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Page 21
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading & Interpreting Gra – DISC: Reading & interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
48. Refer to Figure 11.1. Suppose the exchange rate is $.30 per franc. At this exchange rate there is an ____ of francs
which leads to a ____ in the dollar price of the franc, a (an) ____ in the quantity of francs supplied, and a (an) ____ in the
quantity of francs demanded.
a.
Excess demand, rise, increase, decrease
b.
Excess demand, rise, decrease, increase
c.
Excess supply, fall, decrease, increase
d.
Excess supply, fall, increase, decrease
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
49. Refer to Figure 11.1. Suppose the exchange rate is $.70 per franc. Free-market forces would lead to a (an) ____ of the
dollar against the franc and a (an) ____ in U.S. international competitiveness.
a.
Depreciation, improvement
b.
Depreciation, worsening
c.
Appreciation, improvement
d.
Appreciation, worsening
ANSWER:
d
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
Copyright Cengage Learning. Powered by Cognero.
Page 22
PREFACE NAME:
Figure 11.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
50. Refer to Figure 11.1. Suppose the exchange rate is $.30 per franc. Free-market forces would lead to a (an) ____ of the
dollar against the franc and a (an) ____ in U.S. international competitiveness:
a.
Depreciation, improvement
b.
Depreciation, worsening
c.
Appreciation, improvement
d.
Appreciation, worsening
ANSWER:
a
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.1
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
The figure below illustrates the market for Swiss francs in a world of market-determined exchange rates. Assume the
equilibrium exchange rate is $0.5 per franc, given by the intersection of schedules S0 and D0.
Figure 11.2. Market for Francs
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51. Refer to Figure 11.2. A shift in the demand for francs from D0 to D1 or a shift in the supply of francs from S0 to S2,
would result in a (an):
a.
b.
c.
d.
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
52. Refer to Figure 11.2. A shift in the demand for francs from D0 to D2, or a shift in the supply of francs from S0 to S1,
would result in a (an):
a.
Depreciation in the dollar against the franc
b.
Appreciation in the dollar against the franc
c.
No change in the dollar/franc exchange rate
d.
None of the above
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
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Page 24
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
53. A (An) ____ is an arrangement by which two parties exchange one currency for another and agree that the exchange
will be reversed at a stipulated date in the future:
a.
Arbitrage
b.
Swap
c.
Option
d.
Hedge
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign Currency Options
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
Table 11.2. Supply and Demand of British Pounds
Quantity
Dollars
Quantity
of Pounds
per
of Pounds
Supplied
Pound
Demanded
1,000
2.00
200
800
1.80
400
600
1.60
600
400
1.40
800
200
1.20
1,000
54. Refer to Table 11.2. The equilibrium exchange rate equals:
a.
$1.20 per pound
b.
$1.40 per pound
c.
$1.60 per pound
d.
$1.80 per pound
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ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
55. Refer to Table 11.2. At the exchange rate of $1.40 per pound, there is an ____ for pounds. This imbalance causes ____
in the price of the pound, which leads to ____ in the quantity of pounds supplied and ____ in the quantity of pounds
demanded.
a.
Excess supply, a decrease, an increase, a decrease
b.
Excess supply, an increase, a decrease, an increase
c.
Excess demand, an increase, an increase, a decrease
d.
Excess demand, an increase, a decrease, an increase
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
56. Refer to Table 11.2. At the exchange rate of $1.80 per pound, there is an ____ for pounds. This imbalance causes ____
in the price of the pound, which leads to ____ in the quantity of pounds supplied and ____ in the quantity of pounds
demanded.
a.
Excess supply, a decrease, a decrease, an increase
b.
Excess supply, an increase, a decrease, an increase
c.
Excess demand, an increase, an increase, a decrease
d.
Excess demand, an increase, a decrease, an increase
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
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Page 26
HAS VARIABLES:
False
PREFACE NAME:
Table 11.2
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
Table 11.3. Key Currency Cross Rates
Dollar
Euro
Pound
Swiss Franc
Canada
1.5326
1.4400
2.2362
0.9790
Japan
124.48
116.96
181.63
79.515
Mexico
9.7410
9.1526
14.213
6.2223
Switzerland
1.5655
1.4709
2.2842
……….
