Topic 8 Foreign Exchange Market Exam Questions and Answers

Topic 8: Foreign Exchange Market Exam Questions
and Answers

1. Exporters and importers of goods rely on the foreign exchange
market to ease transactions across markets. Another participant in
this market could be Correct Answer:

Select one Correct Answer:
a. a foreign exchange broker who matches buy and sell orders.
b. a portfolio manager who buys and sells foreign securities.
c. traders who make a market in foreign exchange.
d. future traders who need to satisfy delivery.
e. All of the given choices Correct Answer: e. All of the given choices

These days capital flows are much larger than trade flows
2. Suppose it takes 5 euros to buy 1 US dollar. The direct exchange
rate for a US investor is Correct Answer:

Select one Correct Answer:
a. 5.00USD/EUR
b. 1USD/5EUR
c. 0.25USD/EUR
d. IUSD/0.20EUR
e. None of the given choices Correct Answer: b. 1USD/5EUR

Direct quote is when USD is the unit of the quotation i.e. 1USD= 5EUR
3. Basic FX hedging techniques include all of the following except
Correct Answer:

Select one Correct Answer:
a. money market hedge.
b. a forward market hedge.
c. primary market hedge.
d. none, because all are basic hedging techniques.
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,Topic 8: Foreign Exchange Market Exam Questions
and Answers
e. capital market hedge Correct Answer: c. primary market hedge.
4. If the forward exchange rate is lower
than the spot rate, then the currency is said to be trading at a .




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