Professional Documents
Culture Documents
The foreign exchange market converts the currency of one country into 1/1
that of another country.
True
False
When Krista traveled from the United States to England, she had to change 1/1
her money from dollars into pounds. Krista was participating in the
currency exchange market.
True
False
True
False
True
False
True
False
If $1 bought more yen with a spot exchange than with a 30-day forward 1/1
exchange, it indicates the dollar is expected to depreciate against the yen
in the next 30 days. When this occurs, we say the dollar is selling at a
premium on the 30-day forward market.
True
False
If the spot rate is $1 = 120, and the 30-day forward rate is $1 = ×130, the 1/1
dollar is selling at a discount in the forward market.
True
False
The purchasing power parity (PPP) theory is a strong predictor of short-run 1/1
movements in exchange rates covering time spans of five years or less.
True
False
True
False
True
False
The gold standard called for fixed exchange rates against the U.S. dollar. 1/1
True
False
Market forces have produced a stable dollar exchange rate under a floating 1/1
exchange rate regime.
True
False
Implementing a fixed exchange rate regime increases the price inflation in 1/1
countries.
True
False
Fixed exchange rates lead to speculation and uncertainty in the value of 1/1
currencies.
True
False
A country that introduces a currency board commits itself to converting its 1/1
domestic currency on demand into another currency at a fixed exchange
rate.
True
False
The IMF does not expect governments to meet any obligations except to 1/1
pay back the money it borrows.
True
False
True
False
The rate at which one currency is converted into another is known as the 1/1
A) exchange rate.
C) Huctuation rate.
A) Translational exposure
C) Economic exposure
D) Transactional exposure
What are the two main functions of the foreign exchange market? 1/1
C) insuring companies against interest rate risk and enabling imports and exports
A pair of shoes costs £40 in Britain. An identical pair costs $50 in the 1/1
United States when the exchange rate is £1 = $1.50. Which of the following
is correct?
D) A trader can make money by buying the shoes in Britain and selling in the
United States at $50.
The ________ helps consumers compare the relative prices of goods and 1/1
services in different countries.
A) interest rate
C) exchange rate
D) tariff rate
International businesses use foreign exchange markets for many reasons. 1/1
Which of the following is one of these reasons?
B) to pay a foreign company for its products or services in its native country's
currency
C) to invest for short terms in money markets when they have spare cash
When a tourist goes to a bank in a foreign country to convert money into 1/1
the local currency, the exchange rate used is the
B) forward rate.
C) carry trade.
D) spot rate.
________ are reported on a real-time basis on many financial websites and 1/1
are continually changing—their value being determined by supply and
demand for that currency relative to others.
B) Currency swaps
A) The standard makes sure that goods are not priced out from markets due to
inHation.
B) The standard does not require a commitment from a nation to maintain its
currency's value.
A) ratio of the price of gold in a currency to the price of gold in U.S. dollars.
D) amount of gold required to equal the reference currency that a nation is using.
C) Countries can isolate themselves from uncertainties when they trade using a
mutually agreed on exchange rate.
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