ACTUAL QUESTIONS AND CORRECT
ANSWERS
What is a currency peg? - CORRECT ANSWERS A nation's
governmental policy whereby its exchange rate with another country is fixed.
Most nations peg their currencies to encourage trade and foreign investments, as
well as hedge inflation.
What is a floating currency? - CORRECT ANSWERS A currency that is
not backed by gold or assets and tends to fluctuate in value due to supply and
market expectations.
What is the law of one price? - CORRECT ANSWERS The idea that a
good should cost the same no matter where. Indexes such as the big mac index
seek to identify over or under-valuations of currencies.
Which three economic surprises can impact the value of a currency? -
CORRECT ANSWERS Surprise changes in interest rates, surprise
changes in inflation, and surprise changes in trade.
Which two tools are used to assess currency risk? - CORRECT ANSWERS
Historic volatility and analyst forecast.