When an individual or firm in the United States requests that a bank sell foreig

Question

When an individual or firm in the United States requests that a bank sell foreign exchange, the bank will probably A) call a foreign exchange broker and arrange a purchase. B) call the central bank and arrange a purchase. C) call another bank customer with foreign exchange holdings. D) call a foreign bank and arrange a purchase. In order to protect against foreign exchange risk, firms can use A) the J-curve. C) the spot market for foreign exchange. B) interest rate arbitrage. D) the forward market for foreign exchange. Which of the following institutions is the most important participant in foreign currency markets? A) A central bank C) A commercial bank B) A retail customer D) A foreign exchange broker All else equal and given the current system of exchange rates, if the United States enters a period of exceptionally strong growth, A) the pressure on the dollar is to devalue. C) the pressure on the dollar is to appreciate. B) the pressure on the dollar is to depreciate. D) the pressure on the dollar is to revalue.

Explanation / Answer

When an individual or firm in the US requests that a bank sell foreign exchange, the bank will probably call the central bank and arrange a purchase.

In order to protect aginst the foreignexchange risk, firms can use the interest rate arbitrage. So option B is correct

A central bank is the most important participant in foreign currency market.

All else equal and given the current system of exchange rates,if the US enters a period of exceptionally strong growth The pressure on the dollar is to appreciate. So option C is correct.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.