Sophomore Year

Question 1

How many foreign currencies comprise the U.S. Dollar Index?

Answer 1

6

Question 2

Which of the following currencies is not included in the U.S. Dollar Index?

a. the Swiss franc (CHF)
b. the Canadian dollar (CAD)
c. the Australian dollar (AUD)

Answer 2

the Australian dollar (AUD)

Question 3

How many countries are included in the index?

Answer 3

24

Question 4

Which currency holds the greatest weight in the U.S. Dollar Index?

a. the yen (JPY)
b. the euro (EUR)
c. the pound (GBP)

Answer 4

the euro (EUR)

Question 5

How often is the index calculated?

a. (8 hours a day, 5 days a week)
b. (24 hours a day, 7 days a week)
c. (24 hours a day, 5 days a week)

Answer 5

(24 hours a day, 5 days a week)

Question 6

The USDX measures the dollar’s relative value to a base of __, which was established at the start of the index in 1973.

a. 1.00
b. 100.00
c. 1,000.00

Answer 6

100.00

Question 7

The trade-weighted U.S. dollar index is…

a. the exact same as the USDX
b. composed of less currencies than the USDX
c. composed of more currencies than the USDX

Answer 7

composed of more currencies than the USDX

Question 8

Between the USDX and the trade-weighted U.S. dollar index, which probably provides a better reflection of the dollar’s value across the globe?

a. the USDX
b. the trade-weighted U.S. dollar index
c. they are the same

Answer 8

the trade-weighted U.S. dollar index

Question 9

The USDX is ___ related to EUR/USD.

a. directly
b. inversely
c. not at all

Answer 9

inversely

Question 10

If the USDX is rising, it is reasonable to expect to see USD/CHF ___.

a. rising as well
b. falling
c. ranging

Answer 10

rising as well

Question 11

If the USD is the quote currency (XXX/USD), then the USDX and the currency pair should move…

Answer 11

in opposite directions

Question 12

What theory did the Stephen Jen come up with to explain why the USD strengthens in times of risk aversion and in times of economic growth?

a. The Morgan Stanley Model
b. The Stephen Jen Theory
c. The Dollar Smile Theory

Answer 12

The Dollar Smile Theory

Question 13

When can you expect the dollar to drop to a new low?

Answer 13

when the U.S. economy struggles with weak fundamentals

Question 14

What type of relationship usually exists between the U.S. dollar and gold?

a. Inverse
b. Direct
c. No relationship

Answer 14

Inverse

Question 15

Which country is one of the largest gold producers in the world?

Answer 15

Australia

Question 16

If the price of gold rises, how does USD/CHF usually react?

Answer 16

Drops

Question 17

Which among these countries is one of the top oil producers in the world?

a. Canada
b. Philippines
c. Australia

Answer 17

Canada

Question 18

What is the usual effect of rising oil prices on USD/CAD?

a. USD/CAD rises
b. USD/CAD drops
c. USD/CAD doesn’t move

Answer 18

USD/CAD drops

Question 19

If demand from the U.S. rises, how does USD/CAD usually react?

a. USD/CAD rises
b. USD/CAD drops
c. USD/CAD doesn’t move

Answer 19

USD/CAD drops

Question 20

When you lend money to the U.S. government, that means you just bought a..

a. Stock
b. U.S. government bond
c. Yacht

Answer 20

U.S. government bond

Question 21

What is the other term for the rate of return on a bond?

Answer 21

Bond yield

Question 22

When bond prices fall, what happens to bond yields?

a. Bond yields rise
b. Bond yields fall
c. Bond yields don’t move

Answer 22

Bond yields rise

Question 23

When yields of U.S. government bonds rise, what usually happens to EUR/USD?

a. Rises
b. Falls
c. Bond yields don’t move

Answer 23

Drops

Question 24

True or False. Bond yields serve as an indicator of the country’s interest rate expectations.

Answer 24

True

Question 25

True or False. The currency with the higher bond yield tends to fall against the currency with the lower bond yield.

Answer 25

False

Question 26

When investors make carry trades, they are taking advantage of...

Answer 26

Bond spreads

Question 27

What is the nickname for U.K. bonds?

