Global Foreign Exchange Trading Quiz
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Questions and Answers

What is the main reason for London being the center of global foreign exchange trading?

  • Presence of a large number of foreign exchange traders
  • High volume of trading conducted in London
  • Significant investments in computer and telecommunications hardware and software
  • Network of dealer banks actively involved in foreign exchange trading (correct)
  • What percentage of the global trading in foreign exchange was conducted by JPMorgan in 2018?

  • 12 percent (correct)
  • 8 percent
  • 10 percent
  • 6 percent
  • What is one of the reasons why there are so few foreign exchange traders?

  • Lack of interest in foreign exchange trading as a career
  • Presence of highly complex trading algorithms
  • Capital intensity of the business (correct)
  • High degree of regulation in the foreign exchange market
  • What kind of personality traits are desirable for a foreign exchange trader?

    <p>Loves pressures, makes quick decisions, and can take losses</p> Signup and view all the answers

    What is the primary reason for people to engage in the foreign exchange market?

    <p>To trade goods and services</p> Signup and view all the answers

    What happens when a nation's export of goods and services increases?

    <p>There is a demand for foreign currency and a supply of the nation's currency</p> Signup and view all the answers

    How does importing goods and services affect the home currency in the foreign exchange market?

    <p>Causes the home currency to be sold in order to buy foreign currency</p> Signup and view all the answers

    What determines whether U.S. exports to Britain generate a supply of pounds and a demand for dollars?

    <p>The preference of U.S. exporters to end up holding U.S. dollars</p> Signup and view all the answers

    What is the process called when an opportunity to make a riskless profit is exploited using three different exchange rates?

    <p>Triangular arbitrage</p> Signup and view all the answers

    If the exchange rate for the pound in terms of dollars is $1.60, and the exchange rate for the Swiss franc in terms of dollars is $0.50, how many francs can be bought with $150?

    <p>300 francs</p> Signup and view all the answers

    What tends to happen to the dollar–franc exchange rate as a result of the extra demand for francs due to triangular arbitrage?

    <p>Increase</p> Signup and view all the answers

    What is the main outcome of the pressures placed on the exchange rates due to triangular arbitrage?

    <p>Bring the exchange rates into line with each other</p> Signup and view all the answers

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