Exam 5: Currency Derivatives

The premium on a pound put option is $.04. The spot rate and the exercise price are $1.52. The spot rate at the time of this option expiration is expected to be $1.51. Speculators could profit by:

(Multiple Choice)

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Question 21

Forward contracts are usually liquidated by actual delivery of the currency, while futures contracts are usually liquidated by offsetting transactions.

(True/False)

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Question 22

Futures contracts are standardized with respect to delivery date and the futures price specified for the settlement date.

(True/False)

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Question 23

When currency options are not standardized and are traded over-the-counter, there is liquidity and a bid/ask spread.

(Multiple Choice)

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Question 24

A straddle is a speculative strategy that involves the purchase of both a call and a put.

(True/False)

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Question 25

With a bull spread, the spreader believes that the underlying currency will appreciate substantially, even more so than with a strangle.

(True/False)

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Question 26

Both call and put option premiums are affected by the level of the existing spot rate relative to the strike price, the length of time before the expiration date, and the potential variability of the currency.

(True/False)

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Question 27

Currency options sold through an options exchange contain:

(Multiple Choice)

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Question 28

Which of the following is not an instrument used by U.S.-based MNCs to cover their foreign currency positions?

(Multiple Choice)

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Question 29

An MNC frequently uses either forward or futures contracts to hedge its exposure to foreign payables. To do so, the MNC can either sell the foreign currency forward or sell futures.

(True/False)

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Question 30

As mentioned in the text, the most common maturities for forward rates are:

(Multiple Choice)

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Question 31

Conditional currency options are:

(Multiple Choice)

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Question 32

The greater the variability of a currency, the will be the premium of a call option on this currency, and the will be the premium of a put option on this currency, other things being equal.

(Multiple Choice)

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Question 33

Since corporations have specialized needs, they usually prefer futures contracts to forward contracts for hedging purposes.

(True/False)

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Question 34

The writer of a put option has a right, but not an obligation, to buy the underlying currency from the option buyer.

(True/False)

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Question 35

A call option on Australian dollars has a strike (exercise) price of $.56. The present exchange rate is $.59. This call option can be referred to as:

(Multiple Choice)

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Question 36

The shorter the time to the expiration date for a currency, the will be the premium of a call option, and the will be the premium of a put option, other things being equal.

(Multiple Choice)

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Question 37

The spot rate of the British pound is quoted at $1.49. The 90-day forward rate exhibits a 2% discount. What is the 90-day forward rate of the pound?

(Multiple Choice)

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Question 38

Which of the following is true for futures, but not for forwards?

(Multiple Choice)

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Question 39

The one-year forward rate of the British pound is quoted at $1.60, and the spot rate of the British pound is quoted at $1.63. The forward is percent.

(Multiple Choice)

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Question 40

Showing 21 - 40 of 161

Exam 5: Currency Derivatives

The premium on a pound put option is $.04. The spot rate and the exercise price are $1.52. The spot rate at the time of this option expiration is expected to be $1.51. Speculators could profit by:​

Forward contracts are usually liquidated by actual delivery of the currency, while futures contracts are usually liquidated by offsetting transactions.

Futures contracts are standardized with respect to delivery date and the futures price specified for the settlement date.

When currency options are not standardized and are traded over-the-counter, there is ____ liquidity and a ____ bid/ask spread.

A straddle is a speculative strategy that involves the purchase of both a call and a put.

With a bull spread, the spreader believes that the underlying currency will appreciate substantially, even more so than with a strangle.

Both call and put option premiums are affected by the level of the existing spot rate relative to the strike price, the length of time before the expiration date, and the potential variability of the currency.

Currency options sold through an options exchange contain:

Which of the following is not an instrument used by U.S.-based MNCs to cover their foreign currency positions?

An MNC frequently uses either forward or futures contracts to hedge its exposure to foreign payables. To do so, the MNC can either sell the foreign currency forward or sell futures.

As mentioned in the text, the most common maturities for forward rates are:

Conditional currency options are:

The greater the variability of a currency, the ____ will be the premium of a call option on this currency, and the ____ will be the premium of a put option on this currency, other things being equal.

Since corporations have specialized needs, they usually prefer futures contracts to forward contracts for hedging purposes.

The writer of a put option has a right, but not an obligation, to buy the underlying currency from the option buyer.

A call option on Australian dollars has a strike (exercise) price of $.56. The present exchange rate is $.59. This call option can be referred to as:

The shorter the time to the expiration date for a currency, the ____ will be the premium of a call option, and the ____ will be the premium of a put option, other things being equal.

The spot rate of the British pound is quoted at $1.49. The 90-day forward rate exhibits a 2% discount. What is the 90-day forward rate of the pound?

Which of the following is true for futures, but not for forwards?

The one-year forward rate of the British pound is quoted at $1.60, and the spot rate of the British pound is quoted at $1.63. The forward ____ is ____ percent.

Multinational Financial Management: An Overview

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

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The premium on a pound put option is $.04. The spot rate and the exercise price are $1.52. The spot rate at the time of this option expiration is expected to be $1.51. Speculators could profit by:

When currency options are not standardized and are traded over-the-counter, there is liquidity and a bid/ask spread.

The greater the variability of a currency, the will be the premium of a call option on this currency, and the will be the premium of a put option on this currency, other things being equal.

The shorter the time to the expiration date for a currency, the will be the premium of a call option, and the will be the premium of a put option, other things being equal.

The one-year forward rate of the British pound is quoted at $1.60, and the spot rate of the British pound is quoted at $1.63. The forward is percent.