Chapter 6

chapter 6
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Unformatted text preview: Fundamentals of Multinational Finance, 4e (Moffett) Chapter 6 The Foreign Exchange Market Multiple Choice and True/False Questions 6.1 Geographical Extent of the Foreign Exchange Market 1) Which of the following is NOT true regarding the market for foreign exchange? A) The market provides the physical and institutional structure through which the money of one country is exchanged for another. B) The rate of exchange is determined in the market. C) Foreign exchange transactions are physically completed in the foreign exchange market. D) All of the above are true. Answer: D 2) While trading in foreign exchange takes place worldwide, the major currency trading centers are located in A) London, New York, and Tokyo. B) New York, Zurich, and Bahrain. C) Paris, Frankfurt, and London. D) Los Angeles, New York, and London. Answer: A 3) Which of the following is NOT a motivation identified by the authors as a function of the foreign exchange market? A) The transfer of purchasing power between countries. B) Obtaining or providing credit for international trade transactions. C) Minimizing the risks of exchange rate changes. D) All of the above were identified as functions of the foreign exchange market. Answer: D 6.2 Market Participants 1) The authors identify two tiers of foreign exchange markets: A) bank and nonbank foreign exchange. B) commercial and investment transactions. C) interbank and client markets....
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