5.5 Foreign Exchange Rates and Quotations

A foreign exchange ________ is the price of one currency expressed in terms of another currency. A foreign exchange ________ is a willingness to buy or sell at the announced rate.

• quote; rate
• quote; quote
• rate; quote
• rate; rate

Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this known as ________ whereas ________ are expressed as dollars per foreign unit.

• European terms; indirect
• American terms; direct
• American terms; European terms
• European terms; American terms

The following is an example of an American term foreign exchange quote:

• $20/£
• €0.85/$
• ¥100/€
• none of the above

From the viewpoint of a British investor, which of the following would be a direct quote in the foreign exchange market?

• SF2.40/£
• $1.50/£
• £0.55/€
• $0.90/€

A/an ________ quote in the United States would be foreign units per dollar, while a/an ________ quote would be in dollars per foreign currency unit.

• direct; direct
• direct; indirect
• indirect; indirect
• indirect; direct

If the direct quote for a U.S. investor for British pounds is $1.43/£, then the indirect quote for the U.S. investor would be ________ and the direct quote for the British investor would be ________.

• £0.699/$; £0.699/$
• $0.699/£; £0.699/$
• £1.43/£; £0.699/$
• £0.699/$; $1.43/£

________ make money on currency exchanges by the difference between the ________ price, or the price they offer to pay, and the ________ price, or the price at which they offer to sell the currency.

• Dealers; ask; bid
• Dealers; bid; ask
• Brokers; ask; bid
• Brokers; bid; ask

Refer to Table 5.1. The current spot rate of dollars per pound as quoted in a newspaper is ________ or ________.

• £1.4484/$; $0.6904/£
• $1.4481/£; £0.6906/$
• $1.4484/£; £0.6904/$
• £1.4487/$; $0.6903/£

Refer to Table 5.1. The one-month forward bid price for dollars as denominated in Japanese yen is:

• -¥20.
• -¥18.
• ¥129.74/$.
• ¥129.62/$.

Refer to Table 5.1. The ask price for the two-year swap for a British pound is:

• $1.4250/£
• $1.4257/£.
• -$230.
• -$238.