Question 1

A request to deposit additional funds in a margin account is a:

Accepted Answer

A) margin call. 
B) deposit advice. 
C) required deposit. 
D) margin hold. 
A) margin call. 
B) deposit advice. 
C) required deposit. 
D) margin hold. A

Question 2

Forwards are traded in the Interbank market and forwards are traded in the CME and other markets,so currency markets are:

Accepted Answer

A) among the few where both forwards and futures are traded. 
B) able to treat forwards and futures as a single derivative. 
C) difficult to understand because they sell two different derivatives using the same pricing structure. 
D) able to control the prices of both forwards and futures. 
A) among the few where both forwards and futures are traded. 
B) able to treat forwards and futures as a single derivative. 
C) difficult to understand because they sell two different derivatives using the same pricing structure. 
D) able to control the prices of both forwards and futures. A

Question 3

Financial instruments that allow the holder to elect to buy (or sell)underlying assets in the future are called:

Accepted Answer

A) real options. 
B) financial options. 
C) call options. 
D) put options. 
A) real options. 
B) financial options. 
C) call options. 
D) put options. B

Question 4

If counterparties agree that one currency can be exchanged for another currency at a specified future date at a specified exchange rate,a _________________ contract is formed.

Accepted Answer

A) currency forward 
B) currency swap 
C) cross-currency swap 
D) spot currency 
A) currency forward 
B) currency swap 
C) cross-currency swap 
D) spot currency

Question 5

The best way to deal with counterparty risk is to:

Accepted Answer

A) make sure that the counterparties are good credit risks. 
B) deal only with firms that have been dealt with in previous transactions. 
C) avoid it. 
D) require counterparties to post collateral to ensure the performance of their obligations. 
A) make sure that the counterparties are good credit risks. 
B) deal only with firms that have been dealt with in previous transactions. 
C) avoid it. 
D) require counterparties to post collateral to ensure the performance of their obligations.

Question 6

Derivative contracts that can be traded after they are made are:

Accepted Answer

A) illegal. 
B) not valuable. 
C) forward contracts. 
D) financial instruments. 
A) illegal. 
B) not valuable. 
C) forward contracts. 
D) financial instruments.

Question 7

What do the sellers of options do to earn the option premium?

Accepted Answer

An option gives the holder of the option

Question 8

From a cash flow standpoint,the difference between forwards and futures is that:

Accepted Answer

A) forwards require the payment of the purchase price at the time the forward is obtained,but futures are paid for only at maturity. 
B) forwards cost more than futures. 
C) futures are sold in larger denominations than forwards. 
D) futures are settled every day,but forwards are settled only at maturity. 
A) forwards require the payment of the purchase price at the time the forward is obtained,but futures are paid for only at maturity. 
B) forwards cost more than futures. 
C) futures are sold in larger denominations than forwards. 
D) futures are settled every day,but forwards are settled only at maturity.

Question 9

If a long counterparty has the right but not the obligation to buy the underlying asset at a future date at a strike price,the contract is called a(n):

Accepted Answer

A) forward. 
B) option. 
C) future. 
D) agreement for purchase. 
A) forward. 
B) option. 
C) future. 
D) agreement for purchase.

Question 10

The online trading systems used in the currency markets:

Accepted Answer

A) allow for faster and less costly trading. 
B) are unregulated and,therefore,risky. 
C) allow individual investors to be the major traders in currency forwards. 
D) are still being constructed and will not be available for several years. 
A) allow for faster and less costly trading. 
B) are unregulated and,therefore,risky. 
C) allow individual investors to be the major traders in currency forwards. 
D) are still being constructed and will not be available for several years.

Question 11

The exchange rate that is specified in a currency forward contract is called the:

Accepted Answer

A) strike price. 
B) contract exchange rate. 
C) prevailing exchange rate. 
D) forward price. 
A) strike price. 
B) contract exchange rate. 
C) prevailing exchange rate. 
D) forward price.

Question 12

The predetermined amount that will have to be paid if an option is exercised is the:

Accepted Answer

A) contract price. 
B) option price. 
C) strike price. 
D) actual price. 
A) contract price. 
B) option price. 
C) strike price. 
D) actual price.

Question 13

__________________________ comprise the great majority of derivatives used.

Accepted Answer

A) Currency derivatives 
B) Interest rate derivatives 
C) Stock purchase derivatives 
D) Currency swap derivatives 
A) Currency derivatives 
B) Interest rate derivatives 
C) Stock purchase derivatives 
D) Currency swap derivatives

Question 14

The nominal value of a forward contract to purchase 5 million United States dollars (USD)is:

Accepted Answer

A) 5 million USD. 
B) 5.1 million USD. 
C) 2 million MXP. 
D) the nominal value cannot be determined until a future date. 
A) 5 million USD. 
B) 5.1 million USD. 
C) 2 million MXP. 
D) the nominal value cannot be determined until a future date.

