Question

According to the text, the average foreign exchange trading around the world ____ per day.

a.	equals about $200 billion
b.	equals about $400 billion
c.	equals about $700 billion
d.	exceeds $1 trillion

  

          

   Assume a Japanese firm invoices exports to the U.S. in U.S. dollars. Assume that the forward rate and spot rate of the Japanese yen are equal. If the Japanese firm expects the U.S. dollar to ____ against the yen, it would likely wish to hedge. It could hedge by ____ dollars forward.

a.	depreciate; buying
b.	depreciate; selling
c.	appreciate; selling
d.	appreciate; buying

  

          

    The bid-ask spread on an exchange rate can be used to directly determine:

a.	how an exchange rate will change.
b.	the transaction cost of foreign exchange.
c.	the forward premium.
d.	the currency option premium.

Answer 1

1) according to the text,the average foreign exchange trading around the world is exceeds $1 trillion per day.

Option-d

2)the Japanese firm expects us dollar to depreciate against Japanese yen,it would likely wish to hedge .it could hedge by selling dollars forward.

Option -B

3)the bid ask spread on an exchange rate can be used to directly determine the transaction cost of foreign exchange.

Option - B