Lecture #3 – Practice Questions – International Financial Management 456
Chapter 5 – The Market for Foreign Exchange
1.Most foreign exchange transactions are for
A. intervention by central banks.
B. interbank trades between international banks or nonbank dealers.
C. retail trade.
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D. purcha of hard currencies.
2.The difference between a broker and a dealer is
A. dealers ll drugs; brokers ll hous.
B. brokers bring together buyers and llers, but carry no inventory; dealers
stand ready to buy and ll from their inventory.
C. brokers transact in stocks and bonds; currency is bought and sold through
dealers.
D. none of the above
3. Intervention in the foreign exchange market is the process of
A. a central bank requiring the commercial banks of that country to trade at a
t price level.
B. commercial banks in different countries coordinating efforts in order to
stabilize one or more currencies.
C. a central bank buying or lling its currency in order to influence its
value.
D. the government of a country prohibiting transactions in one or more
currencies.中国大竹海
4.The spot market
A. involves the almost-immediate purcha or sale of foreign exchange.
B. involves the sale of futures, forwards, and options on foreign exchange.
C. takes place only on the floor of a physical exchange.
D. all of the above.
5.
Using the table shown, what is the most current spot exchange rate shown for British pounds? U a direct quote from a U.S. perspective.
A. $1.61 = £1.00
B. $1.60 = £1.00
C. $1.00 = £0.625
D. $1.72 = £1.00
6.Suppo that the current exchange rate is €0.80 = $1.00. The direct quote,
from the U.S. perspective is
A. €1.00 = $1.25.
B. €0.80 = $1.00.
C. £1.00 = $1.80.
D. None of the above
7.Suppo that the current exchange rate is €1.00 = $1.60. The indirect quote,
from the U.S. perspective is
A. €1.00 = $1.60.
B. €0.6250 = $1.00.
C. €1.60 = $1.00.
D. None of the above
8.The Bid price
A. is the price that the dealer has just paid for something, his historical二年级下册语文古诗
cost of the most recent trade.
B. is the price that a dealer stands ready to pay.
C. refers only to auctions like eBay, not over the counter transactions with
dealers.
D. is the price that a dealer stands ready to ll at.
9.Suppo the spot ask exchange rate, S a($|£), is $1.90 = £1.00 and the spot bid
exchange rate, S b($|£), is $1.89 = £1.00. If you were to buy $10,000,000 worth of British pounds and then ll them five minutes later, how much of your $10,000,000 would be "eaten" by the bid-ask spread?
A. $1,000,000
B. $52,910.05
C. $100,000
D. $52,631.58
10.If the $/€ bid and ask prices are $1.50/€ and $1.51/€, respectively, the
corresponding €/$ bid and ask prices are
A. €0.6667 and €0.6623.火龙果种苗
B. $1.51 and $1.50.
C. €0.6623 and €0.6667.
D. cannot be determined with the information given.
11.In the Interbank market, the standard size of a trade among large banks in the
major currencies is
A. for the U.S.-dollar equivalent of $10,000,000,000.
B. for the U.S.-dollar equivalent of $10,000,000.
C. for the U.S.-dollar equivalent of $100,000.
D. for the U.S.-dollar equivalent of $1,000.
12.The dollar-euro exchange rate is $1.25 = €1.00 and the dollar-yen exchange
rate is ¥100 = $1.00. What is the euro-yen cross rate?
A. ¥125 = €1.00
B. ¥1.00 = €125
C. ¥1.00 = €0.80
D. None of the above
13.Suppo you obrve the following exchange rates: €1 = $1.25; £1 = $2.00.
Calculate the euro-pound exchange rate.
A. €1 = £1.60
炒土豆丝怎么做B. €1 = £0.625
C. €2.50 = £1
D. €1 = £2.50
有肉的言情小说14.Suppo you obrve the following exchange rates: €1 = $1.60; £1 = $2.00.
Calculate the euro-pound exchange rate.
A. €1.3333 = £1.00
B. £1.3333 = €1.00
C. €3.00 = £1
D. €1.25 = £1.00
15.Find the no-arbitrage cross exchange rate. The dollar-euro exchange rate is
quoted as $1.60 = €1.00 and t he dollar-pound exchange rate is quoted at $2.00 = £1.00.
A. €1.25/£1.00
B. $1.25/£1.00
C. £1.25/€1.00
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D. €0.80/£1.00
16.The euro-pound cross exchange rate can be computed as:
A. S(€/£) = S($/£) S(€/$)
B.
C.
D. all of the above
17.Suppo a bank customer with €1,000,000 wishes to trade out of euro and into
Japane yen. The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120. How many yen will the customer get?
A. ¥192,000,000
B. ¥5,208,333
C. ¥75,000,000
D. ¥5,208.33
18.Suppo you obrve the following exchange rates: €1 = $.85; £1 = $1.60; and
€2.00 = £1.00. Starting with $1,000,000, how can you make money?
A. Exchange $1m for £625,000 at £1 = $1.60. Buy €1,250,000 at €2 = £1.00;
trade for $1,062,500 at €1 = $.85.
B. Start with dollars, exchange for euros at €1 = $.85; exchange for pounds
at €2.00 = £1.00; exchange for dollars at £1 = $1.60.
C. Start with euros; exchange for pounds; exchange for dollars; exchange for
euros.
D. No arbitrage profit is possible.
19.You are a U.S.-bad treasurer with $1,000,000 to invest. The dollar-euro
exchange rate is quoted as $1.20 = €1.00 and the dollar-pound exchange rate is quoted at $1.80 = £1.00. If a bank quotes you a cross rate of £1.00 =
€1.50 how much money can an astute trader make?
A. No arbitrage is possible
B. $1,160,000
C. $500,000
D. $250,000
20.You are a U.S.-bad treasurer with $1,000,000 to invest. The dollar-euro
exchange rate is quoted as $1.60 = €1.00 and the dollar-pound exchange rate is quoted at $2.00 = £1.00. If a bank quotes you a cross rate of £1.00 =
€1.20 how can you make money?
A. No arbitrage is possible
B. Buy euro at $1.60/€, buy £ at €1.20/£, ll £ at $2/£
C. Buy £ $2/£, buy € at €1.20/£, ll € at $1.60/€
21.The Singapore dollar—U.S. dollar (S$/$) spot exchange rate is S$1.60/$, the
Canadian dollar—U.S. dollar (CD/$) spot rate is CD1.33/$ and the S$/CD1.15.
Determine the triangular arbitrage profit that is possible if you have
$1,000,000.
A. $44,063 profit
B. $46,093 loss
C. No profit is possible
D. $46,093 profit
22.Market microstructure refers to
A. the basic mechanics of how a marketplace operates.
B. the basics of how to make small (micro-sized) currency trades.
C. how macroeconomic variables such as GDP and inflation are determined.
D. none of the above
23.The forward price
A. may be higher than the spot price.
B. may be the same as the spot price.
C. may be less than the spot price.
D. all of the above
24.For a U.S. trader working in American quotes, if the forward price is higher
than the spot price
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A. the currency is trading at a premium in the forward market.
B. the currency is trading at a discount in the forward market.
C. then you should buy at the spot, hold on to it and ll at the forward—
it's a built-in arbitrage.
D. all of the above—it really depends if you're talking American or European
quotes.
25.The forward market
A. involves contracting today for the future purcha of sale of foreign
exchange at the spot rate that will prevail at the maturity of the contract.
B. involves contracting today for the future purcha of sale of foreign
exchange at a price agreed upon today.
C. involves contracting today for the right but not obligation to the future
purcha of sale of foreign exchange at a price agreed upon today.
D. none of the above
