Quiz Chapter 12

Topics: Foreign exchange market, United States dollar, Exchange rate Pages: 6 (535 words) Published: April 25, 2014
Question 1
1.1 out of 1.1 points

Everything else equal, significant trade deficits, imports exceeding exports, should have what effect on a country's exchange rate?

Selected Answer:
C. 
The country's currency should depreciate in value relative to their major trading countries.

Question 2
1.1 out of 1.1 points

Which instrument is issued by a bank?

Selected Answer:
Letter of credit

Question 3
0 out of 1.1 points

Common causes of “capital flight” include all the following except

Selected Answer:
high inflation in the host country

Question 4
1.1 out of 1.1 points

With reference to international balance of payment accounting, if a country's merchandise imports exceed merchandise exports for a period,

Selected Answer:
A. 
the country has a deficit in the merchandise trade account.

Question 5
1.1 out of 1.1 points

A Mexican importer of computer parts from Canada would take which action in the foreign exchange markets?

Selected Answer:
C. 
demand Canadian dollars

Question 6
1.1 out of 1.1 points

Both forward foreign exchange markets and foreign currency futures can hedge foreign exchange risk.

Selected Answer:
True

Question 7
1.1 out of 1.1 points

When a commercial bank issues a payment guarantee on behalf of an importer, that guarantee is

Selected Answer:
a letter of credit.

Question 8
1.1 out of 1.1 points

Eurobonds are bearer bonds and do not have to be registered, which makes them more marketable.

Selected Answer:
True

Question 9
1.1 out of 1.1 points

A U.S. commercial bank must pay 20 million Canadian dollars (C$) in 90 days. It wishes to hedge the risk in the futures market. To do so the bank should

Selected Answer:
B. 
buy C$20 million in Canadian dollar futures.

Question 10
1.1 out of 1.1 points

Modern foreign exchange markets depend on all the following except

Selected Answer:
political stability

Question 1
1.1 out of 1.1 points

In the balance of payments, the difference between current account flows and capital account flows is shown as statistical discrepancy.

Selected Answer:
True

Question 2
1.1 out of 1.1 points

When a commercial bank issues a payment guarantee on behalf of an importer, that guarantee is

Selected Answer:
a letter of credit.

Question 3
1.1 out of 1.1 points

Eurobonds are bearer bonds and do not have to be registered, which makes them more marketable.

Selected Answer:
True

Question 4
1.1 out of 1.1 points

An importer who must pay yen in 60 days may hedge the foreign exchange risk

Selected Answer:
A. 
in the forward market.

Question 5
1.1 out of 1.1 points

Under freely floating exchange rates a government would

Selected Answer:
do nothing.

Question 6
1.1 out of 1.1 points

A U.S. commercial bank must pay 20 million Canadian dollars (C$) in 90 days. It wishes to hedge the risk in the futures market. To do so the bank should

Selected Answer:
A. 
buy C$20 million in Canadian dollar futures.

Question 7
1.1 out of 1.1 points

A __________ draft would be paid on demand; whereas a bank would pay a __________ draft at maturity as stated in the __________.

Selected Answer:
sight; time; letter of credit

Question 8
1.1 out of 1.1 points

Both forward foreign exchange markets and foreign currency futures can hedge foreign exchange risk.

Selected Answer:
True

Question 9
1.1 out of 1.1 points

The foreign exchange market

Selected Answer:
C. 
is composed of a group of informal markets closely interlocked through international...
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