International Payment 4

Given a two-country world, assume Canada and Sweden devalue their currencies by 20 percent. This would result in:

• An appreciation in the Canadian currency
• An appreciation in the Swedish currency
• An appreciation in both currencies
• An appreciation in neither currency

Foreign exchange ________ earn a profit by a bid-ask spread on currencies they purchase and sell. Foreign exchange _________, on the other hand, earn a profit by bringing currencies and buyers and sellers of foreign currencies and earning a commission on each sale and purchase

• Central banks; commercial bank
• Dealers; speculators
• Dealers; brockers
• Speculators; brockers

From USA perspective. Which following quotations is indirect?

• USA 1.4023 per GBP
• CHF 0.978 per USD
• USD 2.234 per EUR
• A and C

If the direct quote for a U.S. investor for British pounds is $1.43/pound, then the indirect quote for the U.S. investor would be_______ and the direct quote for the British investor would be________.

• Pound 0.699/$; Pound0.699/$
• $0.699/Pound; Pound0.699/$
• Pound1.43/Pound; Pound0.699/$
• Pound 0.699/$; $1.43/Pound

To keep the yen’s exchange value from approciating against the dollar, Japan’s exchange stabilization fund would:

• Buy yen for dollars on the foreign exchange market.
• Sell dollars for yen on the foreign exchange market.
• A or B
• None of the above.

Suppose a country with a fixed exchange rate decides to reduce the value of its currency. This change in policy is called:

• a devaluation
• a depreciation
• an appreciation
• a revaluation

The cross rate

• is an exchange rate computed from two non-dollar currencies.
• is the number of units of the domestic currency for one unit of the foreign currency.
• is the number of units of the foreign currency for one unit of the domestic currency.
• can be computed only with two widely-traded currencies.

A…. gives the buyer the right, but not obligation, to sell a specified number of foreign currency units to the option seller (the writer) at a fixed price, up to the option’s expiration date.

• Call option
• Put option
• Currency option
• No right answer

A ……. Transaction in the foreign exchange market requires an almost immediate delivery of foreign exchange.

• Forward
• Spot
• Swap
• None of the above

In a forward transaction, the maturity (settlement) date is:

• Two business day after deal date
• On the deal date
• More than two business day in the future
• At any time after the deal date