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Suppose 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 options

Correct Answer

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Most foreign exchange transactions are for


A) intervention by central banks.
B) interbank trades between international banks or nonbank dealers.
C) retail trade.
D) purchase of hard currencies.

Correct Answer

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The current exchange rate is €1.00 = $1.50.Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys €100,000 from a currency trader at Bank B for $150,000 using its correspondent relationship with Bank B.


A) Bank A's dollar-denominated account at B will fall by $150,000.
B) Bank B's dollar-denominated account at A will fall by $150,000.
C) Bank A's pound-denominated account at B will fall by €100,000.
D) Bank B's pound-denominated account at A will rise by €100,000.

Correct Answer

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Indirect exchange rate quotations from the U.S.perspective are


A) the price of one unit of the foreign currency in terms of the U.S.dollar.
B) the price of one U.S.dollar in the foreign currency.

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When a currency trades at a premium in the forward market


A) the exchange rate is more than one dollar .
B) the exchange rate is less than one dollar.
C) the forward rate is less than the spot rate.
D) the forward rate is more than the spot rate.

Correct Answer

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Including the transaction costs of the bid-ask spread,the euro-pound cross exchange rate for a customer who wants to sell euro and buy pounds can be computed as


A) Sb(£/€) = Sb($/€) × Sb(£/$)
B) Sa(€/£) = Sa(€/$) × Sa($/£)
C) Sb(€/£) = Sb($/€) × 1Sa(£/$) \frac { 1 } { S ^ { a } ( £ / \$ ) }
D) all of the options

Correct Answer

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 Country  U.S. $ equiv.    Currency per U.S. $  
   Tuesday  Monday  Tuesday  Monday
 Britain (Pound) £62,500  1.6000  1.6100  0.6250  0.6211
 1 Month Forward  1.6100  1.6300  0.6211  0.6173
 3 Month Forward  1.6300  1.6600  0.6173  0.6024
6 Month Forward  1.6600  1.7200  0.6024  0.5814
 13 Month Forward  1.7200  1.8000  0.5814  0.5556
Using the table shown,what is the most current spot exchange rate shown for British pounds? Use 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

Correct Answer

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 Americar Terns  Europearl Terms  Bark Quotations  Bid  Ask  Bid  Ask  British pounds $1.9712$1.9717 £ 0.5072 £ 0.5073 Euros $1.4738$1.4742€0.6783€0.6785\begin{array} { l c c c c c c } & & { \text { Americar Terns } } & & { \text { Europearl Terms } } \\\text { Bark Quotations } & \text { Bid } & \text { Ask } & \text { Bid } & \text { Ask } \\\text { British pounds } & \$ 1.9712 & \$ 1.9717 & \text { £ } 0.5072 & \text { £ } 0.5073 \\\text { Euros } & \$ 1.4738 & \$ 1.4742 & € 0.6783 & € 0.6785\end{array} Using the table above,what is the ask price of euro in terms of pounds?


A) €1.3371/£
B) €1.3378/£
C) £0.7475/€
D) £0.7479/€

Correct Answer

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The current exchange rate is £1.00 = $2.00.Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at Bank B for $90,000 using its correspondent relationship with Bank B.


A) Bank A's dollar-denominated account at B will fall by $90,000.
B) Bank B's dollar-denominated account at A will rise by $90,000.
C) Bank A's pound-denominated account at B will rise by £45,000.
D) Bank B's pound-denominated account at A will fall by £45,000.
E) all of the options

Correct Answer

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The SF/$ 180-day forward exchange rate is SF1.30/$ and the 180 day forward premium is 8 percent.What is the outright spot exchange rate?


A) SF1.30/$
B) SF1.35/$
C) SF1.25/$
D) none of the options

Correct Answer

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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 options

Correct Answer

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Which of the following are correct?


A) FNF _ { N } (j / k) = FN($/j) FN($/k) \frac { F _ { N ^ { ( \$ / j ) } } } { F _ { N ^ { ( \$ / k ) } } }
B) FNF _ { N } (j / k) = FN(j/$) FN(k/$) \frac { F _ { N } ( j / \$ ) } { F _ { N } ^ { ( k / \$ ) } }
C) FNF _ { N } (k / j) = FN($/k) FN($/j) \frac { F _ { N ^ { ( \$ / k ) } } } { F _ { N ^ { ( \$ / j ) } } }
D) all of the options

Correct Answer

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Find the no-arbitrage cross exchange rate.The dollar-euro exchange rate is quoted as $1.60 = €1.00 and the dollar-yen exchange rate is quoted at $1.00 = ¥120.


A) €192/¥1.00
B) €1.92/¥100
C) €1.25/¥1.00
D) €1.00/¥1.92

Correct Answer

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Most interbank trades are


A) speculative or arbitrage transactions.
B) simple order processing for the retail client.
C) overnight loans from one bank to another.
D) brokered by dealers.

Correct Answer

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The forward market


A) involves contracting today for the future purchase 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 purchase of sale of foreign exchange at a price agreed upon today.
C) involves contracting today for the right but not obligation to the future purchase of sale of foreign exchange at a price agreed upon today.
D) none of the options

Correct Answer

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 Americar Terns  Europearl Terms  Bark Quotations  Bid  Ask  Bid  Ask  British pounds $1.9712$1.9717 £ 0.5072 £ 0.5073 Euros $1.4738$1.4742€0.6783€0.6785\begin{array} { l c c c c c c } & { \text { Americar Terns } } & & { \text { Europearl Terms } } \\\text { Bark Quotations } & \text { Bid } & \text { Ask } & \text { Bid } & \text { Ask } \\\text { British pounds } & \$ 1.9712 & \$ 1.9717 & \text { £ } 0.5072 & \text { £ } 0.5073 \\\text { Euros } & \$ 1.4738 & \$ 1.4742 & € 0.6783 & € 0.6785\end{array} Using the table above,what is the bid price of pounds in terms of euro?


A) €1.3371/£
B) €1.3378/£
C) £0.7475/€
D) £0.7479/€

Correct Answer

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You are a U.S.-based 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

Correct Answer

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Swap transactions


A) involve the simultaneous sale (or purchase) of spot foreign exchange against a forward purchase (or sale) of approximately an equal amount of the foreign currency.
B) account for about half of Interbank FX trading.
C) involve trades of one foreign currency for another without going through the U.S.dollar.
D) all of the options

Correct Answer

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Spot foreign exchange trading


A) accounted for about 5 percent of all foreign exchange trades in 2013.
B) accounted for about 20 percent of all foreign exchange trades in 2013.
C) accounted for about 40 percent of all foreign exchange trades in 2013.
D) accounted for about 70 percent of all foreign exchange trades in 2013.

Correct Answer

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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.

Correct Answer

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