Foreign Exchange

What is Foreign Exchange Market?

• a place where corporation and government can raise fund

• a market for converting currency of one country into another country

• trading of instrument by an exchange of securities

The purpose of the Forex market is to encourage international investment and trade.

• False

• True

In the foreign exchange market for the Mexican peso, which of the following would best describe the exchange rate for the peso?

• a. The interest rate earned from saving pesos

• b. The price of a peso in terms of some other currency

• c. The price of a good in Mexico in terms of another goods in Mexico

• d.The price of a peso in terms of pesos

1. State whether the following is true or false.

£1 = US$1.8879 is a direct quote of the exchange rate of the Pound sterling.

• a. False

• b. True

If a French firm buys computers from the United States, there would be an increase in which of the following in the foreign exchange market?

• Demand for United States dollars and supply of euros

• Demand for both United States dollars and euros

• Supply of United States dollars and demand for euros

• Supply of both United States dollars and euros

• International value of the euro relative to the United States dollar

The exchange rate is determined when

• Demand for Forex=Supply of Forex

• Demand for Forex > Supply of Forex

• Demand for Forex < Supply of Forex

Price in one country in relation to other currencies in the international exchange market is known as-

• equilibrium rate

• fixed exchange rate

• exchange rate

• flexible exchange rate

Identify the most traded currency around the world.

• US Dollar

• Malaysian Ringgit

• Euro

• Yuan

In an agreement to exchange dollars for euros in three months at a price of $0.90 per euro, the price is the ________.

• spot exchange rate

• money exchange rate

• forward exchange rate

• fixed exchange rate

The ________ consists of foreign-exchange transactions that are to occur sometime in the future.

• spot market

• soft currency market

• bond market

• forward market