国际金融试题

Fundamentals of Multinational Finance, 4e (Moffett) Chapter 6 The Foreign Exchange Market

Multiple Choice and True/False Questions

6.1 Geographical Extent of the Foreign Exchange Market

1) Which of the following is NOT true regarding the market for foreign exchange?

A) The market provides the physical and institutional structure through which the money of one country is exchanged for another.

B) The rate of exchange is determined in the market.

C) Foreign exchange transactions are physically completed in the foreign exchange market. D) All of the above are true. Answer: D Diff: 1

Topic: 6.1 Geographical Extent of the Foreign Exchange Market Skill: Recognition

2) A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency. A) Eurodollar transaction B) import/export exchange

C) foreign exchange transaction D) interbank market transaction Answer: C Diff: 1

Topic: 6.1 Geographical Extent of the Foreign Exchange Market Skill: Recognition

3) While trading in foreign exchange takes place worldwide, the major currency trading centers are located in

A) London, New York, and Tokyo. B) New York, Zurich, and Bahrain. C) Paris, Frankfurt, and London.

D) Los Angeles, New York, and London. Answer: A Diff: 1

Topic: 6.1 Geographical Extent of the Foreign Exchange Market Skill: Recognition

4) Because the market for foreign exchange is worldwide, the volume of foreign exchange currency transactions is level throughout the 24-hour day. Answer: FALSE Diff: 1

Topic: 6.1 Geographical Extent of the Foreign Exchange Market Skill: Recognition

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5) Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market?

A) The transfer of purchasing power between countries.

B) Obtaining or providing credit for international trade transactions. C) Minimizing the risks of exchange rate changes.

D) All of the above were identified as functions of the foreign exchange market. Answer: D Diff: 1

Topic: 6.1 Geographical Extent of the Foreign Exchange Market Skill: Recognition

6) The greatest amount of foreign exchange trading takes place in the following three cities: A) New York, London, and Tokyo. B) New York, Singapore, and Zurich. C) London, Frankfurt, and Paris. D) London, Tokyo, and Zurich. Answer: A Diff: 1

Topic: 6.1 Geographical Extent of the Foreign Exchange Market Skill: Recognition

6.2 Market Participants

1) The authors identify two tiers of foreign exchange markets: A) bank and nonbank foreign exchange. B) commercial and investment transactions. C) interbank and client markets. D) client and retail market. Answer: C Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

2) The foreign exchange market is NOT efficient because

A) market participants do not compete with one another due to the fact that trading takes place around the world and not in a single centralized location.

B) dealers have ask prices that are higher than bid prices.

C) central governments dominate the foreign exchange market and everybody knows that by definition, central governments are inefficient.

D) none of the reasons listed are accurate because the foreign exchange market is efficient. Answer: D Diff: 1

Topic: 6.2 Market Participants Skill: Conceptual

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3) Dealers in foreign exchange departments at large international banks act as market makers and maintain inventories of the securities in which they specialize. Answer: TRUE Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

4) Currency trading lacks profitability for large commercial and investment banks but is maintained as a service for corporate and institutional customers. Answer: FALSE Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

5) It is characteristic of foreign exchange dealers to

A) bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale.

B) act as market makers, willing to buy and sell the currencies in which they specialize.

C) trade only with clients in the retail market and never operate in the wholesale market for foreign exchange.

D) All of the above are characteristics of foreign exchange dealers. Answer: B Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

6) Which of the following may be participants in the foreign exchange markets? A) bank and nonbank foreign exchange dealers B) central banks and treasuries C) speculators and arbitragers D) All of the above. Answer: D Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

7) ________ seek to profit from trading in the market itself rather than having the foreign exchange transaction being incidental to the execution of a commercial or investment transaction. A) Speculators and arbitragers B) Foreign exchange brokers C) Central banks D) Treasuries Answer: A Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

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8) In the foreign exchange market, ________ seek all of their profit from exchange rate changes while ________ seek to profit from simultaneous exchange rate differences in different markets. A) wholesalers; retailers B) central banks; treasuries C) speculators; arbitragers D) dealers; brokers Answer: C Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

9) Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange ________, on the other hand, earn a profit by bringing together buyers and sellers of foreign currencies and earning a commission on each sale and purchase. A) central banks; treasuries B) dealers; brokers C) brokers; dealers

D) speculators; arbitragers Answer: B Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

10) The primary motive of foreign exchange activities by most central banks is profit. Answer: FALSE Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

11) Dealers sometimes use brokers in the foreign exchange market because the dealers desire A) speed. B) accuracy.

C) to remain anonymous. D) all of the above. Answer: D Diff: 1

Topic: 6.2 Market Participants Skill: Recognition

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6.3 Transactions in the Interbank Market

1) The ________ is a derivative forward contract that was created in the 1990s. It has the same

characteristics and documentation requirements as traditional forward contracts except that they are only settled in U.S. dollars and the foreign currency involved in the transaction is not delivered. A) nondeliverable forward B) dollar only forward C) virtual forward D) internet forward Answer: A Diff: 1

Topic: 6.3 Transactions in the Interbank Market Skill: Recognition

2) Which of the following is NOT true regarding nondeliverable forward (NDF) contracts? A) NDFs are used primarily for emerging market currencies.

B) Pricing of NDFs reflects basic interest rate differentials plus an additional premium charged for dollar settlement.

C) NDFs can only be traded by central banks. D) All of the above are true. Answer: C Diff: 1

Topic: 6.3 Transactions in the Interbank Market Skill: Conceptual

3) A foreign exchange ________ is the price of one currency expressed in terms of another currency. A foreign exchange ________ is a willingness to buy or sell at the announced rate. A) quote; rate B) quote; quote C) rate; quote D) rate; rate Answer: C Diff: 1

Topic: 6.3 Transactions in the Interbank Market Skill: Recognition

4) A ________ transaction in the foreign exchange market requires an almost immediate delivery of foreign exchange. A) spot B) forward C) futures

D) none of the above Answer: A Diff: 1

Topic: 6.3 Transactions in the Interbank Market Skill: Recognition

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