Financial institutions engage in the purchasing and selling of foreign currencies for all of the following reasons except to: a. Hedge against foreign exchange exposures. b. Allow customers access to foreign markets to transact business. c. Avoid trading in speculative investments. d.
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Financial institutions engage in the purchasing and selling of foreign currencies for all of the following reasons except to:
Hedge against foreign exchange exposures.
Allow customers access to foreign markets to transact business.
Avoid trading in speculative investments.
Allow itself and/or customers to trade and invest in foreign financial markets.
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- A bank engaged in the foreign currency business is normally exposed to currency risk, but will also be exposed to these additional risks except: a. Liquidity risk b. Market risk c. Credit risk d. Interest rate riskWhich of the following situation is NOT the case that a domestic company is exposed to foreign currency exchange risk? a. A firm commitment to enter into a foreign currency transaction. b. A forecasted foreign currency transaction that has a high probability of occurrence. c. An investment in a domestic subsidiary. d. An actual existing foreign currency transaction that results in recognition of assets or liabilities.Foreign exchange risk arises when: A)business transactions are denominated in foreign currencies. B)sales are made to customers in a foreign country. C)goods or services are purchased from suppliers in a foreign country. D)accounting reports are prepared in a foreign currency.
- Which of the following is NOT a benefit of investing in ADRs? The dividends are received in U.S. currency. Currency risk is minimized. ADRs are subject to anti-fraud rules. The transactions are done in U.S. currency.Why do governments intervene in the foreign exchange market? Check all that apply: To maintain exchange rate boundaries To reduce fear in financial markets To smooth out the business cycle To smooth out exchange rate movements To earn a profit for the governmentForeign exchange risk or exchange rate risk is a financial risk that occurs when a financialdeal is denominated in a currency other than that of the base currency of the company.Explain the following types of risks that international firms are exposed to:a. Transaction riskb. Translation riskc. Economic risk
- What type of banking risk includes deterioration of the value of the local currency in terms of the bank’s base currency; convertibility or transfer risks. a. Credit Risk b. Liquidity Risk c. Foreign Exchange Risk d. Interest Rate RiskLeads are deliberate early payments of amounts due to be paid in foreign currency to overseas suppliers, or other foreign currency payments. Leads can avoid the risk that the sterling cost of these payments may rise if the amounts of the payments are quoted in foreign currency and the foreign currency increases in value Under what circumstances can how an international company can use ‘leads and lags’ to protect itself against foreign exchange risk.Which foreign exchange risk relates to the value of assets held in foreign currency on the statement of financial position of financial institutions which trades? a. Economic risk b. Transaction type risk c. Currency risk d. Translation risk
- Unsponsored ADRs are created by a bank at the request of the foreign company that issues the underlying security. True or False?Companies that compete in an international marketplace may be faced with three types of risk owing to foreign exchange.These are: * A. specific, translation and transaction risk. B. translation, transaction and economic risk. C. accounting, transaction and translation risk. D. accounting, specific and transaction risk.As foreign exchange activity has grown, a given degree of central bank intervention has become: A. more effective. B. more frequent. C. none of these D. less effective.