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externalities
TOPICS:
Foreign Exchange Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 10:21 AM
DATE MODIFIED:
7/5/2016 10:22 AM
178. Throughout the world, the foreign exchange market is open for business only during the hours of 9 A.M. to 3 P.M.,
Pacific Standard Time.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
Foreign Exchange Market
KEYWORDS:
BLOOM’S: Analyze
DATE CREATED:
7/5/2016 10:22 AM
DATE MODIFIED:
7/5/2016 10:23 AM
179. The major banks that trade foreign exchange generally do not deal directly with one another but instead use the
services of foreign exchange brokers.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
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:
7/5/2016 10:24 AM
DATE MODIFIED:
7/5/2016 10:25 AM
180. Estimates are that speculation accounts for only about 10 percent of the daily trading activity in the foreign exchange
market.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Easy
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QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
Foreign Exchange Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 10:25 AM
DATE MODIFIED:
7/5/2016 10:27 AM
181. Concerning the volume of foreign exchange market trading, forward transactions and foreign-exchange options are
the two dominant instruments of foreign exchange.
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
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
Types of Foreign Exchange Transactions
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 10:27 AM
DATE MODIFIED:
7/5/2016 10:28 AM
182. Foreign exchange transactions are generally carried out by smaller banks located in smaller cities throughout the
United States.
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
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 10:29 AM
DATE MODIFIED:
7/5/2016 10:30 AM
183. When a bank trades foreign currencies, its offer rate will be less than its bid rate.
a.
True
b.
False
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ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 10:32 AM
DATE MODIFIED:
7/5/2016 10:33 AM
184. A foreign currency trader who works for a bank is assigned a position limit that stipulates the amount of buying and
selling that can be conducted in a given currency.
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
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Interbank Trading
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/5/2016 10:34 AM
DATE MODIFIED:
7/5/2016 10:35 AM
185. If the dollar cost of the U.K. pound is $1.50 and the dollar cost of the Swiss franc is $1, the cross exchange rate
between pound and the franc is 0.67 francs per pound.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – 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: Evaluate
DATE CREATED:
7/5/2016 10:35 AM
DATE MODIFIED:
7/5/2016 10:37 AM
186. In 2013, Japanese automakers found that their vehicles were becoming more affordable to American consumers.
Why? The exchange value of the yen was appreciating against the dollar.
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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
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Reading Foreign Exchange Quotations
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/5/2016 10:37 AM
DATE MODIFIED:
7/5/2016 10:39 AM
187. When conducting foreign exchange trading, commercial banks like Bank of America offer forward contracts. The
size of these contracts can be tailored to the needs of an importer or importer and their date of delivery is negotiable.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – 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: Apply
DATE CREATED:
7/7/2016 12:55 AM
DATE MODIFIED:
7/7/2016 12:56 AM
188. Trading in foreign currencies can be conducted in the futures market such as the International Monetary Market of
the Chicago Mercantile 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
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:
7/7/2016 1:34 AM
DATE MODIFIED:
7/7/2016 1:36 AM
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189. Futures contracts of the International Monetary Market have no set size, the contracts’ dates of delivery are
negotiable, and their costs are based on the bid-offer spread.
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
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:
7/7/2016 1:36 AM
DATE MODIFIED:
7/7/2016 1:37 AM
190. Concerning foreign currency trading, an option contract provides the holder the right to buy or sell a fixed amount of
currency at a prearranged price within a few days or a couple of years.
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
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:
7/7/2016 1:38 AM
DATE MODIFIED:
7/7/2016 1:39 AM
191. If the dollar’s real exchange rate index increases, American products become more affordable to foreign buyers.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/7/2016 1:39 AM
DATE MODIFIED:
7/7/2016 1:40 AM
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192. The nominal exchange rate equals the real exchange rate adjusted for changes in the price level.
