MCQs - Chapter 5 - The Foreign Exchange Market
Exam Questions and Answers
1. What is a Direct Quote? Correct Answer: A direct quote is a foreign exchange rate quoted in
fixed units of foreign currency in variable amounts of the domestic currency.
2. What question is the Direct Quote asking? Correct Answer: How many units of
domestic currency are needed to buy one unit of the foreign currency?
3. In a direct quote, which currency (domestic or foreign) is the base
currency?-
Correct Answer: Foreign Currency
4. In a direct quote, which currency (domestic or foreign) is the price
currency?-
Correct Answer: Domestic Currency
5. What determines the use of a direct vs indirect quote in foreign
exchange? Correct Answer: The
location of the trader asking for the quote
6. What is the relationship between the direct and indirect quotations?
Correct Answer: Inverse
7. In a direct quote, what does a higher exchange rate imply? Correct Answer:
Domestic currency is
depreciating since the price of the foreign currency is rising.
8. In a direct quote, what does a lower exchange rate imply? Correct
Answer: Domestic currency is appreciating since the price of the foreign currency is
falling.
9. The USD/JPY (Direct) quotation changes from 100 to 105. What does this
indicate? Correct Answer: The Yen has depreciated against the dollar. It would take 5 more yen
(domestic currency) to buy 1 USD (foreign currency).
10. What is an indirect quote? Correct Answer: An indirect quote expresses the amount
of foreign currency required to buy or sell one unit of the domestic currency.
11. What is the indirect quote often referred to as? Correct Answer: Quantity
quotation
12. Why is the indirect quote often referred to as the quantity
quotation? Correct Answer: It
expresses the quantity of foreign currency required to buy a unit of the domestic currency.
,MCQs - Chapter 5 - The Foreign Exchange Market
Exam Questions and Answers
13. What is the direct quote often referred to as? Correct Answer: Price
quotation
14. Why is the direct quote sometimes referred to as the price
quotation? Correct Answer: It
expresses the price of one unit of a foreign currency in terms of a variable number of units of the domestic
currency.
15. What does a lower exchange rate imply in an indirect quote? Correct
Answer: The domestic currency is depreciating, since a unit of domestic currency buys less
units of the foreign currency.
16. What does a higher exchange rate imply in an indirect quote? Correct
Answer: The domestic currency is appreciating, since a unit of domestic currency buys more
units of the foreign currency.
Exam Questions and Answers
1. What is a Direct Quote? Correct Answer: A direct quote is a foreign exchange rate quoted in
fixed units of foreign currency in variable amounts of the domestic currency.
2. What question is the Direct Quote asking? Correct Answer: How many units of
domestic currency are needed to buy one unit of the foreign currency?
3. In a direct quote, which currency (domestic or foreign) is the base
currency?-
Correct Answer: Foreign Currency
4. In a direct quote, which currency (domestic or foreign) is the price
currency?-
Correct Answer: Domestic Currency
5. What determines the use of a direct vs indirect quote in foreign
exchange? Correct Answer: The
location of the trader asking for the quote
6. What is the relationship between the direct and indirect quotations?
Correct Answer: Inverse
7. In a direct quote, what does a higher exchange rate imply? Correct Answer:
Domestic currency is
depreciating since the price of the foreign currency is rising.
8. In a direct quote, what does a lower exchange rate imply? Correct
Answer: Domestic currency is appreciating since the price of the foreign currency is
falling.
9. The USD/JPY (Direct) quotation changes from 100 to 105. What does this
indicate? Correct Answer: The Yen has depreciated against the dollar. It would take 5 more yen
(domestic currency) to buy 1 USD (foreign currency).
10. What is an indirect quote? Correct Answer: An indirect quote expresses the amount
of foreign currency required to buy or sell one unit of the domestic currency.
11. What is the indirect quote often referred to as? Correct Answer: Quantity
quotation
12. Why is the indirect quote often referred to as the quantity
quotation? Correct Answer: It
expresses the quantity of foreign currency required to buy a unit of the domestic currency.
,MCQs - Chapter 5 - The Foreign Exchange Market
Exam Questions and Answers
13. What is the direct quote often referred to as? Correct Answer: Price
quotation
14. Why is the direct quote sometimes referred to as the price
quotation? Correct Answer: It
expresses the price of one unit of a foreign currency in terms of a variable number of units of the domestic
currency.
15. What does a lower exchange rate imply in an indirect quote? Correct
Answer: The domestic currency is depreciating, since a unit of domestic currency buys less
units of the foreign currency.
16. What does a higher exchange rate imply in an indirect quote? Correct
Answer: The domestic currency is appreciating, since a unit of domestic currency buys more
units of the foreign currency.
