FOREIGN EXCHANGE FACILITIES FOR
INDIVIDUALS Exam
- What is the primary function of the foreign exchange (Forex) market?
- Stock trading platform
- Currency exchange market
- Commodity marketplace
- Bond trading exchange
Answer: B
Explanation: The Forex market exists primarily to facilitate the exchange of one currency for another, supporting international trade and investments.
- Which of the following is a key participant in the Forex market?
- Real estate agents
- Commercial banks
- Local retailers
- Automobile manufacturers
Answer: B
Explanation: Commercial banks are among the key participants in the Forex market as they engage in currency transactions daily.
- What term describes a pair of currencies quoted against each other?
- Commodity pair
- Stock index 1 / 4
FOREIGN EXCHANGE FACILITIES FOR
INDIVIDUALS Exam
- Currency pair
- Swap pair
Answer: C
Explanation: Currency pairs represent two currencies exchanged against each other in the Forex market.
- In Forex terminology, what is the 'bid' price?
- Price a trader is willing to sell a currency
- Price a trader is willing to buy a currency
- Midpoint price between bid and ask
- Average of several exchange rates
Answer: B
Explanation: The bid price is the price at which a trader or broker is willing to buy a currency.
- Which market type represents transactions that settle immediately?
- Futures market
- Forward market
- Spot market
- Options market
Answer: C 2 / 4
FOREIGN EXCHANGE FACILITIES FOR
INDIVIDUALS Exam
Explanation: The spot market deals with immediate delivery of currencies with transactions settled “on the spot.”
- What does ‘liquidity’ in the Forex market refer to?
- The available cash in a trader’s account
- The ease with which an asset can be converted into cash
- The interest rate offered by banks
- The number of market participants
Answer: B
Explanation: Liquidity is the ease of converting an asset into cash without affecting its market price.
- Which currency pair is typically classified as a “major” pair?
A. USD/EUR
B. USD/XYZ
C. EUR/GBP
D. JPY/INR
Answer: A
Explanation: Major currency pairs include widely traded currencies such as the USD paired with other leading currencies like the EUR.
- What is ‘spread’ in Forex? 3 / 4
FOREIGN EXCHANGE FACILITIES FOR
INDIVIDUALS Exam
- The difference between the bid and ask prices
- A type of currency pair
- A risk management tool
- The total value of a trade
Answer: A
Explanation: The spread is the difference between the bid (buy) and ask (sell) price.
- In Forex, what is a ‘pip’?
- A percentage interest point
- The smallest price movement in a currency pair
- A method of hedging
- A type of trading account
Answer: B
Explanation: A pip, or "percentage in point," represents the smallest standardized price move that a currency pair can make.
- How does leverage function in Forex trading?
- It reduces the size of trades.
- It amplifies trading positions relative to the trader’s capital.
- It minimizes all trading risks.
- It provides free trades with no capital requirement.
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