56. Which of the following indicates that the dollar is selling at a discount on the 30-day
forward market?
57. Which of the following instances indicates that the dollar is selling at a premium on the
30-day forward market?
58. Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market.
Which of the following is true of the foreign exchange dealers’ market’s expectations about the
dollar over the next 30 days?
59. _____ refers to the simultaneous purchase and sale of a given amount of foreign
exchange for two different value dates.
60. Which of the following transactions is used to move out of one currency into another for a
limited period without incurring foreign exchange risk?
61. Which of the following foreign exchange trading centers has the highest percentage of
activity?
62. Which of the following is a reason for London’s dominance in the foreign exchange
market?
63. Which of the following is a key feature of the foreign exchange market?
64. What is meant by arbitrage?
65. Assume that the yen/dollar exchange rate quoted in London at 3 p.m. is ¥120 = $1, and
the New York yen/dollar exchange rate at the same time (10 a.m. New York time) is ¥123 = $1.
Which of the following transactions would yield immediate profit?
66. The yen/dollar exchange rate is ¥120 = $1 in London and ¥123 = $1 in New York at the
same time. What is the net profit if a dealer takes $1,000,000 to purchase ¥1,23,000,000 in New
York and engages in arbitrage by selling it in London?
67. Which of the following is true of arbitrage opportunities in foreign exchange markets?
68. A dealer wishes to sell Thai baht for Argentine peso. Which of the following currencies is
most likely to act as a vehicle currency in this transaction?
69. Which of the following is a vehicle currency due to its central role in foreign exchange
deals?
70. In terms of foreign exchange transactions, the _____ has replaced the German mark as
the world’s second most important vehicle currency.
71. Which of the following is true of the determination of exchange rates?
72. Which of the following is true of the differences in relative demand and supply of
currencies?
73. The law of one price states that:
74. The euro/dollar exchange rate is €1 = $1.20. According to the law of one price, a camera
that retails for $300 in New York should sell for _____ in Germany.
75. The euro/dollar exchange rate is €1 = $1.20. If a trader buys a camera that retails for
$300 in New York and sells it for €200 in Berlin (ignoring transaction costs, transportation
costs, or trade barriers), this represents a potential profit (arbitrage) of _____.