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Multinational Financial Management 10th Edition Shapiro Test Bank
Multinational Financial Management 10th Edition Shapiro Test Bank
CHAPTER 7
The Foreign Exchange Market
EASY (definitional)
Ans: a
Section: Organization of the Foreign Exchange Market
Level: Easy
7.2 Exports of goods and services by the United States by 2008 total more than
_________ of gross domestic product.
a) 10%
b) 20%
c) 50%
d) 75%
Ans: a
Section: Introduction
Level: Easy
7.3 Most currency transactions are channeled through the worldwide ________ market
which accounts for _______ of foreign exchange transactions.
a) stock, 50%
b) interbank, 50%
c) interbank, 95%
d) internet, 30%
Ans: c
Section: Organization of the foreign exchange market
Level: Easy
Ans: c
Section: The participants
Level: Easy
Chapter 7, The Foreign Exchange Market
Ans: d
Section: Size
Level: Easy
Ans: a
Section: Spot quotations
Level: Easy
7.7 When exchange rates are quoted as the number of U.S. dollars per unit of foreign
currency, it is referred to as
a) American terms
b) European terms
c) fixed-exchange terms
d) spot-market terms
Ans: a
Section: The Spot Market
Level: Easy
7.8 When the home currency price of a certain fixed quantity of the foreign currency is
quoted, it is referred to as the
a) indirect quotation
b) direct quotation
c) European quotation
d) American quotation
Ans: b
Section: The Spot Market
Level: Easy
Ans: d
Section: Organization
Level: Easy
7.10 Traders on the foreign exchange market use ___________ to eliminate or cover the
risk of loss on export or import orders denominated in foreign currencies.
a) currency options
b) forward contracts
c) money-market hedges
d) currency futures contracts
Ans: b
Section: The participants
Level: Easy
Ans: c
Section: The participants
Level: Easy
7.12 What is the name of the foreign bank account that a trader maintains in a foreign
bank and from which they would request transfer of currency to the account of another
trader with whom they have concluded a transaction?
a) nostro account
b) short sale account
c) settlement account
d) interbank account
Ans: a
Section: The Mechanics of Spot Transactions
Level: Easy
7.13 A ___________ between a bank and a customer calls for a fixed delivery date, at a
fixed exchange rate for a specified amount of one currency against another currency
payment.
a) spot quotation
Chapter 7, The Foreign Exchange Market
b) currency option
c) currency swap
d) forward contract
Ans: d
Section: The forward market
Level: Easy
7.14 The risk that a central bank will not make the necessary transfer of foreign currency
to complete a currency settlement is known as ________ risk.
a) exchange rate
b) Herstatt
c) Interest-rate
d) settlement
Ans: b
Section: The mechanics of spot transactions
Level: Easy
7.15 When an importer goes long in the forward market, they would be
a) buying currency for future delivery
b) selling currency for future delivery
c) arbitraging the interest rate differential
d) buying a forward contract at a premium
Ans: a
Section: The Forward Market
Level: Easy
MEDIUM (applied)
7.16 The spot and 30-day forward rates for the Dutch euro are $1.4757 and $1.48,
respectively. The guilder is said to be selling at a forward
a) premium of 1.2%
b) premium of 3.5%
c) discount of 3.5%
d) discount of 1.2%
Ans: b
Section: Forward quotations
Level: Medium
7.17 Suppose the spot direct quotes for the pound sterling and euro are $1.3981-89 and
$.1230-33, respectively. What is the direct quote for the pound in Paris?
a) €1.1339-73/£
b) €.8793-.8819/£
Chapter 7, The Foreign Exchange Market
c) £.0808-12/€
d) £.0976-87/€
Ans: a
Section: Spot quotations
Level: Medium
7.18 Suppose it is 1995 and the following direct quotes are received for spot and one-
month French francs in New York: .1160-684-6. Then the outright 30- day forward
quote for the French franc was:
a) .1156-62
b) .1164-74
c) .1166-72
d) .1154-64
Ans: b
Section: Forward quotations
Level: Medium
7.19 Suppose it is 1990 and the spot direct quotes for the Swedish krona and French
franc are $.1395-99 and $.1130-33, respectively. What is the direct quote for the krona
in Paris?
