Question 1

Using an FX swap to hedge a foreign currency loan:

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Question 2

Calculate the AUD/GBP cross rate given AUD/USD0.9334 and USD/GBP0.5952.

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The answer of Calculate the AUD/GBP cross rate given AUD/USD0.9334...

Question 3

Most trading in the Australian FX market:

Accepted Answer

The inter-dealer electronic broking systems are widely used in the Australian FX market for trading. These systems are order-driven, allowing dealers to submit their bids and offers electronically, and matching them with counterparties without the need for voice brokers or phone calls.

Question 4

The turnover in the Australian FX market is:

Accepted Answer

The turnover in the Australian FX market is relatively high, largely due to Australia's time zone. As Australia is located between the time zones of Asia and the US, it allows for the market to be open for a longer period of time, leading to increased trading volumes.

Question 5

Identify the INCORRECT statement below regarding global capital markets.

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Question 6

Identify and briefly explain the functions of FX markets.

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Question 7

Relatively high commodity prices:

Accepted Answer

Relatively high commodity prices improve Australia's terms of trade as they increase the value of exports relative to imports. This leads to a strengthening of the AUD as foreign demand for Australian goods increases.

Question 8

Suppose that yesterday the GBP/USD rate was 1.6802, and today it is 1.6698.Identify the terms and the commodity currency and indicate which currency has appreciated.

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Question 9

Given the quote USD/JPY102.51, calculate 
(i)the amount of JPY that can be purchased with 100 000USD, and (ii)the amount of USD that can be purchased with 1million JPY.

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(i)the amount...

Question 10

An FX dealer provides a quote of AUD/USD0.9345-53.(i)A fund manager wishes to convert AUD 5 million into USD to invest in US shares. If they accept the dealer's quote, how much in USD will they receive?
(ii)Big Bank has USD 10 million that they wish to convert to AUD. If they accept the dealer's quote, how much in AUD will they receive?

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Question 11

Which of the following is an example of eurocurrency financing?

Accepted Answer

Eurocurrency financing involves deposits or loans in a currency that is not the domestic currency of the country where the bank is located. In option A, a Canadian bank in Paris accepts a deposit in US dollars, which fits this definition.

Question 12

Which services are NOT provided by eurocurrency markets?

Accepted Answer

Eurocurrency markets do not provide payment services. Payment services are typically provided by banks or other financial institutions operating within a specific country's regulatory framework. Eurocurrency markets, on the other hand, deal primarily with the lending and borrowing of funds in currencies other than the currency of the country in which they are located. They do provide indirect and direct financing through short-term and long-term securities.

Question 13

Explain why most developed countries have 'floated' their currencies.

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Question 14

Eurocurrency markets:

Accepted Answer

Eurocurrency markets involve arranging financing in a currency that is not the domestic currency of the country where the bank or financial institution offering the service is located. They do not specifically trade securities denominated in the euro (C), nor are they limited to financing markets in Europe (D), and they are distinct from the foreign exchange market (A), which deals with the exchange of currencies.

Question 15

The RBA:

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...

Question 16

The following factors may have an influence on the value of a currency.For which of these is the relative inflation rate of central importance?

Accepted Answer

Purchasing-power parity is a theory that suggests exchange rates between two currencies should adjust to reflect changes in the inflation rates of the two countries. Therefore, relative inflation rates have a direct impact on this factor and can influence the value of a currency.

Question 17

An Australian firm goes to the US to borrow because US interest rates are only 3% compared with 6.5% in Australia.The transaction is fully hedged using an FX swap.What will be the effective cost of funds?

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The answer of An Australian firm goes to the US...

Question 18

A factor that has had a significant influence on turnover in the Australian FX market during the past decade is:

Accepted Answer

All of these factors have contributed to the turnover in the Australian FX market over the past decade. The growth in foreign trade increases the demand for currency exchange, while offshore borrowing by banks and companies requires them to convert currencies. Speculation, particularly the carry trade, involves borrowing in a low-interest-rate currency to invest in a higher-interest-rate currency, which also increases FX turnover. The GFC had a significant impact on the FX market globally, leading to increased volatility and trading activity.

Question 19

Expected interest-rate parity predicts that:

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...

Question 20

Advantages of electronic broking systems (over traditional telephone based FX trading)do NOT include:

Accepted Answer

Electronic broking systems do not necessarily lead to lower volatility in FX trading. The other options listed are all advantages of electronic broking systems over traditional telephone based FX trading.

Quiz 11: Foreign Exchange and Global Capital Markets