Question 1

On the basis of which interest rate are Euroloans often quoted?

Accepted Answer

A)   United States Prime Rate
B)   European Central Bank Offer Rate
C)   London Interbank Offer Rate
D)   International Monetary Fund Interest RateE) None of the above
F) A) and B)

Question 2

The world's largest trading markets include all of the following except ________.

Accepted Answer

A)   London
B)   Frankfurt
C)   Tokyo
D)   SingaporeE) A) and C)
F) None of the above

Question 3

All of the following are common activities of a bank's commercial customers EXCEPT ________,

Accepted Answer

A)   exporting goods
B)   importing services
C)   receiving dividends from foreign sources
D)   conducting short-term sales of foreign currencyE) All of the above
F) A) and C)

Question 4

What is the difference between a Eurobond, a global bond, and a foreign bond?

Accepted Answer

Foreign bonds are issued by a resident o...

Question 5

________ is a commodity that consists of currencies issued by countries other than one's own.

Accepted Answer

A)   Eurozone
B)   Foreign exchange
C)   Floating exchange
D)   International monetary fundE) B) and C)
F) A) and D)

Question 6

The rising value of the Canadian dollar relative to the U.S. dollar has all of the following effects EXCEPT that ________ .

Accepted Answer

A)   Canadian exports to the U.S. are down
B)   Canadian vacationers pay higher costs for trips to the U.S.
C)   Canadian consumers pay lower prices for U.S.-made goods
D)   Canadian retailers in border towns lose customers to U.S. storesE) B) and C)
F) A) and D)

Question 7

International bankers can customize currency options for their commercial clients.

Accepted Answer

A) True 
 B)False

Question 8

Explain the concept of covered interest arbitrage. Why does it occur?

Accepted Answer

Covered interest arbitrage is arbitrage ...

Question 9

Two-point arbitrage is also known as ________.

Accepted Answer

A)   equilibrium arbitrage
B)   forward arbitrage
C)   discount arbitrage
D)   geographic arbitrageE) A) and B)
F) A) and C)

Question 10

It is common in the U.S. to quote the British pound on a direct basis and the Japanese yen on an indirect basis.

Accepted Answer

A) True 
 B)False

Question 11

A ________ allows, but does not require, a firm to buy or sell a specified amount of foreign currency at a specified price at any time up to a specified date.

Accepted Answer

A)   forward swap
B)   currency option
C)   call option
D)   discount putE) B) and C)
F) A) and D)

Question 12

Moffet Manufacturing wants the right to sell a foreign currency at a specified price at any time up to a specified date. Moffet most likely needs a ________.

Accepted Answer

A)   forward premium
B)   forward discount
C)   call option
D)   put optionE) A) and B)
F) None of the above

Question 13

Foreign exchange rates are usually published weekly in most major newspapers.

Accepted Answer

A) True 
 B)False

Question 14

The international bond market is a major source of debt financing for all of the following EXCEPT ________.

Accepted Answer

A)   foreign governments
B)   international firms
C)   large corporations
D)   small businessesE) A) and B)
F) A) and C)

Question 15

Foreign exchange speculation is attractive to investors because of its low risk nature.

Accepted Answer

A) True 
 B)False

Question 16

________ focus on offering banking and other financial services to nonresident customers.

Accepted Answer

A)   Subsidiary banks
B)   Branch banks
C)   Affiliated banks
D)   Offshore financial centersE) None of the above
F) A) and C)

Question 17

What is three-point arbitrage? What are its benefits?

Accepted Answer

Three-point arbitrage is the b...

Question 18

A swap transaction ________.

Accepted Answer

A)   is a foreign exchange transaction that is consummated immediately
B)   is a foreign exchange transaction that occurs sometime in the future
C)   involves currencies that are not freely tradeable
D)   involves a transaction in which the same currency is bought and sold simultaneouslyE) A) and B)
F) A) and C)

Question 19

What does the difference between the spot and forward prices of a country's currency most likely suggest?

Accepted Answer

The difference between the spo...

Question 20

Ross Manufacturing wants to sell foreign exchange on a spot basis and contracts with an international bank to handle the transaction. What is the most likely reason that Ross uses an international bank in this case?

Accepted Answer

A)   The bank can customize the spot to meet Ross' needs.
B)   Laws require that banks handle spot transactions.
C)   The bank will not charge Ross a service fee.
D)   Ross is a U.S. organization.E) A) and B)
F) A) and D)

Exam 8: Foreign Exchange and International Financial Markets

A swap transaction ________.

Correct AnswerverifiedShow Answer

Foreign exchange speculation is attractive to investors because of its low risk nature.

Correct AnswerverifiedShow Answer

The world's largest trading markets include all of the following except ________.

Correct AnswerverifiedShow Answer

All of the following are common activities of a bank's commercial customers EXCEPT ________,

Correct AnswerverifiedShow Answer

International bankers can customize currency options for their commercial clients.

Correct AnswerverifiedShow Answer

________ is a commodity that consists of currencies issued by countries other than one's own.

Correct AnswerverifiedShow Answer

Two-point arbitrage is also known as ________.

Correct AnswerverifiedShow Answer

________ focus on offering banking and other financial services to nonresident customers.

Correct AnswerverifiedShow Answer

Explain the concept of covered interest arbitrage. Why does it occur?

Correct AnswerverifiedCovered interest arbitrage is arbitrage ...View AnswerShow Answer

What does the difference between the spot and forward prices of a country's currency most likely suggest?

Correct AnswerverifiedThe difference between the spo...View AnswerShow Answer

What is the difference between a Eurobond, a global bond, and a foreign bond?

Correct AnswerverifiedForeign bonds are issued by a resident o...View AnswerShow Answer

The international bond market is a major source of debt financing for all of the following EXCEPT ________.

Correct AnswerverifiedShow Answer

Ross Manufacturing wants to sell foreign exchange on a spot basis and contracts with an international bank to handle the transaction. What is the most likely reason that Ross uses an international bank in this case?

Correct AnswerverifiedShow Answer

What is three-point arbitrage? What are its benefits?

Correct AnswerverifiedThree-point arbitrage is the b...View AnswerShow Answer

Foreign exchange rates are usually published weekly in most major newspapers.

Correct AnswerverifiedShow Answer

A ________ allows, but does not require, a firm to buy or sell a specified amount of foreign currency at a specified price at any time up to a specified date.

Correct AnswerverifiedShow Answer

On the basis of which interest rate are Euroloans often quoted?

Correct AnswerverifiedShow Answer

The rising value of the Canadian dollar relative to the U.S. dollar has all of the following effects EXCEPT that ________ .

Correct AnswerverifiedShow Answer

It is common in the U.S. to quote the British pound on a direct basis and the Japanese yen on an indirect basis.

Correct AnswerverifiedShow Answer

Moffet Manufacturing wants the right to sell a foreign currency at a specified price at any time up to a specified date. Moffet most likely needs a ________.

Correct AnswerverifiedShow Answer

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Covered interest arbitrage is arbitrage ...
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The difference between the spo...
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Foreign bonds are issued by a resident o...
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Three-point arbitrage is the b...
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