U.K.
.68540
.6440
……….
.4378
Euro
1.06430
……….
1.5529
.67984
U.S.
……….
.9396
1.4591
.63877
57. Referring to Table 11.3, the cross exchange rate between the euro and Swiss franc is approximately:
a.
.68 euros per franc
b.
.68 francs per euro
c.
.64 euros per franc
d.
.64 francs per euro
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.3
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
58. Referring to Table 11.3, the yen cost of purchasing 100 British pounds is roughly:
a.
18,000 yen
b.
19,000 yen
c.
20,000 yen
d.
21,000 yen
ANSWER:
a
POINTS:
1
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Page 27
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.3
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
Table 11.4. Forward Exchange Rates
U.S. Dollar Equivalent
Wednesday
Tuesday
Switzerland (Franc)
.6598
.6590
30-day Forward
.6592
.6585
90-day Forward
.6585
.6578
180-day Forward
.6577
.6572
59. Refer to Table 11.4. On Wednesday, the 30-day forward franc was selling at a:
a.
1 percent premium per annum against the dollar
b.
2 percent premium per annum against the dollar
c.
1 percent discount per annum against the dollar
d.
2 percent discount per annum against the dollar
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.4
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
60. Refer to Table 11.4. On Wednesday, the 90-day forward franc was selling at a:
a.
0.8 percent premium per annum against the dollar
b.
1.6 percent premium per annum against the dollar
c.
0.8 percent discount per annum against the dollar
d.
1.6 percent discount per annum against the dollar
ANSWER:
c
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POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.4
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
61. Refer to Table 11.4. On Wednesday, the 180-day forward franc was selling at a:
a.
0.6 percent premium per annum against the dollar
b.
1.6 percent premium per annum against the dollar
c.
0.6 percent discount per annum against the dollar
d.
1.6 percent discount per annum against the dollar
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.4
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
62. Refer to Table 11.4. Comparing the franc’s forward rates against the franc’s spot rate, the exchange market’s consensus
is that over the period of a forward contract, the franc’s spot rate will:
a.
Depreciate against the dollar
b.
Appreciate against the dollar
c.
Remain constant against the dollar
d.
None of the above
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Table 11.4
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
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Page 29
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
63. The offer rate
a.
Is the price at which the bank is willing to sell a unit of foreign currency
b.
Is the price that the bank is willing to pay for a unit of foreign currency
c.
Is synonymous with the spread rate
d.
None of the above
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
64. When the dollar depreciates
a.
U.S. exporters tend to sell more goods in foreign markets
b.
U.S. consumers travel abroad more cheaply
c.
More foreign tourists can afford to visit the United States
d.
both a and c
ANSWER:
d
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
65. When the dollar gets stronger
a.
U.S. firms become more competitive in international market
b.
Foreign tourists travel in the U.S. at a higher cost
c.
U.S. inflation increases
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d.
U.S. consumers face higher prices on foreign goods
ANSWER:
b
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
Figure 11.3 The Market for the Euro
66. Refer to Figure 11.3. If the supply curve is represented by S0, the equilibrium exchange rate is
a.
$1.20
b.
$1.00
c.
$0.80
d.
$0.60
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
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Page 31
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.3
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
67. Refer to Figure 11.3. If the supply curve shifts from S2 to S1
a.
the dollar has depreciated relative to the Euro
b.
the euro has appreciated relative to the dollar
c.
the euro has depreciated relative to the dollar
d.
