2.4
What is the largest financial market in the world measured in dollar-volume trade?
a. b. c. d.
the U.S. stock markets the currency markets
the forward and swap currency markets the global market for loanable funds
Size of the market, p. 38
2.5
When transactions are conducted on the spot currency markets, ________ business day(s) is (are) allowed for contract settlement.
a. b. c. d.
one two five ten
Types of contracts traded, p. 39
2.6
Which one of the following are the main participants in the global currency markets?
a. b. c. d.
commercial banks insurance companies hedge funds
private equity funds
The organization of the foreign exchange market, p. 36
2.7
What do the market makers in the currency markets provide?
a. b. c. d.
insurance against default by the buyers solvency stability liquidity
Foreign exchange dealers, p.39
2.8
Which one of the following is not a characteristic of a liquid market?
a. b. c. d.
Market makers stand ready to buy and sell currencies.
Foreign exchange dealers make transactions only with dealers. It becomes easy to match buyers and sellers. Transaction costs are low.
Foreign exchange dealers, p.39
2.9
How would economists most often define a perfectly competitive market?
a. b. c. d.
Many firms compete with one another, and the cost of entering the market is low. Many firms compete with one another, and the cost of entering the market is high. Firms do not compete with one another, and the cost of entering the market is low. Firms do not compete with one another, and the cost of entering the market is high.
The competitive market place, p.40
2.10 Which one of the following firms dominates the foreign exchange markets?
a. b. c. d.
no one firm dominates Deutsche Bank UBS
Citigroup
Size of the market, p.38
2.11 When an exchange rate is quoted by a dealer in country as the local currency price of
one unit of foreign currency, he is quoting the
a. b. c. d.
indirect quote direct quote bid quote ask quote
Exchange rate quotes, p.42
2.12 What currency currently serves as the world’s primary vehicle currency?
a. b. c. d.
Japanese yen British pound U.S. Dollar European euro
Currency quotes and prices, p.40
2.13 The ________ quote refers to the dollar price of a foreign currency.
a. b. c. d.
European American Bid Ask
Exchange rate quotes, p.44
2.14 If you were trading currency in the New York currency market, the exchange rate
between two currencies not expressed in U.S. dollars would be known as the ________ quote.
a. b. c. d.
direct indirect cross-rate European
Vehicle currencies and currency cross-rates, p.46
2.15 What is the name of the rate currency traders quote in the interbank market to
sell foreign currencies?
a. b. c. d.
Bid-ask spread. Bid rate Cross rate Ask rate
Inside the interbank market I: bid-ask spreads and bank profits, p.51
2.16 The difference between the ask rate and the bid rate is known as the ________.
a. arbitrage profit b. dealer’s profit c. spread
d.
bid-ask spread
Inside the interbank market I: bid-ask spreads and bank profits, p.51
2.17 The fourth decimal place in a dealer’s quote in the trade jargon is known as the
________.
a. pip
b. round trip c. spread d.
haircut
The magnitude of bid-ask spreads, p.53
2.18 What is the name of the computer network in which member banks globally send receive messages pertaining to foreign exchange transactions?
a. Fed funds b. SWIFT c. CHIPS
d.
The Automated Clearing House (ACH)
Communication systems, p.56
2.19 When it comes to currency transfers, what is the most important global
interbank communications network?
a. CHIPS b. TARGET c. SWIFT d.
RTGS
Communication systems, p.56
and
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