Question #1 of 51 Question ID: 1457134

If we compare the prices of goods in two countries through time, we can use the price
information in concert with the quoted foreign exchange rate to calculate the:

A) interest rate spread.

B) nominal exchange rate.
C) real exchange rate.

Question #2 of 51 Question ID: 1462801

When forward currency exchange-rate contracts are available, the difference between the
spot and forward exchange rates for a pair of currencies is most likely to reflect the
difference between the two countries':

A) economic growth rates.

B) risk-free interest rates.
C) annual inflation rates.

Question #3 of 51 Question ID: 1457151

Given the following quotes, GBP/USD 2.0000 and MXN/USD 8.0000, calculate the direct
MXN/GBP spot cross exchange rate.

A) 0.2500.
B) 4.0000.
C) 0.6250.

Question #4 of 51 Question ID: 1457171

The spot rate for Japanese yen per UK pound is 138.78. If the UK interest rate is 1.75% and
the Japanese interest rate is 1.25%, the 6-month no-arbitrage forward rate is closest to:

A) 138.10 JPY/GBP.
B) 138.44 JPY/GBP.
C) 138.95 JPY/GBP.

Question #5 of 51 Question ID: 1457169

Spot and one-month forward exchange rates are as follows:

Spot 1-month forward

EUR/DEF 2.5675 2.5925

EUR/GHI 4.3250 4.2800

EUR/JKL 7.0625 7.0075

Based on these exchange rates, the EUR is closest to a 1-month forward:

A) discount of 1% to the JKL.

B) premium of 1% to the DEF.
C) premium of 1% to the GHI.

Question #6 of 51 Question ID: 1457163

If the no-arbitrage forward exchange rate for a euro in Japanese yen is less than the spot
rate, then the interest rate in:

A) Japan is the same as in the Eurozone.

B) Japan is less than in the Eurozone.
C) the Eurozone is less than in Japan.

Question #7 of 51 Question ID: 1457159

The spot exchange rate is 1.1132 GBP/EUR and the 1-year forward rate is quoted as +1349
points. The 1-year forward exchange rate for GBP/EUR is closest to:

A) 1.1267.
B) 1.2481.
C) 1.2634.

Question #8 of 51 Question ID: 1457142

The exchange rate for Japanese yen (JPY) per euro (EUR) changes from 98.00 to 103.00
JPY/EUR. How has the value of the EUR changed relative to the JPY in percentage terms?

A) Appreciated by 4.9%.
B) Appreciated by 5.1%.
C) Depreciated by 4.9%.

Question #9 of 51 Question ID: 1457149

The exchange rate of the Athelstan riyal (ATH) with the British pound is 9.00 ATH/GBP. The
exchange rate of the Mordred ducat (MOR) with the U.S. dollar is 2.00 MOR/USD. If the
USD/GBP exchange rate is 1.50, the ATH/MOR cross rate is closest to:

A) 12.00 ATH/MOR.
B) 3.00 ATH/MOR.
C) 6.75 ATH/MOR.

Question #10 of 51 Question ID: 1457147

In the foreign exchange markets, transactions by households and small institutions for
tourism, cross-border investment, or speculative trading comprise the:

A) real money market.

B) retail market.
C) sovereign wealth market.

Question #11 of 51 Question ID: 1457135

Assuming no changes in the prices of a representative consumption basket in two currency

areas over the measurement period, changes in the nominal exchange rate:

A) can be converted to the real exchange rate using interest rates.

B) can be extrapolated to calculate interest rates.
C) are equal to changes in the real exchange rate.

Question #12 of 51 Question ID: 1457181

The Marshall-Lerner condition suggests that a country's ability to narrow a trade deficit by
devaluing its currency depends on:

A) capacity utilization in the domestic economy.

B) elasticity of demand for imports and exports.
C) national saving relative to domestic investment.

Question #13 of 51 Question ID: 1457155

The Japanese yen is trading at JPY/USD 115.2200 and the Danish krone (DKK) is trading at
JPY/DKK 16.4989. The USD/DKK exchange rate is:

A) 0.1432.
B) 0.5260.
C) 6.9835.
Question #14 of 51 Question ID: 1457148

In the context of the foreign exchange market, investment accounts are said to be leveraged
if they:

A) borrow and sell foreign currencies.

B) buy currencies on margin.
C) use derivatives.

Question #15 of 51 Question ID: 1457177

With respect to exchange rate regimes, crawling bands are most likely used in a transition
toward:

A) a fixed peg arrangement.

B) a monetary union.
C) floating exchange rates.

Question #16 of 51 Question ID: 1462799

The spot exchange rate between the U.S. dollar and the euro is 1.2749 USD/EUR. The 90-day
forward exchange rate is quoted as +12.4 points. The forward exchange rate is closest to:

A) 1.2761 USD/EUR.
B) 1.3989 USD/EUR.
C) 1.4329 USD/EUR.

Question #17 of 51 Question ID: 1457176

In which of the following exchange rate regimes can a country participate without giving up
its own currency?

A) Crawling peg or formal dollarization.

B) Monetary union or currency board.
C) Target zone or conventional fixed peg.

Question #18 of 51 Question ID: 1457172

Currency depreciation is most likely to affect the balance of trade when a country's imports
are goods that:

A) have close substitutes.

B) have relatively inelastic demand.
C) represent a small proportion of consumer spending.

Question #19 of 51 Question ID: 1457133

Other things equal, a real exchange rate (stated as units of domestic currency per unit of
foreign currency) will decrease as a result of an increase in the:

A) domestic price level.

B) foreign price level.
C) nominal exchange rate (domestic/foreign).

Question #20 of 51 Question ID: 1457140

The exchange rate for Chinese yuan (CNY) per euro (EUR) changed from CNY/EUR 8.1588 to
CNY/EUR 8.3378 over a 3-month period. It is most accurate to state that the:

A) CNY has depreciated 2.19% relative to the EUR.

B) EUR has appreciated 2.15% relative to the CNY.
C) EUR has appreciated 2.19% relative to the CNY.
Question #21 of 51 Question ID: 1462797

At a base period, the CPIs of the countries of Tuolumne (currency is the TOL) and Bodee
(currency is the BDE) are both 100, and the exchange rate is 0.90 BDE/TOL. One year later,
the exchange rate is 0.75 BDE/TOL, and the CPI has risen to 110 in Tuolumne and 105 in
Bodee. The real exchange rate is closest to:

A) 0.83 BDE/TOL.
B) 0.79 BDE/TOL.
C) 0.72 BDE/TOL.

Question #22 of 51 Question ID: 1457164

If the current spot exchange rate for quotes of JPY/GBP is greater than the no-arbitrage 3-
month forward exchange rate, the 3-month GBP interest rate is:

A) equal to the 3-month JPY interest rate.

B) greater than the 3-month JPY interest rate.
C) less than the 3-month JPY interest rate.

Question #23 of 51 Question ID: 1457153

If the exchange rate between the U.S. dollar and the Canadian dollar is USD/CAD 0.6403, and
the exchange rate between the Canadian dollar and the UK pound sterling is CAD/GBP
2.5207, the exchange rate between the U.S. dollar and the UK pound sterling, stated as
GBP/USD, is closest to:

A) 1.6140.
B) 0.6196.
C) 3.9367.

Question #24 of 51 Question ID: 1457174

The spot exchange rate for United States dollars per United Kingdom pound (USD/GBP) is
1.5775. If 30-day interest rates are 1.5% in the United States and 2.5% in the United
Kingdom, and interest rate parity holds, the 30-day forward USD/GBP exchange rate should
be:

A) 1.5621.
B) 1.5762.
C) 1.5788.

Question #25 of 51 Question ID: 1457137

An exchange rate at which two parties agree to trade a specific amount of one currency for
another a year from today is best described as a:

A) real exchange rate.

B) forward exchange rate.
C) future exchange rate.

