Font size
WorksheetsForeign Exchange
Total questions: 81
Worksheet time: 41mins
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 $0.90 per euro, the price is the ________.
spot exchange rate
money exchange rate
forward exchange rate
fixed exchange rate
The ________ consists of foreign-exchange transactions that are to occur sometime in the future.
spot market
soft currency market
bond market
forward market
Select all of the following that will be impacted by a change in exchange rates:
Prices of exports
Costs of imports
Competiveness
None of the answers
Consider the example of the Canadian dollar (C$), which we assume is trading at 1.2500 to the US dollar. In Canada, the indirect form of this quote would be C$1 = US$0.8000 (i.e. 1/1.2500).
True
False
FOREX is
Foreign currency
Foreign country
a Share market
FOREX RATE is
Domestic currency
Value of domestic currency in terms of foreign currency
foreign currency
Under which system Demand and supply for FOREX determines the exchange rate
Flexible exchange rate
Fixed exchange rate
Both
Managed floating system is
flexible system of exchange rate
mixture of fixed exchange rate and fixed exchange rate
A system managed by a foreign country
Depreciation is
Fall in the value of domestic currency in terms of foreign currency
Rise in the value of domestic currency in terms of foreign currency
none
Devaluation is
Fall in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under Fixed exchange rate system
Rise in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under Fixed exchange rate system
Fall in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under FLEXIBLE exchange rate system
Appreciation of domestic currency will
Encourage imports
Encourage Exports
Discourage imports
Under flexible system exchange rate is determined where
Demand for FOREX=Supply of FOREX
Demand for Forex > Supply of FOREX
By Government
Which of the following is a source of FOREX supply
Imports
Exports
Direct purchase in abroad
Stability is a merit of
Fixed exchange rate system
Flexible exchange rate system
Both
price in one country in relation to other currencies in the international exchange market is known is-
equilibrium rate
fixed exchange rate
exchange rate
flexible exchange rate
the rate which is determined by the govt. is known as-
fixed exchange rate
floating exchange rate
what is relationship between demand for foreign and exchange rate-
inverse
direct
when supply of foreign exchange increases, the equilibrium exchange rate will-
rise
fall
no change
demand for foreign currency depends upon-
repayment of international loans
investment in rest of the world
both
due to depreciation of foreign currency, the supply of foreign currency in domestic economy will -
increase
decrease
direct foreign investment is a source of -
demand for foreign exchange
supply of foreign exchange
both
dirty floating is related to-
fixed exchange rate
flexible system of exchange rate
depreciation of domestic currency leads to rise in -
exports
imports
imports of goods and services raises the ................................of foreign exchange.
supply
demand
devaluation of currency means-
reduction in the value of domestic currency by the market forces
reduction in the value of domestic currency by the government
what is foreign exchange -
all currencies other than domestic
only domestic currency
what will be the effect of exchange depreciation on exports-
increase in exports
decrease in exports
what is fixed exchange rate-
fixed by exchange market
fixed by govt.
According to adjustable peg system ( or bretton Woods system) of exchange rate
Different currencies ware pegged to one currency (US dollar)
US dollar was assigned gold value at a fixed price
Parity between two currencies was determined by the quantity of gold contained in them
All of these
Under which system, gold was taken as the common unit of parity between currencies of different countries in circulation?
Bretton woods system of exchange rate
Gold Standard System of exchange rate
Flexible exchange rate system
Managed floating system of exchange rate
The rate which is determined by the government is known as :
Flexible exchange rate
Fixed exchange rate
Floating exchange rate
None of these
What is the relation ship between demand for foreign exchange and exchange rate?
Inverse
Direct
One to one
No relation
When supply of foreign exchange increases, the equilibrium exchange rate will
Rise
Fall
Not change
Either rise or fall
Demand for foreign currency depends upon;
Repayment of international loan
Direct foreign investment in the domestic economy
None of this
All of the above
Due to depreciation of foreign currency, the supply of foreign currency in domestic economy will;
Increase
Not change
Either increase or decrease
Decrease
Direct foreign investment is a source of;
Demand for foreign exchange
Supply of foreign exchange
Both a and b
None of these
When the exchange rate Rises due to managed floating, it is called;
Devaluation
Appreciation
Depreciation
Revaluation
Which of the following functions are performed in a foreign exchange market?
