9/5/24, 5:37 Chapter 15 Testbank - Practice
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1
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
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,9/5/24, 5:37 Chapter 15 Testbank - Practice
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Chapter 15 Testbank
1. The importance of the foreign exchange market is best described in the following statement/s.
A. Banks’ borrowings from off-shore markets are usually converted into home-based currency.
B. The payment of interest and principal needs to be made in the denominated currency of the
loan.
C. Banks’ major sources of funding come from off-shore markets.
D. All of the given answers.
2. Most foreign exchange transactions are conducted:
A. by governments.
B. by tourists.
C. in the FX over-the-counter markets.
D. on the Australian Securities Exchange.
3. The following types of FX market transactions are common except:
A. spot transactions—where the exchange rate is determined today but delivery occurs in two
business days.
B. forward transactions—where the FX contract value date occurs at a specified date beyond the
spot date and the exchange rate is set today and delivered in the specified future date.
C. tod transactions—an FX contract with settlement and delivery today.
D. forex market transactions settled on the same day.
4. The institutions that transact between the foreign exchange (FX) dealers in banks and act as
principals in the FX market are called the:
A. foreign-currency dealer houses.
B. currency syndicates.
C. foreign-exchange brokers.
D. inter-bank currency clearinghouses.
5. A large international organisation representing the central banks of the major
developed countries is called:
A. the OECD.
B. the ECB.
C. Bank for International Settlements.
D. the World Trade Organization.
6. There are risks involved in the FX market. Which of the following scenarios does NOT
describe the risk exposure faced by market participants?
A. The value of a particular currency will move in the opposite direction to that anticipated.
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
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,9/5/24, 5:37 Chapter 15 Testbank - Practice
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3
B. The value of a particular currency will move in an anticipated direction, but less than
expected.
C. Unanticipated changes in the value of one currency relative other currency results a
significant loss to investment returns.
D. the value of a particular currency moves certain way as expected because the currency has
been managed by a central bank such as Reserve Bank of Australia.
7. Currently, the largest FX centre is in:
A. New York.
B. London.
C. Hong Kong.
D. Tokyo.
8. All of the following are primary centres of foreign exchange trading except:
A. London.
B. New York.
C. Munich.
D. Tokyo.
9. Which of the following about global FX markets is NOT correct?
A. Trading in FX is conducted using telephones and computer–based technological systems.
B. New York is the largest FX market.
C. The Bank for International Settlements estimates turnover in excess of USD 4000 billion.
D. A free float FX regime is one where the exchange rate moves according to the forces
of supply and demand.
10. If the value of a currency is determined by market forces, this is regarded as a:
A. partial floating regime.
B. floating rate regime.
C. managed floating regime.
D. crawling peg regime.
11. If the value of a currency moves within a defined band, relative to another major currency
this is a:
A. partial floating regime.
B. floating rate regime.
C. managed floating regime.
D. crawling peg regime.
12. An exchange rate regime that allows the currency to appreciate gradually over time but
within a specified limited band set by government is a:
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
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, 9/5/24, 5:37 Chapter 15 Testbank - Practice
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4
A. partial floating regime.
B. floating rate regime.
C. managed floating regime.
D. crawling peg regime.
13. The exchange rate where the value of the pegged currency is tied into the value of another
currency or basket of currencies is a:
A. crawling peg regime.
B. floating rate regime.
C. managed floating regime.
D. linked exchange rate regime.
14. A managed float exchange rate regime is one which limits exchange rate movements within
a band that is set by:
A. the major banks.
B. the central bank.
C. government legislation.
D. the major FX traders.
15. A floating exchange rate regime is one:
A. which limits exchange rate movements within a band that is set by the major banks.
B. which limits exchange rate movements within a band that is set by the central bank.
C. exchange rate for a currency is allowed to move as factors of supply and demand dictate.
D. which limits exchange rate movements within a band that is set by the major FX traders.
16. Foreign exchange brokers:
A. quote two-way prices at which they are willing to buy and sell at.
B. in Australia require an authority from the central bank to operate.
C. arbitrage price differences between the various FX markets.
D. seek out the best exchange rates and deal mostly with FX dealers.
17. The foreign exchange participant who quotes prices at which they are prepared to buy and
sell foreign currencies is a:
A. foreign exchange broker.
B. foreign exchange arbitrageur.
C. foreign exchange dealer.
D. foreign exchange adviser.
18. Foreign exchange market participants who seek out the best FX rates in the markets and
match the buy and sell orders for a fee are called:
A. FX dealers.
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
about:bl 4/
PM materials
1
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
about:bl 1/
,9/5/24, 5:37 Chapter 15 Testbank - Practice
PM materials
2
Chapter 15 Testbank
1. The importance of the foreign exchange market is best described in the following statement/s.
A. Banks’ borrowings from off-shore markets are usually converted into home-based currency.
B. The payment of interest and principal needs to be made in the denominated currency of the
loan.
