CAED102: FINANCIAL MARKETS

ACTIVITY #6: FOREIGN EXCHANGE

Name: ABARIENTOS, MAE LOU FRIA B. Section: AC24

INSTRUCTIONS:
Answer the following questions and cite your corresponding source/s.

1. What is forex? (1 pts)

Answer:
Forex stands for foreign exchange and is sometimes called the forex market. It is the
world largest financial markets that enable you to trade any two currencies in the world.
Source/s: (videos from the Google classroom)

2. What are the 2 key purposes of forex? (2 pts)

Answer: - MARGIN & FINANCING
Source/s: (videos from the Google classroom)

3. Differentiate spot, forward and future market? (3 pts)

Answer:
Spot FX is an immediate exchange of currencies at a current exchange rate. On the
hand, forward FX is an exchange in the future on a specific date and at a pre-specified
exchange rate. While, on the other hand, future FX was stipulating an exchange of one
currency for another at a future date and at a fixed purchase price.
Source/s: (topic in Intro to financial market)

4. Who trade forex (name atleast 5)? Note: Not individual name of persons. (5 pts)
Answer:
Market Participants
-Individual forex traders
-Companies
-Financial institutions (pension funds, hedge funds, brokers)
-Banks
-Retail forex participants
Source/s: (videos from the Google classroom)

5. How much is the volume of currencies traded in a single day? (1 pts)

Answer:
Volume of currencies at $5.1 trillion is traded on average every day.
Source/s: https://www.investopedia.com/articles/forex/11/who-trades-forex-and-why

5. Using the video as reference, what are the types of currency pairs? (3 pts)
Answer:
Currency pairs are classified into two types, the most often trade are called (1) major
currency pairs, other currency pairs are called (2) minor or emerging currency pairs.
Source/s: (videos from the Google classroom)

6. Name the 7 Majors? (7 pts)

Answer:
(1)The euro and US dollar: EUR/USD.
(2)The US dollar and Japanese yen: USD/JPY.
(3)The British pound sterling and US dollar: GBP/USD.
(4)The US dollar and Swiss franc: USD/CHF.
(5)The Australian dollar and US dollar: AUD/USD.
(6)The US dollar and Canadian dollar: USD/CAD.
(7)The New Zealand dollar and US dollar: NZD/USD.
 Source/s: (videos from the Google classroom)

7. What is spread? How it is being measured? (2 points)

Answer:
Spread is the difference between the buy price and the sale price, it is not
measured in whole dollars or pounds but in so called PIPS smallest possible price charge on most
trading platforms. To most currency pairs, this is the fourth number after decimal point.
Source/s: (videos from the Google classroom)

8. Enumerate and discuss at least three (3) key factors that affect forex markets? (6 points)
Answer:
Factors Affecting Forex Markets
(1) Interest
(2) Economic announcement
(3) News and events
Source/s: (videos from the Google classroom)

9. Enumerate and discuss the two (2) components of a currency pair? (4 points)
Answer:
The first listed currency of a currency pair is called the base currency, and the
second currency is called the quote currency. The base currency is what you buy or sell,
and the quote currency pertains to how much you will pay or receive.
Source/s: (videos from the Google classroom)

10. Differentiate margin and leverage? (2 point)

Answer:
When you trade on margin, you only need to put up a percentage of the total
investment to enter into a position, this amount is known as the margin requirement. Trading on
margin typically means borrowing funds from your broker and it can be as small as 2% and as large
as 20%. While, on the other hand, leverage enables investors to control a large investments with
relatively small amount of money.
Source/s: (videos from the Google classroom)