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Mixed Quiz
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1

The rate at which one currency is converted into another is
A)the spot rate
B)the par value
C)the currency rate
D)the foreign rate
E)the exchange rate
2

Short-term movement of funds from one currency to another in hopes of profiting from shifts in exchange rates is
A)currency speculation
B)arbitrage
C)foreign exchange movement
D)foreign exchange risk
E)a currency swap
3

An indirect quote is
A)the same as an American quote
B)is similar to a direct quote
C)the dollars per unit of foreign currency
D)foreign currency units per dollar
E)a currency swap
4

The ________ is the rate at which a foreign exchange dealer converts one currency into another on a particular day.
A)exchange rate
B)spot rate
C)foreign exchange rate
D)currency swap
E)currency speculation
5

€1=$1.2212 is a
A)spot rate
B)indirect rate
C)direct rate
D)foreign exchange rate
E)currency swap
6

When an investor places a speculative bet that the value of a financial asset will decline, and profits from that decline the investor is
A)engaging in a currency swap
B)entering a forward contract
C)short selling
D)using a spot rate
E)buying into a hedge fund
7

If $1 buys more euros with a spot exchange rate than with a 30-day forward exchange rate
A)foreign exchange dealers expect the dollar to appreciate versus the euro
B)the euro is selling at a discount on the 30-day forward market
C)the euro is selling at a premium on the 30-day forward market
D)a currency swap should take place
E)dealers expect the dollar will appreciate against the euro over the next 30 days
8

The most important centers in the foreign exchange market include all of the following except
A)London
B)Los Angeles
C)Singapore
D)Tokyo
E)New York
9

If the yen/dollar exchange rate in London at 3pm is ¥120=$1 and the New York yen/dollar exchange rate is ¥125=$1 at the same time
A)an arbitrage situation exists
B)an investor should enter a forward contract
C)a currency swap opportunity is present
D)the yen is selling at a premium to the dollar
E)the yen is selling at a discount to the dollar
10

The notion that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries is known as
A)the Fisher Effect
B)the International Fisher Effect
C)the Bandwagon Effect
D)the Theory of Purchasing Power Parity
E)the Efficient Market Theory
11

The foreign exchange market exists for converting one country's currency into that of another country.
A)True
B)False
12

International business risk is the risk that changes in exchange rates will hurt the profitability of a business deal.
A)True
B)False
13

If the exchange rate is £1=$1.25, then 1.25 U.S. dollars buys one British pound.
A)True
B)False
14

Spot rates are static.
A)True
B)False
15

A spot exchange occurs when two parties agree to exchange currency and execute a deal at some specific date in the future.
A)True
B)False
16

A currency swap involves the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates.
A)True
B)False
17

Most foreign exchange transactions involve dollars on one side.
A)True
B)False
18

According to the law of one price, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.
A)True
B)False
19

When a country's government permits both residents and nonresidents to purchase unlimited amounts of foreign currency with the domestic currency.
A)True
B)False
20

A company might employ a lead/lag strategy to minimize economic exposure.
A)True
B)False





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