Forex Market - Quiz International Finance

The most important foreign exchange market place in terms of trading volume is :

• A) New York

• B) Tokyo

• C) London

• D) Frankfurt

As a general rule, currencies bought and sold on the spot foreign exchange market are available :

• A) Immediately after the conclusion of the transaction

• B) 24 hours after the conclusion of the transaction

• C) 48 hours after the conclusion of the transaction

• D) 72 hours after the conclusion of the transaction

Given the subsequent amounts that they involve, arbitrage operations on the foreign exchange market :

• A) Tend to regularise exchange rates

• B) Tend to destabilise exchange rates

• C) Have no influence on exchange rates

• D) Are very risky because they are speculative

In order to trade in the foreign exchange market, forex traders must always deal with brokers.

• A) True

• B) False except when one of the two currencies is not directly quoted with a Major currency (US $, Euro, GBP, Yen).

• C) False

Rank these foreign exchange market participants in descending order of importance (from most important to least important).

I. Commercial Banks

II. Investment Banks (including institutional investors)

III. Multinational companies

IV. Central Banks

• A) I, II, III, IV

• B) I,II,IV,III

• C) II,I,III,IV

• D) II,III,IV,I

CHF 1 = USD 0.6101 is :

• A) A direct quote in Zurich (CH)

• B) A direct quote in New York City (USA)

• C) A dual quote of the CHF on the NYSE

• D) None of the above answers is correct.

If the quotation of the euro in dollar is EUR/USD= 1.0610-1.0616, the quotation USD/EUR is equal to :

• A) USD 1 = EUR (1/1.0616)-(1/1.0610)

• B) USD 1 = EUR 1/1.0613

• C) USD 1 = EUR (1/1.0610)-(1/1.0616)

• D) USD 1 = EUR 1.0616-1.0610

On 17 December at 10 a.m. local time, a major American bank quoted the Euro against the US. Dollar with the following quotation: EUR/USD = 0.9791-0.9795 on the New York interbank market.

This quotation meant that this bank was ready:

• A) To buy Euro at a price of EUR 1 = USD 0.9791 and to sell it at a price of EUR 1 = USD 0.9795

• B) To buy euro at a price of EUR 1 = USD 0.9795 and to sell it at a price of EUR 1 = USD 0.9791

• C) To buy euro at a price of EUR 1 = USD 0.9795 and to sell it at a price of EUR 1 = USD 0.9795

• D) To buy euro at a price of EUR 1 = USD 0.9791 and to sell it at a price of EUR 1 = USD 0.9791

On 2 June at 10.35 a.m., the British Pound (GBP) is quoted against the Euro GBP/EUR= 1.6025. At the same time, the Swiss franc is quoted CHF/EUR= 0.6220. In the absence of arbitrage opportunities, the GBP/CHF is :

• A) GBP/CHF = 0.6220/1.6025

• B) GBP/CHF = 1.6025/0.6220

• C) GBP/CHF = 1.6025 × 0.6220

• D) None of the above answers is correct.

Arbitrageurs in foreign exchange markets:

• A) make their profits through the spread between bid and offer rates of exchange.

• B) take advantage of the small inconsistencies that develop between markets.

• C) attempt to make profits by outguessing the market.

• D) need foreign exchange in order to buy foreign goods.