both a and b
ANSWER:
d
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
PREFACE NAME:
Figure 11.3
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Reading and interpreting g – DISC: Reading and interpreting
graphs
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
68. Similar to stock and commodity exchanges, the foreign exchange market is an organized structure with a central
meeting place and formal licensing requirements.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign-Exchange Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:23 PM
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Page 32
DATE MODIFIED:
6/22/2016 3:23 PM
69. Most foreign exchange transactions are conducted between commercial banks and household customers.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign-Exchange Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
70. Foreign-exchange brokers help commercial banks carry out foreign exchange trading and maintain desired balances of
foreign exchange.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Foreign-Exchange Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
71. A person needing foreign exchange immediately would purchase it on the spot market.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
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Page 33
TOPICS:
Foreign-Exchange Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
72. Most foreign exchange trading is carried out in the forward market.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
73. Swap transactions among commercial banks involve the conversion of one currency to another at one point with an
agreement to reconvert it back into the original currency at some point in the future.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
74. The bid rate refers to the price at which a bank is willing to sell a unit of foreign currency; the offer rate is the price at
which a bank is willing to buy a unit of foreign currency.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
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Page 34
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
75. A commercial bank profits from foreign-exchange trading when its bid rate exceeds its offer rate.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
76. The “spread” is a bank’s profit margin on foreign exchange trading and equals the difference between the bid rate and
the offer rate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
77. If Citibank quoted bid and offer rates for the Swiss franc at $.4850/$.4854, the bank would be prepared to buy, say, 1
million francs for $485,000 and sell them for $485,400.
a.
True
b.
False
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Page 35
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
78. If Chase Manhattan Bank quotes bid and offer rates for the Swiss franc at $.5250/$.5260, the bank would realize
profits of $1,000 on the purchase and sale of 1 million francs.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
79. If a Citibank dealer expects the Swiss franc to appreciate against the U.S. dollar, she will attempt to lower both bid
and offer rates for the franc, attempting to persuade other dealers to buy francs from Citibank and dissuade other dealers
from selling francs to Citibank.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
Copyright Cengage Learning. Powered by Cognero.
Page 36
DATE MODIFIED:
6/22/2016 3:23 PM
80. If a Citibank dealer expects the Swiss franc to depreciate in the future, he will lower bid and offer rates for the franc in
order to discourage other dealers from selling francs to Citibank and persuade other dealers to buy francs from Citibank.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
81. If it takes $0.18544 to purchase 1 French franc, it takes 5.3926 francs to purchase $1.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
82. If it takes 113.28 yen to buy $1, it takes $.009624 to buy 1 yen.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Copyright Cengage Learning. Powered by Cognero.
Page 37
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
83. If it takes $1.5515 to buy 1 pound and $0.6845 to buy 1 franc, it takes 2.27 francs to buy 1 pound.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign-Exchange Quotations
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
84. “Futures” currency contracts are issued by commercial banks and are tailored in size to the needs of the exporter or
importer, while “forward” currency contracts are issued by the International Monetary Market in standardized round lots.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
85. A foreign currency option is an agreement between a holder (corporation) and a writer (commercial bank) giving the
holder the right to buy or sell a certain amount of foreign currency at any time through some specified date.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
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Page 38
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
86. A “call” option gives General Motors the right to sell pounds at a specified price, while a put option gives General
Motors the right to buy pounds at a specified price.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Forward and Futures Markets
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
87. The demand for foreign exchange is derived from credit transactions on the balance of payments.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
88. The U.S. demand for pounds is derived from U.S. exports to the United Kingdom, U.K. investments in the United
States, and U.K. tourist expenditures in the United States.
a.
True
b.
False
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Page 39
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
89. As the dollar’s exchange value appreciates against the pound, U.S. residents tend to import more British goods and
thus demand more pounds.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
90. As the dollar depreciates against the peso, U.S. residents tend to import more Mexican goods and thus demand more
pesos.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
Copyright Cengage Learning. Powered by Cognero.
Page 40
91. The supply of francs is derived from the desire of the Swiss to purchase German goods, make investments in
Germany, repay debts to German lenders, and extend transfer payments to German residents.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
92. The demand schedule for Swiss francs is always downsloping while the supply schedule of francs is always upsloping.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Exchange-Rate Determination
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
6/22/2016 3:23 PM
DATE MODIFIED:
6/22/2016 3:23 PM
93. The supply schedule of yen has a positive-sloping region which corresponds to the inelastic region on the Japanese
demand schedule for foreign currency.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance