Chapter 10: The Foreign Exchange Market Questions

Which of the following is an example of depreciation in a floating rate exchange system? A. 1 Portlandian dollar was worth 90 Japanese Yen in May. In September, 1 Portlandian dollar was worth 56 Japanese Yen. B. One Redsylvanian yen was worth 15 Pinkslyvania ruble in January. In October, 1 Redsylvanian yen was worth 20 Pinksylvania ruble in January. C. In November, 1 Portlandian dollar was worth 0.2 euros. In December, 1 Portlandian dollar was worth 0.24 euros. D. In September, 1 USD was worth 900 Pinkslyvania ruble. By September, 1 USD was worth 1,200 Pinksylvania rubles.

A. 1 Portlandian dollar was worth 90 Japanese Yen in May. In September, 1 Portlandian dollar was worth 56 Japanese Yen.

Hannah Montana toured the European Union and grossed 852,762 euros. Her tour goes to Japan next, and her business manager wants to convert her money to Japanese yen. 1 euro equals 146.70 Japanese yen. 1 Japanese yen equals 0.0068 euros. How much money does Hannah Montana have in yen? A. 125,100,185 yen B. 198,374,123.86 yen C. 5798.7816 yen D. 125,406,176

A. 125,100,185 yen

Which of the following is an example of appreciation in a floating exchange rate system? A. The Portlandian dollar is worth 500 Hamsterdamish dollars in July. In October, the Portlandian dollar is worth 250 Hamsterdamish dollars. B. The US dollar is worth 360 Hamsterdamish dollars in January. In December, the US dollar is worth 400 Hamsterdamish dollars. C. The Redsylvanian yen is worth 90 US dollars in March. In August, the Redsylvanian yen is worth 50 US dollars. D. The Hamsterdamish dollar is worth 25 Redsylvanian yen in September. In November, the Hamsterdamish dollar is worth 10 Redsylvanian yen.

B. The US dollar is worth 360 Hamsterdamish dollars in January. In December, the US dollar is worth 400 Hamsterdamish dollars.

Which of the following is NOT a function of the foreign exchange market? A. To make transactions in foreign countries possible B. To allow businesses to always generate a profit C. To ward against the loss of money from poor exchange rates D. To allow business to directly fund ventures in a foreign country

B. To allow business to always generate a profit

Sally has earned 500,000 Japanese yen while touring. Sally is an American and wants to convert her money to US dollars. However, she only knows that 1 yen is worth 0.0068 euros and that 1 US dollar is worth 0.99 euros. How much money does Sally have in USD? A. $253,485.32 B. $948.84 C. $3,434.34 D. $10,832.73

C. $3,434.34

The gold standard, where the value of a country's currency is based on the amount of gold in their possession, is an example of which of the following? A. A mixed exchange rate system B. Hedging C. A fixed exchange rate system D. Arbitrage

C. A fixed exchange rate system

Which of the following is the BEST definition of a foreign exchange market? A. A market where currencies are sold B. A physical market where currencies are bought and sold C. A market where currencies are valued and then bought and sold D. A market that appraises currencies

C. A market where currencies are valued and then bought and sold

Which of the following is an example of a fixed exchange rate system? A. Portlandia bases the value of its currency on the amount of silver it has. B. Hamsterdam allows its currency value to be based on the market's supply and demand. C. The Kingdom of Redsylvania uses the amount of silver in its possession to be the basis of its currency's value. D. Both A & C

D. Both A & C

1 USD is worth 60.18 Russian rubles. 1 euro is worth 146.48 Japanese yen. 1 British pound is worth 8.36 Chinese yuan. 1 Thai bhat is worth 2.20 Indian rupee. From the information above, which of the following was used as a base currency? A. USD B. Euro C. Thai bhat D. Russian rubles

D. Russian rubles

Which of the following is an example of a spot exchange rate? A. Bob is British and exchanges 50 British pounds into Japanese yen immediately at a rate of 167.13 Japanese yen for every one British pound. B. Hannah agrees to exchange 500,000 USD into Japanese yen in 30 days, assuming that the exchange rate will be 110 Japanese yen for every USD. C. Sarah wants to exchange her Indian rupee for USD. She has 150,000 Indian rupees and immediately exchanges it for USD at a rate of 0.012 USD for every rupee. D. Sam is British and goes to France. He has 900 British pounds and needs to get euros in order to purchase souvenirs. He immediately exchanges his pounds for euros at a bank at a rate of 1.14 euros for every British pound. E. All but B

E. All but B