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Exam 8: Currency of Payment (Managing Transaction Risks)

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Question 1

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If it is agreed that an international exchange will be in the currency of the exporter's country,then there is no exchange rate fluctuation risk for the importer.

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False

Question 2

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In valuing a currency,the direct quote is

A) the traditional way of expressing the value of a currency like the Canadian dollar.
B) the value of the foreign currency expressed in units of the domestic currency.
C) the traditional way of expressing the value of a currency like the Japanese yen.
D) the value of the domestic currency expressed in units of foreign currency.
E) None of the above

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Question 3

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One of the functions of a nation's central bank is that of a check ____________________.

The Japanese government has been known to keep the value of the yen down in order to boost the Japanese economy through under-valued exports.

Documents transferred through SWIFT have the same value as original paper documents.

In its absolute form,the exchange rate determination theory of Purchasing Power Parity

Importers generally prefer quotes that are written in the currency of the exporter's country.

Some currencies are traded in the futures' market as "commodities."

The Ex-Im Bank provides loans to small exporters.

If an exporter chooses to quote in his country's currency,or quotes in the importer's country currency and hedges with a money market hedge,it is to minimize his ____________________ risks.

In the United States,the Wall Street Journal publishes the forward rates for the currencies of _____ countries.

The type of exchange rate for a foreign currency for immediate delivery (roughly the price of a foreign currency to be delivered within 48 hours)is called the forward rate.

In an options market hedge there is the option to sell or purchase certain currencies at a certain exchange rate either on or before a certain date.The agreed-upon exchange rate is called the

As the Wall Street Journal quotes it,the exchange rate is the ____________________ between the bid and ask rates for exchanges of a value greater than $1,000,000 between banks.

A forward market hedge

A problem with market-based forecasting is that the "wisdom" of the market may be skewed by ____________________ who may include people motivated by entirely different motives than the actual purchase and delivery of a currency.

Stable countries representing the greatest percentage of world trade all have _____ currencies.

International exchange rates began to float

The euro was first created as an artificial ____________________.

In the United States,the Federal Reserve System technically fulfills the role of being a ____________________.