FIA FIA Foreign Exchange & Currency Markets 1

Question 1

What does the term 'spot rate' refer to in the foreign exchange market?

Accepted Answer

The rate for currency exchange settled immediately or within two business days

Answer

The rate locked in for a future currency transaction

Answer

The average exchange rate over the past 30 days

Answer

The rate charged by central banks for interbank lending

Question 2

In a USD/EUR currency pair quote of 1.0850, what does the figure 1.0850 represent?

Accepted Answer

The number of USD required to buy one EUR

Answer

The number of EUR required to buy one USD

Answer

The percentage premium of USD over EUR

Answer

The annualized interest rate differential between the two currencies

Question 3

Which type of foreign exchange order guarantees execution but not a specific price?

Accepted Answer

Market order

Answer

Limit order

Answer

Stop-loss order

Answer

Forward order

Question 4

What is the 'bid-ask spread' in foreign exchange trading?

Accepted Answer

The difference between the price a dealer will buy and sell a currency

Answer

The difference between the opening and closing price of a currency

Answer

The fee charged by a broker for executing a currency trade

Answer

The daily trading range of a currency pair

Question 5

Which institution is primarily responsible for setting US monetary policy that influences the USD exchange rate?

Accepted Answer

The Federal Reserve (Fed)

Answer

The US Treasury Department

Answer

The Securities and Exchange Commission (SEC)

Answer

The International Monetary Fund (IMF)

Question 6

What is 'currency appreciation'?

Accepted Answer

An increase in the value of a currency relative to another currency

Answer

A decrease in a currency's purchasing power due to inflation

Answer

The process of converting one currency to another

Answer

A government policy to weaken the domestic currency