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
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange Rates
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 1:41 AM
DATE MODIFIED:
7/7/2016 1:42 AM
193. Arbitrage tends to bring about an identical price for the same currency in different locations and thus results in one
market.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:42 AM
DATE MODIFIED:
7/7/2016 1:44 AM
194. If the dollar/franc exchange rate is 1 franc = $1.20 in New York and 1 franc = 1.22 in Zurich, arbitragers would find
it profitable to purchase francs in Zurich and immediately resell them in New York.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and fi – DISC: International trade and finance
TOPICS:
Indexes of the Foreign Exchange Value of the Dollar: Nominal and Real Exchange
KEYWORDS:
BLOOM’S: Analyze
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DATE CREATED:
7/7/2016 1:44 AM
DATE MODIFIED:
7/7/2016 1:45 AM
195. When a foreign currency is worth more in the forward market than in the spot market, it is said to be at a discount 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
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 1:45 AM
DATE MODIFIED:
7/7/2016 1:46 AM
196. Suppose the selling price of one-month forward British pounds is $1.6036 per pound and the spot price of the pound
is $1.6039. This means that there is an annual forward discount on the pound equal to 0.2 percent.
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
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:47 AM
DATE MODIFIED:
7/7/2016 1:48 AM
197. If interest rates in the U.K. are higher than those in the United States, the pound shows a forward discount which
means the forward rate is less than the spot rate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
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NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:49 AM
DATE MODIFIED:
7/7/2016 1:50 AM
198. If British interest rates are lower than those of the United States, the pound shows a forward discount which means
the forward rate is less than the spot rate.
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
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:50 AM
DATE MODIFIED:
7/7/2016 1:51 AM
199. Hedging is the process of avoiding or covering a foreign exchange risk.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:52 AM
DATE MODIFIED:
7/7/2016 1:53 AM
200. Concerning the management of foreign exchange risk, some business firms do not hedge at all either because they
cannot determine how much money will be coming in from abroad or because they have a deliberate strategy of allowing
currencies to balance each other out around the world.
a.
True
b.
False
ANSWER:
True
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POINTS:
1
DIFFICULTY:
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Promotion – BUSPROG: Analytic
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Remember
DATE CREATED:
7/7/2016 1:53 AM
DATE MODIFIED:
7/7/2016 1:54 AM
201. Assume that Boeing anticipates receiving 1 billion francs in three months from its exports of jetliners to Switzerland.
To avoid the risk of an appreciation of the dollar against the franc, Boeing could contract to sell its expected franc receipts
in the forward market at today’s forward rate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/7/2016 1:55 AM
DATE MODIFIED:
7/7/2016 1:56 AM
202. Suppose that Walmart owes 100 million yen to a Japanese radio manufacturer in three-months’ time. To cover itself
against the risk of the dollar appreciating against the yen during this period, Walmart could buy 100 million yen in the
forward market, at today’s forward rate for delivery in three months.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/7/2016 1:57 AM
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DATE MODIFIED:
7/7/2016 1:58 AM
203. International investors who hedge against exchange rate risk often use currency forward contracts.
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
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 1:58 AM
DATE MODIFIED:
7/7/2016 1:59 AM
204. The euro shows a forward discount against the dollar (the forward rate is less than the spot rate) when interest rates in
Europe are lower than those in the United States.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Challenging
QUESTION TYPE:
True / False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic Reflective Thi – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – PA – DISC: International trade and ec – DISC: International trade and
economy
TOPICS:
The Forward Market
KEYWORDS:
BLOOM’S: Apply
DATE CREATED:
7/7/2016 2:00 AM
DATE MODIFIED:
7/7/2016 2:01 AM
205. A speculator takes a long position by initially buying a currency at a low price then selling it at a higher price later
on.
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
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
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Page 83
externalities
TOPICS:
Foreign Exchange Market Speculation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:01 AM
DATE MODIFIED:
7/7/2016 2:02 AM
206. A speculator engages in a short position by initially selling a currency (that she does not own) at a high price, then
buying it back later at a low price.
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
STATE STANDARDS:
United States – PA – DISC: Markets, market failure, a – DISC: Markets, market failure, and
externalities
TOPICS:
Foreign Exchange Market Speculation
KEYWORDS:
BLOOM’S: Understand
DATE CREATED:
7/7/2016 2:02 AM
DATE MODIFIED:
7/7/2016 2:04 AM