Global Financial Analysis

Fundamentals of Multinational Finance, 3e (Moffett)
Chapter 5
The Foreign Exchange Market

5.1
Multiple Choice and True/False Questions

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
Topic:
Introduction to the Foreign Exchange Market Skill:
Recognition

2)
A/An ________ is an agreement between a buyer and seller that a fixed amount of one currency will be delivered at a specified rate for some other currency. A)
Eurodollar transaction B) import/export exchange C) foreign exchange transaction D) interbank market transaction Answer:
C
Topic:
Introduction to the Foreign Exchange Market Skill:
Recognition

3)
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
Topic:
Introduction to the Foreign Exchange Market Skill:
Recognition

4)
Because the market for foreign exchange is worldwide, the volume of foreign exchange currency transactions is level throughout the 24-hour day. Answer:
FALSE
Topic:
Introduction to the Foreign Exchange Market Skill:
Recognition

5)
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