Financial Info Management Test Bank

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1. The world's largest foreign exchange trading center is  A. New York.
B. Tokyo.
C. London.
D. Hong Kong.
 

Topic: Function and Structure of the FX Market
 
2. On average, worldwide daily trading of foreign exchange is  A. impossible to estimate.
B. $15 billion.
C. $504 billion.
D. $3.21 trillion.
 

Topic: Function and Structure of the FX Market
 
3. The foreign exchange market closes 
A. Never.
B. 4:00 p.m. EST (New York time).
C. 4:00 p.m. GMT (London time).
D. 4:00 p.m. (Tokyo time).
 

Topic: Function and Structure of the FX Market
 

4. Most foreign exchange transactions are for 
A. intervention by central banks.
B. interbank trades between international banks or nonbank dealers. C. retail trade.
D. purchase of hard currencies.
 

Topic: FX Market Participants
 
5. The difference between a broker and a dealer is 
A. dealers sell drugs; brokers sell houses.
B. brokers bring together buyers and sellers, but carry no inventory; dealers stand ready to buy and sell from their inventory. C. brokers transact in stocks and bonds; currency is bought and sold through dealers. D. none of the above

 

Topic: FX Market Participants
 
6. Most interbank trades are 
A. speculative or arbitrage transactions.
B. simple order processing for the retail client.
C. overnight loans from one bank to another.
D. brokered by dealers.
 

Topic: FX Market Participants
 
7. At the wholesale level 
A. most trading takes place OTC between individuals on the floor of the exchange. B. most trading takes place over the phone.
C. most trading flows over Reuters and EBS platforms.
D. most trading flows through specialized "broking" firms.
 

Topic: FX Market Participants
 

8. Intervention in the foreign exchange market is the process of  A. a central bank requiring the commercial banks of that country to trade at a set price level. B. commercial banks in different countries coordinating efforts in order to stabilize one or more currencies. C. a central bank buying or selling its currency in order to influence its value. D. the government of a country prohibiting transactions in one or more currencies.  

Topic: FX Market Participants
 
9. The standard size foreign exchange transactions are for  A. $10 million U.S.
B. $1 million U.S.
C. €1 million.
 
10. Consider a U.S. importer desiring to purchase merchandise from a Dutch exporter invoiced in euros, at a cost of €512,100. The U.S. importer will contact his U.S. bank (where of course he has an account denominated in U.S. dollars) and inquire about the exchange rate, which the bank quotes as €1.0242/$1.00. The importer accepts this price, so his bank will ____________the importer's account in the amount of ____________.  A. debit, $500,000

B. credit, €512,100
C. credit, $500,000
D. debit, €512,100
 

Topic: Correspondent Banking Relationships
 

11. The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at bank B for $90,000 using its correspondent relationship with Bank B.  A. Bank A's dollar-denominated account at B will fall by $90,000. B. Bank B's dollar-denominated account at A will rise by $90,000. C. Bank A's pound-denominated account at B will rise by £45,000. D. Bank B's pound-denominated account at A will fall by £45,000. E. All of the above are correct

 

Topic: Correspondent Banking Relationships
 
12. The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at bank B for $90,000 using its correspondent relationship with Bank B.  A. Bank A's dollar-denominated account at B will rise by $90,000. B. Bank B's dollar-denominated account at A will fall by $90,000. C. Bank A's pound-denominated account at B will rise by £45,000. D. Bank...
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