a) 1.2312-81
b) 1.2435-37
c) .0806-11
d) .0973-81
Ans: a
Section: Spot quotations
Level: Medium
7.20 Suppose pound sterling is quoted at $1.4419-36, and the Swiss franc is quoted at
$0.6250-67. What is the direct quote for the pound in Zurich?
a) 2.3035-70
b) 2.3018- 88
c) 2.3008-98
d) 2.3020-50
Ans: c
Section: Spot quotations
Level: Medium
7.21 Suppose the Brazilian Real is quoted at $0.9455-9510, and the Thai baht is quoted
at $25.2513-3986. What is the direct quote for the Real in Bangkok?
a) 27.1267-5673
b) 26.7801-9801
Chapter 7, The Foreign Exchange Market
c) 25.2597-2700
d) 26.5524-8626
Ans: d
Section: Spot quotations
Level: Medium
7.22 If the direct price of the dollar is DM2.5 in 1990 Frankfurt and transaction costs
were .4% of the amount transacted, then the minimum- maximum direct quotes for the
DM in New York were:
a) $.3968-4032
b) $2.4800-2.5200
c) $.3984-.4016
d) $2.4900-2.5100
Ans: a
Section: Spot quotations
Level: Medium
7.23 It is 1985 and suppose the 90-day forward quotes on the DM and the French franc
are $.4002-10 and $.1180-90, respectively. What is the direct 90-day forward quote for
the franc in Frankfurt?
a) 3.3625-54
b) 3.3631-92
c) .2943-74
d) .2949-68
Ans: c
Section: Forward quotations
Level: Medium
7.24 The spot and 180-day forward rates for the euro are $1.3310 and $1.3402,
respectively. The euro is said to be selling at a forward
a) discount of 6.9%
b) premium of 6.9%
c) discount of 1.4%
d) premium of 1.4%
Ans: d
Section: Forward quotations
Level: Medium
7.25 Suppose the spot direct quotes for the Italian euro and Swedish krone are
$1.2509-51 and $.1201-10, respectively. What is the direct quote for the Swedish krone
in Milan?
a) €.00413-25/Kr
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It was some moments before Polly could speak, then the words came in
gasps.
"What?"
"Yes; yes, she's dead; and the moon is shining on 'em both."
Gwen appalled at the news, opened the door and looked in. But what she saw
was so wonderful and beautiful that all horror subsided. Rachel was kneeling
by the bed on which Luke lay, her cheek resting on his dead hand and a smile
of rapture on her face. The moonlight was streaming into the room from the
open window on to the faces of husband and wife. Once more they were
together in its pathway as they had been on that evening on the sea at
Southwold, but now they were unconscious of it, as they were together in the
city that has no need of the sun neither the moon to shine in it, for the glory of
God did lighten it and the Lamb is the Light thereof.
When the villagers heard that Rachel had died of heart failure on the same
day as her husband they mourned and wept. So young, they said, to die! Two
valuable lives given for the sake of a poor sick baby of a drunken woman!
What a waste of life!
But the Bishop, who came to preach the funeral sermon, said, "It was one of
the most beautiful things of which he had ever heard, and he felt that instead
of mourning and weeping, there should be flowers and singing. Two happy
saints treading together the streets of gold! No long parting! No farewells! The
Rector," he told the people, "could hardly have had time to reach the gates of
Heaven before he was joined by his wife. What could be more joyful for them!"
"But," he added, and with evident emotion, "when we look at it from our own
point of view, we cannot help tears. Did not our blessed Lord weep at the
tomb of Lazarus? It is not wrong to weep; but in thinking of our loss, we must
not forget their gain; for they were lovely and pleasant in their lives and in their
death they were not divided!"
THE END.
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