Pre-Test Chapter 1 Quiz

Which of the following is not a product of financial markets?

• Foreign Exchange

• Real Estate

• Equities

• Derivatives

What is the primary difference between the banking book and the trading book in financial institutions?

• Banking book is for short-term trading; trading book is for long-term investments

• Banking book is marked to market daily; trading book is not

• Banking book holds assets to maturity; trading book holds assets for resale

• Trading book is regulated; banking book is not

Which of the following best explains why the FX market is considered decentralized?

• It is regulated by a single global authority

• It operates only through central banks

• Trades occur directly between parties without a central exchange

• It uses blockchain for all transactions

Which of the following is a disadvantage of Cambodia's dollarization?

• Increased seigniorage revenue

• Full control over interest rates

• Reduced monetary policy effectiveness

• Elimination of exchange rate risk

Which combination of tools would best support NBC's goal of gradual de-dollarization?

• Increase USD reserves and reduce KHR circulation

• Promote KHR usage, enhance payment systems, and develop monetary transmission mechanisms

• Fix the KHR to gold and restrict USD usage

• Eliminate all FX trading platforms

What is the primary function of the FX market?

• Issuing government bonds

• Facilitating currency exchange

• Trading equities

• Managing real estate

Why do central banks participate in the FX market?

• To speculate for profit

• To stabilize or influence currency value

• To issue corporate loans

• To regulate stock exchanges

Which of the following best describes the difference between direct and indirect FX quotations?

• Direct quotes use gold as a reference

• Indirect quotes are used only in Asia

• Direct quotes express domestic currency per unit of foreign currency

• Indirect quotes are always more accurate

Which of the following risks is most likely to affect FX traders during periods of political instability?

• Leverage risk

• Counterparty risk

• Country risk

• Transaction risk

Which of the following would be the most effective strategy to improve FX market transparency in Cambodia?

• Increase the use of informal money changers

• Reduce NBC's involvement in FX regulation

• Publish FX turnover and rate statistics regularly

• Peg the KHR to multiple currencies