Question #26 of 51 Question ID: 1457161

The spot CHF/EUR exchange rate is 1.2025. If the 90-day forward quotation is +0.25%, the
90-day forward rate is closest to:

A) 1.2000.
B) 1.2050.
C) 1.2055.

Question #27 of 51 Question ID: 1457141

The exchange rate for Australian dollars per British pound (AUD/GBP) was 1.4800 five years
ago and is 1.6300 today. The percent change in the Australian dollar relative to the British
pound is closest to:
A) appreciation of 10.1%.
B) depreciation of 10.1%.
C) depreciation of 9.2%.

Question #28 of 51 Question ID: 1457168

The spot exchange rate for Canadian dollars (CAD) per Swiss franc (CHF) is 1.1350 CAD/CHF
and the 12-month forward exchange rate is 1.1460 CAD/CHF. The forward quote is a:

A) discount of 110 points and the CAD is at a forward discount to the CHF.
B) premium of 11 points and the CAD is at a forward premium to the CHF.
C) premium of 110 points and the CAD is at a forward discount to the CHF.

Question #29 of 51 Question ID: 1457150

Given an exchange rate of USD/CAD 0.9250 and USD/CHF 1.6250, what is the cross rate for
CAD/CHF?

A) 0.5692.
B) 1.5032.
C) 1.7568.

Question #30 of 51 Question ID: 1457173

The spot rate for Chinese yuan per Canadian dollar is 6.4440. If the Canadian interest rate is
2.50% and the Chinese interest rate is 3.00%, the 3-month no-arbitrage forward rate is
closest to:

A) 6.436 CNY/CAD.
B) 6.452 CNY/CAD.
C) 6.475 CNY/CAD.
Question #31 of 51 Question ID: 1457178

A country's central bank announces a monetary policy goal of a stable exchange rate with
the euro, which it defines as deviations of no more than 3% from its current exchange rate
of 2.5000. The country's exchange rate regime is best described as a:

A) crawling band.
B) fixed peg.
C) target zone.

Question #32 of 51 Question ID: 1457183

Which approach to analysis of trade deficits indicates that in the absence of excess capacity
in the economy, currency devaluation provides only a temporary improvement in a country's
trade deficit, and that long-term improvement requires either a smaller fiscal deficit or a
larger excess of domestic savings over domestic investment?

A) Absorption approach.
B) Real wealth approach.
C) Elasticities approach.

Question #33 of 51 Question ID: 1457170

The USD/EUR spot exchange rate is 1.3500 and 6-month forward points are −75. The 6-
month forward exchange rate is:

A) 1.3425, and the USD is at a forward discount.

B) 1.3425, and the USD is at a forward premium.
C) 1.3575, and the USD is at a forward discount.

Question #34 of 51 Question ID: 1457154

If the spot exchange rate between the British pound and the U.S. dollar is GBP/USD 0.7775,
and the spot exchange rate between the Canadian dollar and the British pound is CAD/GBP
1.8325, what is the USD/CAD spot cross exchange rate?

A) 0.70186.
B) 0.42428.
C) 1.42477.

Question #35 of 51 Question ID: 1457138

The difference between Country D's nominal and real exchange rates with Country F is most
closely related to:

A) Country D’s inflation rate.

B) the ratio of the two countries’ price levels.
C) the risk-free interest rates of the two countries.

Question #36 of 51 Question ID: 1457143

If the exchange rate value of the CAD goes from USD 0.60 to USD 0.80, then the CAD:

A) appreciated and Canadians will find U.S. goods cheaper.

B) depreciated and Canadians will find U.S. goods cheaper.
C) depreciated and Canadians will find U.S. goods more expensive.

Question #37 of 51 Question ID: 1457157

The spot exchange rate for CHF/EUR is 0.8342 and the 1-year forward quotation is −0.353%.
The 1-year forward exchange rate for EUR/CHF is closest to:

A) 0.8313.
B) 1.2022.
C) 1.2029.
Question #38 of 51 Question ID: 1457165

Country G and Country H have currencies that trade freely and have markets for forward
currency contracts. If Country G has an interest rate greater than that of Country H, the no-
arbitrage forward G/H exchange rate is:

A) equal to the G/H spot rate.