C. Banks’ major sources of funding come from off-shore markets.
D. All of the given answers.
2. Most foreign exchange transactions are conducted:
A. by governments.
B. by tourists.
C. in the FX over-the-counter markets.
D. on the Australian Securities Exchange.
3. The following types of FX market transactions are common except:
A. spot transactions—where the exchange rate is determined today but delivery occurs in two
business days.
B. forward transactions—where the FX contract value date occurs at a specified date beyond the
spot date and the exchange rate is set today and delivered in the specified future date.
C. tod transactions—an FX contract with settlement and delivery today.
D. forex market transactions settled on the same day.
4. The institutions that transact between the foreign exchange (FX) dealers in banks and act as
principals in the FX market are called the:
A. foreign-currency dealer houses.
B. currency syndicates.
C. foreign-exchange brokers.
D. inter-bank currency clearinghouses.
5. A large international organisation representing the central banks of the major
developed countries is called:
A. the OECD.
B. the ECB.
C. Bank for International Settlements.
D. the World Trade Organization.
6. There are risks involved in the FX market. Which of the following scenarios does NOT
describe the risk exposure faced by market participants?
A. The value of a particular currency will move in the opposite direction to that anticipated.
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
about:bl 2/
,9/5/24, 5:37 Chapter 15 Testbank - Practice
PM materials
3
B. The value of a particular currency will move in an anticipated direction, but less than
expected.
C. Unanticipated changes in the value of one currency relative other currency results a
significant loss to investment returns.
D. the value of a particular currency moves certain way as expected because the currency has
been managed by a central bank such as Reserve Bank of Australia.
7. Currently, the largest FX centre is in:
A. New York.
B. London.
C. Hong Kong.
D. Tokyo.
8. All of the following are primary centres of foreign exchange trading except:
A. London.
B. New York.
C. Munich.
D. Tokyo.
9. Which of the following about global FX markets is NOT correct?
A. Trading in FX is conducted using telephones and computer–based technological systems.
B. New York is the largest FX market.
C. The Bank for International Settlements estimates turnover in excess of USD 4000 billion.
D. A free float FX regime is one where the exchange rate moves according to the forces
of supply and demand.
10. If the value of a currency is determined by market forces, this is regarded as a:
A. partial floating regime.
B. floating rate regime.
C. managed floating regime.
D. crawling peg regime.
11. If the value of a currency moves within a defined band, relative to another major currency
this is a:
A. partial floating regime.
B. floating rate regime.
C. managed floating regime.
D. crawling peg regime.
12. An exchange rate regime that allows the currency to appreciate gradually over time but
within a specified limited band set by government is a:
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
about:bl 3/
, 9/5/24, 5:37 Chapter 15 Testbank - Practice
PM materials
4
A. partial floating regime.
B. floating rate regime.
C. managed floating regime.
D. crawling peg regime.
13. The exchange rate where the value of the pegged currency is tied into the value of another
currency or basket of currencies is a:
A. crawling peg regime.
B. floating rate regime.
C. managed floating regime.
D. linked exchange rate regime.
14. A managed float exchange rate regime is one which limits exchange rate movements within
a band that is set by:
A. the major banks.
B. the central bank.
C. government legislation.
D. the major FX traders.
15. A floating exchange rate regime is one:
A. which limits exchange rate movements within a band that is set by the major banks.
B. which limits exchange rate movements within a band that is set by the central bank.
C. exchange rate for a currency is allowed to move as factors of supply and demand dictate.
D. which limits exchange rate movements within a band that is set by the major FX traders.
16. Foreign exchange brokers:
A. quote two-way prices at which they are willing to buy and sell at.
B. in Australia require an authority from the central bank to operate.
C. arbitrage price differences between the various FX markets.
D. seek out the best exchange rates and deal mostly with FX dealers.
17. The foreign exchange participant who quotes prices at which they are prepared to buy and
sell foreign currencies is a:
A. foreign exchange broker.
B. foreign exchange arbitrageur.
C. foreign exchange dealer.
D. foreign exchange adviser.
18. Foreign exchange market participants who seek out the best FX rates in the markets and
match the buy and sell orders for a fee are called:
A. FX dealers.
Copyright © 2019 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.
about:bl 4/
