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89. Which of the following premises is technical analysis, an approach to exchange rate forecasting, based on?
90. Which of the following observations is true of technical analysis, an approach to exchange rate forecasting?
91. How is a country's currency referred to when its government allows both residents and nonresidents to
purchase unlimited amounts of a foreign currency with it?
92. How is a currency classified if only nonresidents may convert it into a foreign currency without any
limitations?
93. The government of Beryllia tightly controls the ability of its residents to convert its currency into other
currencies. However, all foreign businesses with deposits in banks of Beryllia may, at any time, convert all their
currency into foreign currency and take them out of the country. Beryllia's currency is said to be:
94. Which of the following is a reason why governments limit convertibility of their currency?
95. Which of the following occurs when residents and nonresidents of a country rush to convert their holdings
of domestic currency into a foreign currency?
96. The phenomenon of capital flight is most likely to occur when:
97. Companies can deal with the problem of nonconvertibility of currency by engaging in:
98. Which of the following refers to countertrade?
99. Which of the following refers to the extent to which the income from individual transactions is affected by
fluctuations in foreign exchange values?
100. Which of the following is an example of transaction exposure?
101. What is meant by translation exposure?
102. Which of the following is concerned with the present measurement of past events?
103. Which of the following refers to the extent to which the reported consolidated results and balance sheets of
a corporation are affected by fluctuations in foreign exchange values?
104. What is meant by economic exposure?
105. Which of the following is concerned with the effect of exchange rate changes on individual transactions,
most of which are short-term affairs that will be executed within a few weeks or months?
106. A lead strategy involves:
107. A lag strategy involves:
108. In terms of foreign exchange, which of the following is true of leading and lagging strategies?
109. In terms of foreign exchange, which of the following observations is true of leading and lagging
strategies?
110. Which of the following is a step taken to manage foreign exchange risk?
111. How do foreign exchange markets benefit international businesses?
112. What is meant by carry trade? Why is it risky? Explain with an example.
113. Differentiate between spot exchange rates and forward exchange rates.
114. What is meant by a currency swap?
115. How do the purchasing power parity theory and the law of one price relate the prices of commodities to
exchange rate movements?
116. How does an increase in money supply in an economy lead to inflation?
117. Describe the factors that explain the failure of the purchasing power parity theory to predict exchange rates
accurately.
118. What is the Fisher effect?
119. Explain how investor psychology and bandwagon effects impact the movement in exchange rates.
120. Briefly describe the schools of thought regarding exchange rate forecasting.
121. Describe the difference between fundamental analysis and technical analysis in forecasting exchange rate
movements.
122. Explain the concepts of transaction exposure and translation exposure.
123. Explain the concept of economic exposure. How is it different from transaction exposure?
124. Differentiate between a lead strategy and a lag strategy.
125. Briefly describe the tactics and strategies that organizations should use to minimize foreign exchange
exposure.
