1) The 4 main determinants of exchange rates include all of the below except

a) Relative levels of political risks

b) Relative levels of real interest rates

c) Relative levels of nominal interest rates

d) Relative levels of inflation rates

e) Relative levels of economic risks

2) If the supply of the AUD will fall, while the demand for the AUD will rise, then the equilibrium quantity will _____, while the equilibrium exchange rate will _____.

a) Definitely Rise, Definitely Rise

b) Definitely Rise, Definitely Fall

c) Definitely Fall, Definitely Rise

d) Definitely Fall, Definitely Fall

e) None of the above

3) In today's highly competitive FOREX market is it ______ to take advantage of

triangular currency arbitrage, while the risk of losing money would be ______

a) Impossible, Next to zero

b) Impossible, Minimal

c) Very difficult, Next to zero

d) Relatively easy, Significant

e) None of the above

4) The larger portion of FOREX spot market (by total volume) is related to

a) Purchase of foreign capital assets

b) Purchase of local real estate assets

c) Foreign trade

d) Foreign fixed income transactions

e) None of the above

5) In order to hedge the currency exchange risk associated with generating additional foreign currency denominated accounts receivable, a company could generate an

a) Additional local currency denominated accounts payable

b) Additional foreign currency denominated securities

c) Additional foreign currency denominated accounts payable

d) Additional local currency denominated accounts receivable

e) None of the above

6) The major FOREX market participants include all of the below except

1. MNCs
2. Retail banks
3. Central banks
4. Brokers
5. Hedgers

7) A typical currency futures contract includes all of the following features except

1. Open interest
2. Contract size
3. Break-even margin
4. Initial margin
5. Underlying currency

8) Main risks pertaining to international investing include all of the following except

1. Changes in currency exchange rate
2. Low value of foreign market beta
3. Lack of liquidity
4. Lack of information
5. Reliance on foreign legal system