fin 4180 ch 5

cross

A ____-exchange rate is an exchange rate between a currency pair where neither currency is the U.S. dollar.

outright

A bank's uncovered speculative position in a currency is referred to as a(n) ___ forward transaction

ETF

A security that trades on a stock exchange and allows small investors to invest in a currency or a portfolios of assets is known by the initials ______

points

A shorthand method for expressing forward quotes from spot rate quotations is the use of forward

arbitrage

A zero-risk, zero-investment strategy from which a profit is guaranteed is called ___

bid; higher ask

Currency market-makers buy at the ______ price and sell at the ______ ______ price.

over-the-counter

Foreign exchange is traded in a(n) ______ market, not in a central marketplace where buyers and sellers congregate

indirect

From the U.S. perspective, a(n) ___ quotation is the price of one U.S. dollar in the foreign currency.

-indirect; European -direct; American

From the U.S. perspective, a(n) ______ forward quote is in ______ terms

1.25

If £1 costs $1.50 and €1.00 costs $1.20, then the €/£ cross-rate is ______

i

In the formula fN,j = [[FN(i/j)−S(i/j)] /S(i/j) ]] × 360/days, which of the variables represents dollars, in American terms?

rupee

India currency

rupiah

Indonesia currency

SWIFT

International commercial banks communicate instructions through the private, nonprofit message transfer system headquartered in Brussels known by its acronym ______.

shekel

Israel Currency

yen

Japanese currency

dinar

Jordan currency

US dollars

Most foreign exchange trading involves the exchange of _____ for another currency

Intervention

The process of using foreign currency reserves to buy one's own currency in order to decrease its supply and thus increase its value in the foreign exchange market, or alternatively, selling one's own currency for foreign currency in order to increase its supply and lower its price is referred to as ______.

commercial

The structure of the foreign exchange market is an outgrowth of one of the primary functions of a(n) ______ banker: to assist clients in the conduct of international commerce.

one unit of currency k in terms of currency j for delivery in N months

The term FN(j/k) refers to the price of ______

one unit of currency k in terms of currency j for delivery in N months

The term FN(j/k) refers to the price of ______.

-the quotient of 2 American term exchange rates -the product of an American term & a European term exchange rate

What are ways that cross-exchange rates can be calculated?

-It is the largest and most active financial market in the world. -It is open somewhere in the world 24 hours a day, 365 days a year.

Which of the following statements about the foreign exchange market is correct?

pound

egpyt currency

non-deliverable-foward

An emerging market currency that is not freely obtainable may trade in a type of contract that settles in cash and is known as a ___ - ___ - ___ contract.

foreign exchange

Broadly defined, the ______ market includes the conversion of purchasing power from one currency into another, bank deposits of foreign currency, the extension of credit denominated in a foreign currency, foreign trade financing, trading in foreign currency options and futures contracts, and currency swaps.

asset

Currency ETFs can be used by investors for optimal portfolio construction since currency is now recognized as a distinct ___ class, like stocks and bonds.

-The big figure for the bid is 1.05. -The retail bid could be 1.0542.

Suppose that the interbank bid for a currency is $1.0543 and the ask is $1.0545

spot

The almost immediate (two-day) purchase or sale of foreign exchange occurs on the ______ market.

spot exchange

The cash settlement of non-deliverable forward contracts is based on the difference between the NDF rate and the ____ ____rate times the notional amount of contract.

U.S. Dollar

The currency of Ecuador is the ______

fN,j = FN($/j)−S($/j) / S($/j) × 360/days

The formula for calculating the annualized forward premium or discount for currency j in American terms is ______

triangular

The process of trading out of the U.S. dollar into a second currency, then trading it for a third currency, which is in turn traded for U.S. dollars to make a profit is referred to as ____ arbitrage