Answer the following questions. Give what is asked. Each answer should be supported by a brief explanation/justification.

1.What are the four different markets in a foreign exchange market?

2.Describe the widely used currency derivatives.

3.Who are the players in the foreign exchange market?

4.Identify the most widely traded currency.

5.Describe the Herstatt Risk.

6.Cite some examples why exchange rates change.

7.How does covered interest arbitrage affect the exchange rates?

8.Describe the gold standard system.

9.What is a floating rate system?

10.Where can you obtain exchange rate information?

When answering identification type of questions, make sure to check your spelling and type them in capital letters. Articles like "THE, AN, A, and etc." will not be required when writing your answers. Read each question carefully. Good luck!

IDENTIFICATION

1. The first shareholder-owned business may have been the
2. ___________ are the main type of financing available to firms that have not issued securities.
3. ____________ represents the owners' investment in the firm.
4. ________________ invest in new or young firms in return for equity in the firm.
5. The idea of share ownership goes back to ____________.

TRUE OR FALSE

1. Equities are shares that represent part ownership of a business enterprise.
2. Raising capital remains the main function of equity markets.
3. There is always an ideal debt-to-equity ratio.
4. The tangible value of a warrant is the market price of the stock plus the strike price.
5. Rather than selling its shares to the public, a firm may raise equity through a private offering.

MULTIPLE CHOICE

1. It is the most important form of equity investment.
2. COMMON STOCK OR ORDINARY SHARES
3. PREFERRED STOCK
4. CONVERTIBLE PREFERRED STOCK
5. WARRANTS
6. Preferred stock appeals to issuers because the dividend remains constant for as long as the stock is outstanding, which may be in perpetuity.
7. PREFERRED STOCK
8. WARRANTS
9. COMMON STOCK
10. ORDINARY SHARE

13.They offer the holder the opportunity to purchase a firm's common stock during a specified time period in the future, at a predetermined price, known as the exercise price or strike price.

A. WARRANTS

B. COMMON STOCK OR ORDINARY SHARES

C. PREFERRED STOCK

D. CONVERTIBLE PREFERRED STOCK

14. This may be converted into common stock under certain conditions, usually at a predetermined price or within a predetermined time period.

A. CONVERTIBLE PREFERRED STOCK

B. COMMON STOCK OR ORDINARY SHARES

C. WARRANTS

D. PREFERRED STOCK

15. It is also known as an initial public offering (IPO), is the process by which a firm sells its shares to the public.

Group of answer choices

FLOTATION

ISSUING SHARES

TRADING

SELLING

16. This occurs when a firm whose shares are already traded publicly, sells additional shares to the public - called as Additional Listing in the Philippines.

A. SECONDARY OFFERING

B. INITIAL PUBLIC OFFERING

C. TRADING

D. FLOTATION

17. It is the difference between the revenue it claims to have generated during a given period and the expenses it has incurred, as reported on its financial statements.

Group of answer choices

EARNINGS

CASH FLOW

DIVIDENDS

No answer text provided.

18. The difference between the income (cash) received in a given year (as distinct from the income credited to sales made in that year, which may not actually have been received in cash) and cash outlays.

a. CASH FLOW

b.EARNINGS

c.DIVIDENDS

d.INCOME

19.It is a payment made to shareholders.

a. DIVIDENDS

b. INCENTIVE

c. EARNINGS

d. CASH FLOW

20. In the Philippines, the Philippine Stock Exchange Index (PSEi) include thirty _______ common stocks of top ______ listed companies in the stock exchange.

a.30,30

b.30,20

c.20, 30

d.10, 30

21.The foreign-exchange markets influence each country's foreign-trade patterns, guide the flow of international investment and affect domestic interest and inflation rates.

True

False

22.The foreign-exchange markets comprise six different markets, which function separately yet are closely interlinked.

Group of answer choices

True

False

23. The spot markets allow participants to lock in an exchange rate at certain future dates by purchasing or selling a futures contract.

Group of answer choices

True

False

24. Currencies for immediate delivery are traded on the spot market.

Group of answer choices

True

False

25. The futures markets allow participants to lock in an exchange rate at certain future dates by purchasing or selling a futures contract.

Group of answer choices

True

False

26.__________ are agreements similar to futures contracts, providing for the sale of a given amount of currency at a specified exchange rate on an agreed date.

27.____________ involve the sale or purchase of a currency on one date and the offsetting purchase or sale of the same amount on a future date, with both dates agreed when the transaction is initiated.

28. _____________ allow two parties to exchange interest-payment obligations, and if the obligations are in different currencies there is an exchange-rate component to the agreement.

29. The currency markets have no single physical location.

Group of answer choices

True

False

30. The most widely traded currency is the Euro, which has accounted for 40-45% of all trading since the first comprehensive survey in 1989.

Group of answer choices

True

False