CHAPTER GLOBAL FINANCIAL MARKET

A foreign currency swap is simply an agreement between two parties to exchange one currency for another at a yet-to-be-determined future date but at a specified exchange ratio.

• TRUE

• FALSE

The spot rate is simply the exchange rate between two currencies as determined by the respective governments.

• TRUE

• FALSE

The World Bank coordinates international currency exchange.

• TRUE

• FALSE

One function of the foreign exchange market is to provide some insurance against foreign exchange risk

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• FALSE

Tourists are major participants in the foreign exchange market.

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• FALSE

A forward contract specifies the currencies to be exchanged, an exchange rate, and a future date when the transaction will be completed

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• FALSE

Under a floating (flexible) exchange rate system, the value of one currency relative to another is determined by the forces of supply and demand.

• TRUE

• FALSE

Most trading occurs among corporations and investors in secondary markets.

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• FALSE

The international monetary system consists of institutions and mechanisms that foster international trade, manage the flow of financial capital, and determine currency exchange rates.

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• FALSE

Future contracts takes place at a forward exchange rate to minimize riks.

• TRUE

• FALSE