Quiz: Test your FX knowledge

  How well do you understand foreign exchange (FX) risk? Take our quiz to find out.

1. Foreign exchange (FX) exposure can lead to:
a. importers paying more for goods at invoice date than when they’d placed the order
b. exporters receiving less of their local currency than they’d budgeted 
c. lower costs and higher profit margins
d. higher costs and lower profit margins
e. all of the above

2. According to research published by East & Partners*, over a six-month period (Q4 2019 to Q1 2020), Australian importers and exporters suffered an average FX loss of:
a. A$1650 
b. A$15,440
c. A$28,200 
d. A$111,600

3. What can influence exchange rates? 
a. inflation rates and interest rates 
b. global economics
c. world events (e.g. global instability, natural disasters, pandemics)  
d. all of the above 

4. What type of risk occurs when a seller’s currency (the base currency) appreciates against a buyer’s currency, causing the buyer to make a larger payment in their base currency to meet the contracted price?
a. transaction risk
b. translation risk
c. economic risk
d. option risk

5. In Q1 2015, Apple’s revenue as reported by Business Insider* was negatively affected by the strengthening US dollar to the tune of:
a. US$525.62 million
b. US$984.75 million 
c. US$3.73 billion
d. US$5.54 billion

6. In March 2020, the Australian dollar dropped against the US dollar to a 17-year low of:
a) US$0.50
b) US$0.55
c) US$0.60
d) US$0.65

7. How much would an Australian importer have saved on a US$150,000 invoice if they’d locked in a US$0.69 exchange rate in January 2020, rather than paying the March 2020 rate? 
a. A$13,378
b. A$32,609
c. A$55,336
d. A$82,609

8. An Australian exporter agrees to sell a shipment of goods for €50,000 when the Euro is valued at A$0.58. By the time the buyer pays the invoice, the Euro has strengthened to A$0.65, leaving the exporter with:
a. A$9284 less than they’d budgeted
b. A$9284 more than they’d budgeted
c. A$3500 less than they’d budgeted
d. A$3500 more than they’d budgeted

9. A spot rate is:
a) the exchange rate that a company uses to draft budgets and establish business objectives
b) the nominated exchange rate that allows a business to break even
c) the current exchange rates at which specific currencies can be bought or sold on currency exchange markets
d) none of the above

10. Which of the following strategies could a business use to help manage FX risk:
a. Forward Contract
b. Target Rate Transfer (Limit Order) 
c. blend of options (for example, a mix of Spot Transfers and Forward Contracts)
d. all of the above

11. Hedging is a strategy best suited to businesses that:
a) have a regular need to buy goods or services from overseas
b) don’t buy goods or services from overseas on an ad hoc basis
c) aren’t subject to exchange rate shifts
d) have a high appetite for risk

12. Why is it helpful for a business trading globally to know their break-even exchange rate?
a. better understanding of the amount of FX risk they can absorb 
b. clear awareness of the target exchange rate that needs to be hit as a minimum 
c. for planning ahead and getting more cost certainty on their FX
d. all of the above 

Are you an FX risk expert? Check your answers here.

Disclaimer:
*East & Partners Global Business FX Research Program conducted March 2020 and September 2020, sample of 13,000 enterprises:
**www.businessinsider.com.au/apple-currency-losses-vs-google-2015-1?r=US&IR=T

OzForex Limited trading as “OFX”. ABN 65 092 375 703 | AFSL 226 484.


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