Ch.

1. It is characteristic of foreign exchange dealers to: A) bring buyers and sellers of currencies together but never to buy and hold an inventory of currency for resale. B) act as market makers, willing to buy and sell the currencies in which they specialize. C) trade only with clients in the retail market and never operate in the wholesale market for foreign exchange. D) All of the above are characteristics of foreign exchange dealers. 2. In the foreign exchange market, ________ seek all of their profit from exchange rate changes while ________ seek to profit from simultaneous exchange rate differences in different markets. A) wholesalers; retailers B) central banks; treasuries C) speculators; arbitrageurs D) dealers; brokers 3. A ________ transaction in the interbank market is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. A) spot B) forward-forward C) swap D) futures 4. Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit. A) European terms; indirect B) American terms; direct C) American terms; European terms D) European terms; American terms 5. The following is an example of an American term foreign exchange quote: A) $20/ B) 0.85/$ C) 100/ D) none of the above

Ch. 6

Use the table t to answ wer followin ng question n(s).

6. Refer R to Tabl le 6.1. The cu urrent spot rate r of dollar rs per pound d as quoted in n a newspap per is __ _______ or ________. A) 1.4484/$; $0.690 04/ B) $1.4481/; 0.690 06/$ 04/$ C) $1.4484/; 0.690 D) 1.4487/$; $0.690 03/ R to Tabl le 6.1. The one-month fo orward bid p rice for dollars as denom minated in 7. Refer Ja apanese yen is: A) -20. B) -18. C) 129.74/$. D) 129.62/$. 8. Refer R to Tabl le 6.1. The ask price for the t two-year r swap for a British poun nd is: A) $1.4250/. B) $1.4257/. 0. C) -$230 D) -$238 8. 9. Refer R to Tabl le 6.1. Accor rding to the information i provided in the table, th he 6-month y yen is se elling at a fo orward _____ ____ of appr roximately _ ________ pe er annum. (U Use the mid r rates to o make your calculations s.) A) discou unt; 2.09% B) discou unt; 2.06% C) premi ium; 2.09% D) premi ium; 2.06% 10. Given G the following exch hange rates, which w of the e multiple-ch hoice choices represents a potentially pr rofitable inte ermarket arbi itrage oppor rtunity (and w with $1,000,000, how m much rofit you can n make)? pr 129.87/$ 1.1226/$ 0.00864 4/ A) 115.69/ B) 114.96/ C) $0.8908/ D) $0.0077/
2

Ch. 6

AK 1. B 2. C 3. C 4. D 5. A 6. C 7. D 8. B 9. C 10. B