Answer 27

Gilts

Question 28

If the fixed income yield in Japan is lower compared to the fixed income yield in Canada, how will CAD/JPY behave? a. CAD/JPY will drop b. CAD/JPY will rise c. CAD/JPY will not move

Answer 28

CAD/JPY will rise

Question 29

How does a country's stock market outlook affect its currency? a. A strong outlook is bullish for its currency b. A weak outlook is bullish for its currency c. Stocks don't affect the currency

Answer 29

A strong outlook is bullish for its currency

Question 30

As a currency trader, should you still monitor the stock market performance of the major economies?

Answer 30

Yes

Question 31

True or False. Money flows into the economy whose stock market is performing worse than those of the other economies

Answer 31

False

Question 32

True or False. Only the industrial companies are included in the DJIA

Answer 32

False

Question 33

Which is the most traded index in the U.S. stock market?

Answer 33

DJIA

Question 34

Which among these companies is included in the Nikkei? a. Toyota b. Fuji c. Honda d. All of the above

Answer 34

All of the above

Question 35

The principle that the stronger the stock market, the stronger the currency usually holds for most currencies except for... a. USD and EUR b. EUR and JPY c. USD and JPY

Answer 35

USD and JPY

Question 36

True or False. Stock markets all over the world generally move in the same direction.

Answer 36

True

Question 37

What global phenomenon changed the correlation between USD/JPY and the Nikkei?

Answer 37

Global financial crisis

Question 38

Which currency pair is typically used as a barometer for risk?

Answer 38

EUR/JPY

Question 39

When the global economy is down, how does EUR/JPY usually react? a. EUR/JPY falls b. EUR/JPY rises c. EUR/JPY doesn't move

Answer 39

EUR/JPY falls

Question 40

How does rising gold prices tend to affect NZD/USD?

Answer 40

NZD/USD rises

Question 41

If Nikkei is falling, what's a good trading strategy for USD/JPY? a. Long USD/JPY b. Short USD/JPY

Answer 41

Short USD/JPY

Question 42

What is the main governing body of the U.S. when it comes to monetary policy? a. The Fed b. The SNB c. The ECB

Answer 42

The Fed

Question 43

The Fed has two main tools to battle inflation. One is altering the Feds Funds Rate. What is the other one?

Answer 43

Open market operations

Question 44

Which of the following is NOT an important indicator in the U.S.? a. Non-Farm Payrolls report b. University of Michigan Consumer Sentiment index c. Claimant Count Change

Answer 44

Claimant Count Change

Question 45

Whenever the dollar is at risk of losing its value due to inflation, what commodity usually rises?

Answer 45

Gold

Question 46

What does "ECB" stand for?

Answer 46

European Central Bank

Question 47

Who is the president of the euro zone? a. Jean-Claude Trichet b. Angela Merkel c. Nobody

Answer 47

Nobody

Question 48

Which currency is called the "anti-dollar"?

Answer 48

Euro

Question 49

What is the oldest central bank in the world?

Answer 49

The BOE

Question 50

What do you call the group inside the BOE that is charged of determining interest rates? a. Federal Open Market Committee (FOMC) b. Ministry of Finance (MOF) c. Monetary Policy Committee (MPC)

Answer 50

Monetary Policy Committee (MPC)

Question 51

Which country has the third largest economy in the world?

Answer 51

Japan

Question 52

The printing of money to increase the supply of money and stimulate the economy is also called...

Answer 52

Quantitative Easing

Question 53

Why doesn't the BOJ want the yen to appreciate too much? a. It encourages domestic inflation. b. It causes their stock market to fall. c. It makes Japan's exports more expensive.

Answer 53

It makes Japan's exports more expensive.

Question 54

What is the inflation target of the Bank of Canada (BOC)? a. 1% - 3% b. 2% - 4% c. 1.5% - 3.5%

Answer 54

1% - 3%

Question 55

The price of oil is highly correlated with which currency?

Answer 55

Canadian dollar

Question 56

True or false: Australia's GDP comes mainly from the manufacturing industry

Answer 56

False

Question 57

Ensuring growth and maintaining full employment are two of the RBA's goals. What is the third one? a. Make sure that the mining industry is growing. b. Keep the exchange rate stable. c. Keep the crime rate low.

Answer 57

Keep the exchange rate stable.

Question 58

Which of the following is the BEST candidate for a carry trade? a. Canadian dollar b. Euro c. Australian dollar

Answer 58

Australian dollar

Question 59

How many times a year does the RBNZ hold monetary policy meetings? a. 8 b. 10 c. 12

Answer 59

8

Question 60

Which country is considered politically neutral?

Answer 60

Switzerland