Transfer function
Credit function
Hedging function
All of these
Hedging is possible in;
Spot market
Forward market
Manage floating system
None of these
Spot market is the market where;
Only current transactions are handled
Forward rate of exchange is determined
All of the above
None of these
Forward market is that market which:
Handles transactions of foreign exchange meant for future delivery
Handles current transactions
Handles current as well as future transactions
None of these
If rupees 120 are required to buy $2, instead of rupees 100 for $1 earlier, than:
Domestic currency has appreciated
Domestic currency has depreciated Aad
None of these
Both are correct
Forward market is that market which:
Handles transactions of foreign exchange meant for future delivery
Handles current transactions
Handles current as well as future transactions
None of these
Equilibrium exchange rate occurs when:
Supply of foreign exchange> demand of foreign exchange
Supply of foreign exchange = demand of foreign exchange
Supply of foreign exchange < demand of foreign exchange
Both a and b
Which of the following is a source of FOREX supply
Imports
Exports
Direct purchase in abroad
Stability is a merit of
Fixed exchange rate system
Flexible exchange rate system
Both
Appreciation of domestic currency will
Encourage imports
Encourage Exports
Discourage imports
Devaluation is
Fall in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under Fixed exchange rate system
Rise in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under Fixed exchange rate system
Fall in the value of domestic currency in terms of foreign currency as a deliberate step adopted by the govt. under FLEXIBLE exchange rate system
Arbitrageurs in foreign exchange markets :
a. attempt to make profits by outguessing the market.
b. make their profits through the spread between bid and offer rates of exchange.
c. need foreign exchange in order to buy foreign goods.
d. take advantage of the small inconsistencies that develop between markets.
It is very difficult to interpret news in foreign exchange markets because
a. it is difficult to know which news is relevant to future exchange rates.
b. it is difficult to know whether the news has been obtained legally.
c. very little information is publicly available.
State whether the following is true or false.
Almost all direct quotations of exchange rates involve the US dollar.
a. False
b. True
If Malaysia inflation rate decrease, what will happen in the demand of us goods and services?
Decrease
Increase
How can the government of foreign country influence the equilibrium exchange rate?
impose forex barriers
Impose foreign trade barriers
Intervene by buying and selling currency
All above
Expectation is when foreign exchange market react to any news that may have future effect.
True
False
Below are factors that affecting forex rates.
a. Relative Price Level
b. Relative Inflation Rate
c. Relative Income Level
d. Government Expenditure
e. Relative to GDP
f.
a,b,c
a,c,d
b,c,d
All above
There are 3 reasons for intervention, one of them are,
React to permanent disturbances
Fluctuate of Income Level
Establish implicit exchange rate boundaries
High trade of exchange rate
The relative of income level and forex is
Income decrease, Dd for foreign product will decrease
Interest rate constant, Dd for domestic product will increase
Income increase, Dd for foreign product will increase
How much of one country's money is worth compared to another country?
Exchange rate
Exchange control
Currency
Foreign trade
International trade free of government control and trade barriers
Trade barrier
Free trade
Tariff
Voluntary trade
An action a government uses to control trade between countries
Trade barrier
Voluntary trade
Free trade
None of the above
Identify the second most traded currency around the world.
US Dollars
Indian Rupee
Euro
Yuan
Decreased government spending would result in
A lower discount rate
Higher prices
Lower taxes
Higher reserve amount
The government issues currency and coins to
Promote global trade
Control exchange of goods and services
Promote monopolies
Help make exchange of goods and services easier
India is facing continuous deficit in BOP. In the foreign exchange market, rupee is expected to
Depreciate
Appreciate
No specific tendency
All of the above
The demand for domestic currency in the foreign exchange market is indicated by the following transactions in balance of payment
Export of goods and services
Import of goods and services.
Export of goods and services and capital inflows.
Import of goods and services and capital outflows.
Reduction of value of currency due to market forces
Revaluation
Devaluation
Depreciation
Appreciation
The exchange rate determines how much foreign currency you get when exchanging different currencies.
True
False
When the pound is strong...
Exports are expensive for the buyer
Exports are cheap for the buyer
A weak pound will result in an increase in...
Tourists
Exports
Imports
Holidays abroad
The Pound has become weaker against the Euro, imports are now...
more expensive
cheaper
The Pound has become weaker against the Euro, exports are now...
more expensive
cheaper
Joe wants to convert £100 into $USD at an exchange rate of 1.20. What will he get for his money?
£110
£120
£122
£140.20
Molly wants to know how much $200 USD is in £GBP. The current rate is 1.50.
£133
£150
£155
£160
