Question 1

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

Accepted Answer

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.E) None of the above
F) All of the above

Question 2

________ are agents who facilitate trading between dealers without themselves becoming principals in the transaction.

Accepted Answer

A)   Central banks
B)   Foreign exchange brokers
C)   Arbitrageurs
D)   Foreign exchange dealersE) All of the above
F) A) and B)

Question 3

What are some of the reasons central banks and treasuries enter the foreign exchange markets, and in what important ways are they different from other foreign exchange participants?

Accepted Answer

Central banks and treasuries enter the f...

Question 4

Given the following exchange rates, which of the multiple-choice choices represents a potentially profitable intermarket arbitrage opportunity?
¥129.87/$
€1) 1226/$
€0) 00864/¥

Accepted Answer

A)   ¥115.69/€
B)   ¥114.96/€
C)   $0.8908/€
D)   $0.0077/¥E) B) and C)
F) All of the above

Question 5

The foreign exchange market provides the physical and institutional structure through which three typical functions are accomplish. List and explain three functions of the foreign exchange market.

Accepted Answer

The foreign exchange market is the mecha...

Question 6

Banks, and a few nonbank foreign exchange dealers, operate ONLY in the interbank markets.

Accepted Answer

A) True 
 B)False

Question 7

A bid is the price in one currency at which a dealer will buy another currency. An ask is the price at which a dealer will sell the other currency. Dealers bid (buy) at one price and ask (sell) at a slightly higher price, making their profit from the spread between the prices. List and explain three reasons/factors that could make the spread small.

Accepted Answer

The bid-ask spread may be quite large fo...

Question 8

Which of the following is NOT true regarding nondeliverable forward (NDF)  contracts?

Accepted Answer

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.E) A) and C)
F) A) and B)

Question 9

The authors identify two tiers of foreign exchange markets:

Accepted Answer

A)   bank and nonbank foreign exchange.
B)   commercial and investment transactions.
C)   interbank and client markets.
D)   client and retail market.E) None of the above
F) A) and C)

Exam 5: The Foreign Exchange Market

What are some of the reasons central banks and treasuries enter the foreign exchange markets, and in what important ways are they different from other foreign exchange participants?

Correct Answer
verified
Central banks and treasuries enter the f...
View Answer

Banks, and a few nonbank foreign exchange dealers, operate ONLY in the interbank markets.

Correct Answer
verified

Given the following exchange rates, which of the multiple-choice choices represents a potentially profitable intermarket arbitrage opportunity? ¥129.87/$ €1) 1226/$ €0) 00864/¥

Correct Answer
verified

Correct Answer
verified
The bid-ask spread may be quite large fo...
View Answer

Which of the following is NOT true regarding nondeliverable forward (NDF) contracts?

Correct Answer
verified

The foreign exchange market provides the physical and institutional structure through which three typical functions are accomplish. List and explain three functions of the foreign exchange market.

Correct Answer
verified
The foreign exchange market is the mecha...
View Answer

________ are agents who facilitate trading between dealers without themselves becoming principals in the transaction.

Correct Answer
verified

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

Correct Answer
verified

The authors identify two tiers of foreign exchange markets:

Correct Answer
verified

Exam 5: The Foreign Exchange Market

What are some of the reasons central banks and treasuries enter the foreign exchange markets, and in what important ways are they different from other foreign exchange participants?

Correct AnswerverifiedCentral banks and treasuries enter the f...View AnswerShow Answer

Banks, and a few nonbank foreign exchange dealers, operate ONLY in the interbank markets.

Correct AnswerverifiedShow Answer

Given the following exchange rates, which of the multiple-choice choices represents a potentially profitable intermarket arbitrage opportunity? ¥129.87/$ €1) 1226/$ €0) 00864/¥

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe bid-ask spread may be quite large fo...View AnswerShow Answer

Which of the following is NOT true regarding nondeliverable forward (NDF) contracts?

Correct AnswerverifiedShow Answer

The foreign exchange market provides the physical and institutional structure through which three typical functions are accomplish. List and explain three functions of the foreign exchange market.

Correct AnswerverifiedThe foreign exchange market is the mecha...View AnswerShow Answer

________ are agents who facilitate trading between dealers without themselves becoming principals in the transaction.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The authors identify two tiers of foreign exchange markets:

Correct AnswerverifiedShow Answer

Correct Answer
verified
Central banks and treasuries enter the f...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The bid-ask spread may be quite large fo...
View Answer

Correct Answer
verified

Correct Answer
verified
The foreign exchange market is the mecha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified