Quiz for ESP teamwork:)

When did the World Bank's Treasury enter into the world's first formal currency swap agreement?

• 1918

• 1980

• 1981

• 1982

Which is the World Bank's counterpart in the first formal currency swap transaction?

• IBM

• Bank of America

• JPMorgan Chase

• Credit Suisse

2 currencies that the World Bank swapped for in the first formal currency swap transaction were:

• French francs and Deutsche marks

• Swiss francs and Deutsche marks

• Swiss francs and Japanese yens

• French francs and Japanese yens

What are the reasons why the World Bank's Treasury entered into the world's first formal currency swap agreement?

• A. Because at that time, interest rates in the two transacted currencies were almost half of U.S. dollar interest rates, so the World Bank faced significant demand from its borrowers in those currencies.

• B. Because it directly participated in transactions with the two countries using those currencies.

• C. Because it had a great surplus of U.S. dollars in exchange for other currencies for stock.

• D. B and C

Which of these stands for Foreign Exchange market?

• A. Forex market

• B. FX market

• C. Spot market

• D. A and B

• E. A and C

Answer explanation

There are only two main foreign exchange markets: the spot market and the forward market.

• True

• False

The functions of foreign exchange market consist of currency converting, currency hedging, currency arbitrage and currency speculation.

• True

• False

Answer explanation

The forward rate is:

• An exchange rate at which two parties agree to exchange currencies on a specified future date

• An exchange rate that require delivery of the traded currency within two business days

• An exchange rate at which the bank will buy a currency

• An exchange rate at which the bank will sell a currency

Which of these following statements is wrong?

• There are two components to every quoted exchange rate: the quoted currency and the base currency.

• The base currency is the currency that is to be purchased with another currency.

• The quoted currency is also called the counter currency

• When you designate any exchange rate, the base currency is always the numerator.

Which of these statements is wrong?

• The foreign exchange market facilitates corporate financial activities and international transactions.

• The practice of insuring against potential losses that result from adverse changes in exchange rates is called currency hedging.

• Currency arbitrage is riskier than currency speculation because the value or price of currencies is volatile.

• One function of foreign exchange market is to convert to home-country currency when a country undertake foreign direct investment.