The Market for Foreign ExchangeMultiple Choice Questions.doc

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1、Lecture 5 - The Market for Foreign Exchange5-1 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website

2、, in whole or part.Lecture 5(Chapter 5) The Market for Foreign ExchangeMultiple Choice Questions1. The worlds largest foreign exchange trading center is A. New York. B. Tokyo. C. London. D. Hong Kong.2. On average, worldwide daily trading of foreign exchange is A. impossible to estimate. B. $15 bill

3、ion. C. $504 billion. D. $3.21 trillion.3. The foreign exchange market closes 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).4. Most foreign exchange transactions are for A. intervention by central banks. B. interbank trades between internationa

4、l banks or nonbank dealers. C. retail trade. D. purchase of hard currencies.Lecture 5 - The Market for Foreign Exchange5-2 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be

5、 copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.5. The difference between a broker and a dealer is 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

6、 their inventory. C. brokers transact in stocks and bonds; currency is bought and sold through dealers. D. none of the above6. Most interbank trades are A. speculative or arbitrage transactions. B. simple order processing for the retail client. C. overnight loans from one bank to another. D. brokere

7、d by dealers.7. At the wholesale level 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.8. Intervention in the

8、foreign exchange market is the process of 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

9、order to influence its value. D. the government of a country prohibiting transactions in one or more currencies.9. The standard size foreign exchange transactions are for A. $10 million U.S. B. $1 million U.S. C. 1 million.Lecture 5 - The Market for Foreign Exchange5-3 2012 by McGraw-Hill Education.

10、 This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.10. Consider a U.S. importer desiring to purchase merchand

11、ise 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 wil

12、l _the importers account in the amount of _. A. debit, $500,000 B. credit, 512,100 C. credit, $500,000 D. debit, 512,10011. The current exchange rate is 1.00 = $2.00. Compute the correct balances in Bank As correspondent account(s) with bank B if a currency trader employed at Bank A buys 45,000 from

13、 a currency trader at bank B for $90,000 using its correspondent relationship with Bank B. A. Bank As dollar-denominated account at B will fall by $90,000. B. Bank Bs dollar-denominated account at A will rise by $90,000. C. Bank As pound-denominated account at B will rise by 45,000. D. Bank Bs pound

14、-denominated account at A will fall by 45,000. E. All of the above are correct12. The current exchange rate is 1.00 = $2.00. Compute the correct balances in Bank As 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 u

15、sing its correspondent relationship with Bank B. A. Bank As dollar-denominated account at B will rise by $90,000. B. Bank Bs dollar-denominated account at A will fall by $90,000. C. Bank As pound-denominated account at B will rise by 45,000. D. Bank Bs pound-denominated account at A will rise by 45,

16、000.Lecture 5 - The Market for Foreign Exchange5-4 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a web

17、site, in whole or part.13. The current exchange rate is 1.00 = $1.50. Compute the correct balances in Bank As correspondent account(s) with bank B if a currency trader employed at Bank A buys 100,000 from a currency trader at bank B for $150,000 using its correspondent relationship with Bank B. A. B

18、ank As dollar-denominated account at B will fall by $150,000. B. Bank Bs dollar-denominated account at A will fall by $150,000. C. Bank As pound-denominated account at B will fall by 100,000. D. Bank Bs pound-denominated account at A will rise by 100,000.14. The spot market A. involves the almost-im

19、mediate 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.15. Spot foreign exchange trading A. accounts for about 5 percent of all foreign exchange trading. B.

20、 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.Spot Rate QuotationsLecture 5 - The Market for Foreign Exchange5-5 2012 by McGraw-Hill Education. This is

21、 proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.16. Using the table shown, what is the most current spot exchange

22、rate shown for British pounds? Use a direct quote from a U.S. perspective. A. $1.61 = 1.00 B. $1.60 = 1.00 C. $1.00 = 0.625 D. $1.72 = 1.0017. Suppose that the current exchange rate is 0.80 = $1.00. The direct quote, from the U.S. perspective is A. 1.00 = $1.25. B. 0.80 = $1.00. C. 1.00 = $1.80. D.

23、None of the above18. Suppose that the current exchange rate is 1.00 = $1.60. The indirect quote, from the U.S. perspective is A. 1.00 = $1.60. B. 0.6250 = $1.00. C. 1.60 = $1.00. D. None of the above19. Suppose that the current exchange rate is 1.00 = $2.00. The indirect quote, from the U.S. perspec

24、tive is A. 1.00 = $2.00. B. 1.00 = $0.50. C. 0.50 = $1.00. D. None of the above20. Indirect exchange rate quotations from the U.S. perspective are 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.Lecture 5 - The Mar

25、ket for Foreign Exchange5-6 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

26、21. 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. A. 86 percent B. 75 percent C. 45 percen

27、t D. 15 percent22. 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 man

28、y quotes would he have to provide? A. 36 B. 30 C. 60 D. 120 E. None of the above23. The Bid price A. is the price that the dealer has just paid for something, his historical cost of the most recent trade. B. is the price that a dealer stands ready to pay. C. refers only to auctions like eBay, not ov

29、er the counter transactions with dealers. D. is the price that a dealer stands ready to sell at.24. Suppose the spot ask exchange rate, Sa($|), is $1.90 = 1.00 and the spot bid exchange rate, Sb($|), is $1.89 = 1.00. If you were to buy $10,000,000 worth of British pounds and then sell them five minu

