in the foreign exchange market is the process of

Choose correct answer/s
A
a central bank requiring the commercial banks of that country to trade at a set price level.
B
commercial banks in different countries coordinating efforts in order to stabilize one or more currencies.
C
a central bank buying or selling its currency in order to influence its value.
D
the government of a country prohibiting transactions in one or more currencies.
To unlock the question
Question 9
Multiple Choice

The standard size foreign exchange transactions are for

Choose correct answer/s
A
$10 million U.S.
B
$1 million U.S.
C
€1 million.
To unlock the question
Question 10
Multiple Choice

Consider a U.S.importer desiring to purchase merchandise from a Dutch exporter invoiced in euros,at a cost of €512,100.The U.S.importer will contact his U.S.bank (where of course he has an account denominated in U.S.dollars)and inquire about the exchange rate,which the bank quotes as €1.0242/$1.00.The importer accepts this price,so his bank will ____________ the importer's account in the amount of ____________ .

Choose correct answer/s
A
debit, $500,000
B
credit, €512,100
C
credit, $500,000
D
debit, €512,100
To unlock the question
Question 11
Multiple Choice

The current exchange rate is £1.00 = $2.00.Compute the correct balances in Bank A's correspondent account(s)with bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at bank B for $90,000 using its correspondent relationship with Bank B.

Choose correct answer/s
A
Bank A's dollar-denominated account at B will fall by $90,000.
B
Bank B's dollar-denominated account at A will rise by $90,000.
C
Bank A's pound-denominated account at B will rise by £45,000.
D
Bank B's pound-denominated account at A will fall by £45,000.
E
All of the above are correct
To unlock the question
Question 12
Multiple Choice

The spot market

Choose correct answer/s
A
involves the almost-immediate purchase or sale of foreign exchange.
B
involves the sale of futures, forwards, and options on foreign exchange.
C
takes place only on the floor of a physical exchange.
D
all of the above.
To unlock the question
Question 13
Multiple Choice

Spot foreign exchange trading

Choose correct answer/s
A
accounts for about 5 percent of all foreign exchange trading.
B
accounts for about 20 percent of all foreign exchange trading.
C
accounts for about 33 percent of all foreign exchange trading.
D
accounts for about 70 percent of all foreign exchange trading.
To unlock the question
Question 14
Multiple Choice

Using the table shown,what is the most current spot exchange rate shown for British pounds? Use a direct quote from a U.S.perspective.

Choose correct answer/s
A
$1.61 = £1.00
B
$1.60 = £1.00
C
$1.00 = £0.625
D
$1.72 = £1.00
To unlock the question
Question 15
Multiple Choice

Suppose that the current exchange rate is €0.80 = $1.00.The direct quote,from the U.S.perspective is

Choose correct answer/s
A
€1.00 = $1.25.
B
€0.80 = $1.00.
C
£1.00 = $1.80.
D
None of the above
To unlock the question
Question 16
Multiple Choice

Suppose that the current exchange rate is €1.00 = $1.60.The indirect quote,from the U.S.perspective is

Choose correct answer/s
A
€1.00 = $1.60.
B
€0.6250 = $1.00.
C
€1.60 = $1.00.
D
None of the above
To unlock the question
Question 17
Multiple Choice

Suppose that the current exchange rate is £1.00 = $2.00.The indirect quote,from the U.S.perspective is

Choose correct answer/s
A
£1.00 = $2.00.
B
£1.00 = $0.50.
C
£0.50 = $1.00.
D
None of the above
To unlock the question
Question 18
Multiple Choice

Indirect exchange rate quotations from the U.S.perspective are

Choose correct answer/s
A
the price of one unit of the foreign currency in terms of the U.S.dollar.
B
the price of one U.S.dollar in the foreign currency.
To unlock the question
Question 19
Multiple Choice

It is common practice among currency traders worldwide to both price and trade currencies against the U.S.dollar.In fact,2007 BIS statistics indicate that about _________ of currency trading in the world involves the U.S.dollar on one side of the transaction.

Choose correct answer/s
A
86 percent
B
75 percent
C
45 percent
D
15 percent
To unlock the question
Question 20
Multiple Choice

It is common practice among currency traders worldwide to both price and trade currencies against the U.S.dollar.Consider a currency dealer who makes a market in 5 currencies against the dollar.If he were to supply quotes for each currency in terms of all of the others,how many quotes would he have to provide?

Choose correct answer/s
A
36
B
30
C
60
D
120
E
None of the above
To unlock the question