Capital Flows and the FX Market

Question 1

What will be the effect on a direct exchange rate quote if the domestic currency appreciates?
A. Increase
B. Decrease
C. No change

Answer 1

B. Decrease

Question 2

An executive from Switzerland checks into a hotel room in Spain and is told by the manager that EUR1 will buy CHF1.2983. From the executive’s perspective, an indirect exchange rate quote would be:
A. EUR0.7702 per CHF1
B. CHF0.7702 per EUR1
C. EUR1.2983 per CHF1

Answer 2

A. EUR0.7702 per CHF1

Question 3

Over the past month, the Swiss franc (CHF) has depreciated 12 percent against the GBP. How much has the pound sterling appreciated against the Swiss franc?
A: 12%
B: Less than 12%
C. More than 12%

Answer 3

C. More than 12%

Question 4

An exchange rate between two currencies has increased to 1.4500. If the base currency has appreciated by 8% against the prince currency, the initial exchange rate between the two currencies was closest to:
A. 1.3340
B. 1.3426
C. 1.5660

Answer 4

B. 1.3426