International Business Opportunities and Challenges Study Set 1

Business

Quiz 7 :

Foreign Exchange and the Global Capital Markets

Quiz 7 :

Foreign Exchange and the Global Capital Markets

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The possibility of the trading of a currency in the forward market depends on the currency's demand in international financial markets.
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True False
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True

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A currency swap helps a firm to reduce its foreign exchange rate risk by simultaneously locking into the price for two transactions of a currency.
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True False
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True

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A company operating globally must deal in foreign currencies, as it has to pay suppliers in other countries with a currency different from its home country's currency.
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True False
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True

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Currency option is a right but not a requirement and therefore parties in a currency option do not have to actually exchange the currencies if they choose not to.
True False
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An organization makes use of the spot rate for making an immediate payment.The organization does not face the risk of the currency increasing or decreasing in value.
True False
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Companies are motivated to repay their bonds in a timely manner in order to maintain credibility in the financial market.
True False
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Companies use hedging as a way to protect themselves if there is a time lag between when they bill and receive payment from a customer.
True False
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In an indirect quote, the domestic currency is a variable amount and the foreign currency is fixed at one unit.
True False
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In a direct quote, the foreign currency is a variable amount and the domestic currency is fixed at one unit.
True False
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A company, when it expects to be paid in its own currency, must assess the risk that the buyer may not be able to pay the full amount due to currency fluctuations.
True False
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In the forward markets, foreign exchange is always quoted against the U.S.dollar.
True False
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In an exchange rate quote, the base currency is typically the numerator.
True False
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The only reason a saver puts his cash at risk in the capital market is if the returns on the investment are greater than returns on holding risk-free assets.
True False
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A company's primary purpose for wanting or needing to convert currencies is to pay or receive money for goods or services.
True False
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Typically, the sell or the ask is always cheaper than the bid or the buy.
True False
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An organization making use of the foreign exchange market can afford to ignore the rate at which a currency is bought or sold.
True False
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The indirect quote method follows the American terms for noting the base and quoted currency.
True False
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Non-finance companies prefer currency arbitrage and speculation while making investments, as they are not a risk and there are high gain methods of earning profits.
True False
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All secondary markets deal in trade of securities, of which most common are stock and equity.
True False
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Futures contracts are identical to forward contracts.
True False
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