FIN 390 FINAL EXAM QUESTIONS WITH VERIFIED
ACCURATE ANSWERS
FX Trading Activities - Answers - 1. The purchase and sale of foreign currencies to
allow customers to partake in and complete international commercial trade transactions
2. The purchase and sale of foreign currencies to allow customers to take positions in
foreign real and financial investments
3. The purchase and sale of foreign currencies for hedging purposes to offset customer
exposure in any given currency
4. The purchase and sale of foreign currencies for speculative purposes through
forecasting/anticipating future movements in FX rates
An FI can eliminate its currency risk exposure by matching its foreign currency assets to
its foreign currency liabilities. - Answers - False
The position in foreign assets and liabilities by U.S. banks at the end of 2003 was at an
all-time high. - Answers - False
The exposure to foreign exchange risk by U.S. FIs has decreased with the growth of the
various derivative markets. - Answers - False
The market in which foreign currency is traded for future delivery is the forward foreign
exchange market. - Answers - True
The greater the volatility of foreign exchange rates given any net exposure position, the
greater the fluctuations in value of the foreign exchange portfolio. - Answers - True
Most nonbank FIs have foreign exchange risk exposure that is smaller than the
exposure of the large U.S. money-center banks - Answers - True
The underlying cause of foreign exchange volatility reflects fluctuations in the demand
and supply of a country's currency - Answers - True
The volume of foreign currency trading increased consistently from 1998 to 2003. -
Answers - False
Most profits or losses on foreign trading come from taking an open position in
currencies. - Answers - True
The FX markets of the world have become one of the largest of all financial markets. -
Answers - True
FX trading risk exposure continues into the night until all FI operations are closed. -
Answers - False
ACCURATE ANSWERS
FX Trading Activities - Answers - 1. The purchase and sale of foreign currencies to
allow customers to partake in and complete international commercial trade transactions
2. The purchase and sale of foreign currencies to allow customers to take positions in
foreign real and financial investments
3. The purchase and sale of foreign currencies for hedging purposes to offset customer
exposure in any given currency
4. The purchase and sale of foreign currencies for speculative purposes through
forecasting/anticipating future movements in FX rates
An FI can eliminate its currency risk exposure by matching its foreign currency assets to
its foreign currency liabilities. - Answers - False
The position in foreign assets and liabilities by U.S. banks at the end of 2003 was at an
all-time high. - Answers - False
The exposure to foreign exchange risk by U.S. FIs has decreased with the growth of the
various derivative markets. - Answers - False
The market in which foreign currency is traded for future delivery is the forward foreign
exchange market. - Answers - True
The greater the volatility of foreign exchange rates given any net exposure position, the
greater the fluctuations in value of the foreign exchange portfolio. - Answers - True
Most nonbank FIs have foreign exchange risk exposure that is smaller than the
exposure of the large U.S. money-center banks - Answers - True
The underlying cause of foreign exchange volatility reflects fluctuations in the demand
and supply of a country's currency - Answers - True
The volume of foreign currency trading increased consistently from 1998 to 2003. -
Answers - False
Most profits or losses on foreign trading come from taking an open position in
currencies. - Answers - True
The FX markets of the world have become one of the largest of all financial markets. -
Answers - True
FX trading risk exposure continues into the night until all FI operations are closed. -
Answers - False