30、tes later, how much of your $10,000,000 would be “eaten“ by the bid- ask spread? A. $1,000,000 B. $52,910.05 C. $100,000 D. $52,631.58Lecture 5 - The Market for Foreign Exchange5-7 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sa

31、le or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.25. If the $/ bid and ask prices are $1.50/ and $1.51/, respectively, the corresponding /$ bid and ask prices are A. 0.6667 and 0.6623. B. $1.51 an

32、d $1.50. C. 0.6623 and 0.6667. D. cannot be determined with the information given.26. In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/ bid-ask quote of $1.9072-$1.9077. The “big figure“, assumed to be known to all

33、traders is _. A. 1.9077 B. 1 C. 1.90 D. 7727. In conversation, interbank foreign exchange traders use a shorthand abbreviation in expressing spot currency quotations. Consider a $/ bid-ask quote of $1.9072-$1.9077. The currency dealer would likely quote that as _. A. 72-77 B. 77-72 C. 5 points D. No

34、ne of the above28. In the Interbank market, the standard size of a trade among large banks in the major currencies is A. for the U.S.-dollar equivalent of $10,000,000,000. B. for the U.S.-dollar equivalent of $10,000,000. C. for the U.S.-dollar equivalent of $100,000. D. for the U.S.-dollar equivale

35、nt of $1,000.Lecture 5 - The Market for Foreign Exchange5-8 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted

36、 on a website, in whole or part.29. A dealer in British pounds who thinks that the pound is about to appreciate A. may want to widen his bid-ask spread by raising his ask price. B. may want to lower his bid price. C. may want to lower his ask price. D. none of the above30. A dealer in British pounds

37、 who thinks that the pound is about to depreciate A. may want to widen his bid-ask spread by raising his ask price. B. may want to lower his bid price and his ask price. C. may want to lower his ask price. D. none of the above.31. A dealer in pounds who thinks that the exchange rate is about to incr

38、ease in volatility A. may want to widen his bid-ask spread. B. may want to decrease his bid-ask spread. C. may want to lower his ask price. D. none of the above.Lecture 5 - The Market for Foreign Exchange5-9 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor

39、 use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.32. Using the table shown, what is the spot cross-exchange rate between pounds and euro? A. 1.00 = 0.75 B. 1.33 = 1.00 C

40、. 1.00 = 0.75 D. none of the above33. The dollar-euro exchange rate is $1.25 = 1.00 and the dollar-yen exchange rate is 100 = $1.00. What is the euro-yen cross rate? A. 125 = 1.00 B. 1.00 = 125 C. 1.00 = 0.80 D. None of the above34. Suppose you observe the following exchange rates: 1 = $1.25; 1 = $2

41、.00. Calculate the euro-pound exchange rate. A. 1 = 1.60 B. 1 = 0.625 C. 2.50 = 1 D. 1 = 2.5035. The AUD/$ spot exchange rate is AUD1.60/$ and the SF/$ is SF1.25/$. The AUD/SF cross exchange rate is _. A. 0.7813 B. 2.0000 C. 1.2800 D. 0.350036. Suppose you observe the following exchange rates: 1 = $

42、1.50; 1 = $2.00. Calculate the euro-pound exchange rate. A. 1.3333 = 1.00 B. 1.3333 = 1.00 C. 3.00 = 1 D. 1.25 = 1.00Lecture 5 - The Market for Foreign Exchange5-10 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributi

43、on in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.37. Suppose you observe the following exchange rates: 1 = $1.60; 1 = $2.00. Calculate the euro-pound exchange rate. A. 1.3333 = 1.00 B. 1.3333 = 1.00 C. 3.00 = 1 D

44、. 1.25 = 1.0038. Suppose you observe the following exchange rates: 1 = $1.50; 120 = $1.00. Calculate the euro-pound exchange rate. A. 133.33 = 1.00 B. 1.00 = 180 C. 80 = 1.00 D. 1 = 2.5039. Suppose you observe the following exchange rates: 1 = $1.45; 1 = $1.90. Calculate the euro-pound exchange rate

45、. A. 1.3103 = 1.00 B. 1.3333 = 1.00 C. 2.00 = 1 D. 3 = 140. What is the BID cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Swiss francs. A. 0.5386/CHF B. 0.5389/CHF C. 0.5463/CHF D. 0.5466/CHFLecture 5 - The Market for Foreign

46、 Exchange5-11 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.41. What is th

47、e ASK cross-exchange rate for Swiss Francs priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Swiss francs. A. 0.5386/CHF B. 0.5389/CHF C. 0.5463/CHF D. 0.5466/CHF42. Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is quoted as $1.60 = 1.00

48、 and the dollar-pound exchange rate is quoted at $2.00 = 1.00. A. 1.25/1.00 B. $1.25/1.00 C. 1.25/1.00 D. 0.80/1.0043. What is the BID cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will pay in euro to buy Canadian dollars. A. 0.6094/CAD B. 0.6104/CAD C. 0.6181/CAD D. 0.6191/CAD44. What is the ASK cross-exchange rate for Canadian dollars priced in euro? Hint: Find the price that a currency dealer will take in euro to sell Canadian dollars. A. 0.6094/CAD B. 0.6104/CAD C. 0.6181/CAD D. 0.6191/CADLecture 5 - The Market for Fore