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Multiple Choice Quiz
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1
The foreign exchange market:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
2
A market for converting the currency of one country into that of another is called a(n):
A)free trade market.
B)FDI market.
C)foreign exchange market.
D)currency Speculation market.
E)arbitrage market.
3
An exchange rate:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
4
Adverse consequences of unpredictable changes in exchange rates refers to:
A)free trade limitation.
B)FDI aftermath.
C)arbitrage.
D)foreign exchange risk.
E)International Fisher Effect.
5
Which of these is not a main use of the foreign exchange markets?
A)Converting the payments received from exports and/or licensing contracts.
B)Paying a foreign company for its products/services.
C)Investing for short-term in money markets.
D)Currency speculation.
E)Meeting the payroll needs of the domestic employees.
6
Currency speculation:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
7
Canadian dollar's importance worldwide: as the text explains, our currency is linked to raw materials, which results in our dollar being recognized as a
A)Poor risk
B)High risk
C)"petrocurrency"
D)Gold standard
E)Exchange rate
8
The spot exchange:
A)is for converting the currency of one country into the currency of another.
B)is simply the rate at which one currency is converted into another.
C)is to provide some insurance against exchange risk.
D)is the short term movement of funds among currencies in the hopes of profiting from shifts in the rates.
E)the rate at which a foreign exchange dealer converts a currency at a particular time.
9
_______ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.
A)Currency arbitrage
B)Restricted trade
C)Spot currency exchange
D)International Fisher Effect
E)Forward exchange
10
The simultaneous purchase and sale of a given amount of 4X for two different value dates is termed
A)International Fisher Effect
B)Arbitrage
C)Spot currency exchange
D)Currency Swap
E)Forward exchange
11
Buying a currency low and selling it high for a profit, is known as
A)International Fisher Effect
B)Arbitrage
C)Spot currency exchange
D)Currency Swap
E)Forward exchange
12
Which of these states that in competitive markets, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency?
A)Arbitrage play
B)Purchasing power parity
C)Law of one price
D)International fisher effect
E)Currency speculation
13
_______ markets are markets in which few impediments to international trade exist.
A)Foreign exchange
B)Efficient
C)Empirical
D)Forward
E)Relatively efficient
14
_______ occurs when the quantity of money in circulation rises faster than the stock of goods and services.
A)Money supply
B)Deflation
C)Inflation
D)Currency swap
E)Deregulation
15
Which of the following determines whether the rate of growth in a country's money supply is greater than the rate of growth of output?
A)Consumers
B)Government policy
C)Business
D)Foreign trade
E)The stock market
16
PPP Theory predicts that 4X rates are determined by
A)Gold prices
B)Forward exchange
C)Currency speculation
D)Relative prices
E)The stock market
17
Increasing evidence reveals that __________ play an important role in determining the expectations of market traders as to likely future 4X rates.
A)Gold prices
B)Forward exchange
C)Psychological factors
D)Relative prices
E)The stock market
18
_______ refers to a range of barter like agreements by which goods and services can be traded for other goods and services.
A)Arbitrage
B)Counter trade
C)Forward exchange
D)Selling short
E)Hedge fund





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