PT Ch32

PT Ch32 - Exam Name_ MULTIPLE CHOICE. Choose the one...

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A ________ in the foreign exchange market leads arbitrageurs to act, with the result that the forward exchange rate changes. 1) A) riskless and uncertain arbitrage situation B) riskless arbitrage situation C) risky opportunity possibility D) risky arbitrage situation 2) The fundamental fact of international finance is that different countries issue different currencies, and the relative values of those currencies may change ________. 2) A) quickly, substantially, and without warning. B) as a response to political events that make no economic sense. C) reflect economic developments. D) All of these 3) Which of the below statements is FALSE? 3) A) Market participants who want to buy or sell a currency must search different dealers to get the best exchange rate on a specific currency. B) Dealers in the foreign - exchange market are large international banks and other financial institutions that specialize in making markets in foreign exchange with commercial banks playing a small part of this market. C) The foreign - exchange market is an over - the - counter market that operates 24 hours a day. D) Foreign - exchange dealers do not quote one price, but quote an exchange rate at which they are willing to buy a foreign currency and one at which they are willing to sell a foreign currency. 4) Since the early 1970s, exchange rates among major currencies have been free to float, with ________ determining the relative value of a currency. Thus, each day a currency's price relative to that of another freely floating currency may stay the ________. 4) A) risk/beta forces; increase or decrease. B) risk/beta forces; same, increase, or decrease. C) market forces; increase or stay the same. D) market forces; same, increase, or decrease. 5) Foreign - exchange risk ________. 5) A) is the risk that a currency's value may change adversely. B) cannot affect issues denominated in a foreign currency (e.g., in terms of the effective value of the cash payments owed to investors). C) is an unimportant consideration for all participants in the international financial markets. D) cannot affect an international investor's return after adjusting for changes in the exchange rate. 1
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6) Which of the below statements is FALSE? 6) A) Futures options are options to enter into foreign - exchange futures contracts. B) Only options on the major currencies are traded in the over - the - counter market. C) In the case of currency options, the underlying is the foreign currency specified by the option contract. D) In addition to the organized exchanges, an over - the - counter market exists for options on currencies. 7) A key factor affecting the expectation of changes in a country's exchange rate with another currency
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PT Ch32 - Exam Name_ MULTIPLE CHOICE. Choose the one...

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