B) greater than the G/H spot rate.
C) less than the G/H spot rate.

Question #39 of 51 Question ID: 1457158

The spot exchange rate is 0.6243 USD/GBP and the 1-year forward rate is quoted as 3.016%.
The 1-year forward exchange rate for USD/GBP is closest to:

A) 0.6054.
B) 0.6431.
C) 0.6544.

Question #40 of 51 Question ID: 1462800

The three-month interest rate in the currency MNO is 4% and the three-month interest rate
for the currency PQR is 5%. Based only on this information, the three-month forward
MNO/PQR exchange rate:

A) may be greater than or less than spot MNO/PQR.

B) is less than spot MNO/PQR.
C) is greater than spot MNO/PQR.

Question #41 of 51 Question ID: 1457180

The tendency for currency depreciation to increase a country's trade deficit in the short run
is known as the:

A) absorption effect.
B) J-curve effect.
C) Marshall-Lerner effect.

Question #42 of 51 Question ID: 1457136

In the currency market, traders quote the:

A) base currency rate.

B) nominal exchange rate.
C) real exchange rate.

Question #43 of 51 Question ID: 1457182

Under the absorption approach, which of the following is least likely required to move the
balance of payments toward surplus?

A) Decreased domestic expenditure relative to income.

B) Increased savings relative to domestic investment.
C) Sufficient elasticities of export and import demand.

Question #44 of 51 Question ID: 1457175

Country X has a risk-free interest rate of 6% and an inflation rate of 3%. Country Y has a risk-
free interest rate of 7% and an inflation rate of 4%. If the current spot exchange rate is 1.45
units of Country X's currency (XXX) per unit of Country Y's currency (YYY), the one-year
forward XXX/YYY exchange rate is closest to:

A) 1.43606.
B) 1.46368.
C) 1.43645.

Question #45 of 51 Question ID: 1462798

Assume the exchange rate between the Trotter (TRT) and the Roeckl (RKL) is 5.50 TRT/RKL
and the exchange rate between the Roeckl and the Passage (PSG) is 8.00 RKL/PSG. The cross
rate between the PSG and the TRT is closest to:

A) 0.0227 PSG/TRT.
B) 0.6875 PSG/TRT.
C) 44.00 PSG/TRT.

Question #46 of 51 Question ID: 1457160

If the AUD/CAD spot exchange rate is 0.9875 and 60-day forward points are −25, the 60-day
AUD/CAD forward rate is closest to:

A) 1.0125.
B) 0.9900.
C) 0.9850.

Question #47 of 51 Question ID: 1457152

An analyst observes that one U.S. dollar is worth eight Mexican pesos (MXN) or six Polish
zlotys (PLN). The value of one PLN in terms of MXN is closest to:

A) 1.3333.
B) 0.7500.
C) 7.0000.

Question #48 of 51 Q i ID 1457144

Question #48 of 51 Question ID: 1457144

Participants in foreign exchange markets that can be characterized as "real money accounts"
most likely include:

A) central banks.
B) hedge funds.
C) insurance companies.

Question #49 of 51 Question ID: 1457145

The sell side of the foreign exchange markets primarily consists of:

A) multinational banks that deal in currencies.

B) firms and investors that are hedging their currency risks.
C) firms and investors that require foreign currencies for transactions.

Question #50 of 51 Question ID: 1462802

Akor is a country that has chosen to use a conventional fixed peg arrangement as the
country's exchange rate regime. Under this arrangement, Akor's exchange rate against the
currency to which it pegs:

A) is market-determined.
B) will be equal to the peg rate.
C) may fluctuate around the peg rate.

Question #51 of 51 Question ID: 1457146

Which of the following would least likely be a participant in the forward market?

A) Arbitrageurs.
B) Long-term investors.
C) Traders.