Question 15

An MNC faced with the need for a certain amount of foreign currency at a specific date in the future has two choices in guaranteeing the cost of acquiring that foreign currency: it can simply buy the needed currency now and hold that currency until it is needed at the future date,or it can buy a forward contract for the currency and guarantee the exchange rate that it will use to acquire the currency at the future date.What are the primary differences in these approaches:

Accepted Answer

If the MNC purchases the needed currency

Question 16

The underlying asset in a currency forward contract is:

Accepted Answer

A) units of the currency selected by a counterparty at a future date. 
B) units of the term currency. 
C) units of the base currency. 
D) any asset specified by the long counterparty at a future date. 
A) units of the currency selected by a counterparty at a future date. 
B) units of the term currency. 
C) units of the base currency. 
D) any asset specified by the long counterparty at a future date.

Question 17

The Chicago Mercantile Exchange is the market leader in currency futures and provides a place to trade currency futures and:

Accepted Answer

A) services such as investment advice,asset valuation,and loaning money to purchase currency futures. 
B) a depository for the assets underlying derivatives. 
C) services such as clearing trades,processing settlements,and keeping track of collateral posted by counterparties. 
D) secrecy for the details of currency forwards transactions. 
A) services such as investment advice,asset valuation,and loaning money to purchase currency futures. 
B) a depository for the assets underlying derivatives. 
C) services such as clearing trades,processing settlements,and keeping track of collateral posted by counterparties. 
D) secrecy for the details of currency forwards transactions.

Question 18

In terms of options,____________________ is (are)the commodities,instruments,or currency that can be bought or sold by exercising the option.

Accepted Answer

A) underlying assets 
B) option object 
C) collateral 
D) corpus 
A) underlying assets 
B) option object 
C) collateral 
D) corpus

Question 19

How are forward contracts used in international financial transactions?

Accepted Answer

Forward contract are contracts in which

Question 20

In a ____________________________,counterparty A pays interest to counterparty B at a fixed rate and in a designated currency and counterparty B pays interest to counterparty A at a fixed rate and in a different designated currency.

Accepted Answer

A) currency swap 
B) forward contract 
C) cross-currency swap 
D) interest rate swap 
A) currency swap 
B) forward contract 
C) cross-currency swap 
D) interest rate swap

A request to deposit additional funds in a margin account is a:

Forwards are traded in the Interbank market and forwards are traded in the CME and other markets,so currency markets are:

Financial instruments that allow the holder to elect to buy (or sell)underlying assets in the future are called:

If counterparties agree that one currency can be exchanged for another currency at a specified future date at a specified exchange rate,a _________________ contract is formed.

The best way to deal with counterparty risk is to:

Derivative contracts that can be traded after they are made are:

What do the sellers of options do to earn the option premium?

From a cash flow standpoint,the difference between forwards and futures is that:

If a long counterparty has the right but not the obligation to buy the underlying asset at a future date at a strike price,the contract is called a(n):

The online trading systems used in the currency markets:

The exchange rate that is specified in a currency forward contract is called the:

The predetermined amount that will have to be paid if an option is exercised is the:

__________________________ comprise the great majority of derivatives used.

The nominal value of a forward contract to purchase 5 million United States dollars (USD)is:

The underlying asset in a currency forward contract is:

The Chicago Mercantile Exchange is the market leader in currency futures and provides a place to trade currency futures and:

In terms of options,____________________ is (are)the commodities,instruments,or currency that can be bought or sold by exercising the option.

How are forward contracts used in international financial transactions?

In a ____________________________,counterparty A pays interest to counterparty B at a fixed rate and in a designated currency and counterparty B pays interest to counterparty A at a fixed rate and in a different designated currency.

Introduction

International Financial Markets: Structure and Innovation

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

Exam 3: Currency and Eurocurrency Derivatives

A request to deposit additional funds in a margin account is a:

Forwards are traded in the Interbank market and forwards are traded in the CME and other markets,so currency markets are:

Financial instruments that allow the holder to elect to buy (or sell)underlying assets in the future are called:

If counterparties agree that one currency can be exchanged for another currency at a specified future date at a specified exchange rate,a _________________ contract is formed.

The best way to deal with counterparty risk is to:

Derivative contracts that can be traded after they are made are:

What do the sellers of options do to earn the option premium?

From a cash flow standpoint,the difference between forwards and futures is that:

If a long counterparty has the right but not the obligation to buy the underlying asset at a future date at a strike price,the contract is called a(n):

The online trading systems used in the currency markets:

The exchange rate that is specified in a currency forward contract is called the:

The predetermined amount that will have to be paid if an option is exercised is the:

__________________________ comprise the great majority of derivatives used.

The nominal value of a forward contract to purchase 5 million United States dollars (USD)is:

The underlying asset in a currency forward contract is:

The Chicago Mercantile Exchange is the market leader in currency futures and provides a place to trade currency futures and:

In terms of options,____________________ is (are)the commodities,instruments,or currency that can be bought or sold by exercising the option.

How are forward contracts used in international financial transactions?

In a ____________________________,counterparty A pays interest to counterparty B at a fixed rate and in a designated currency and counterparty B pays interest to counterparty A at a fixed rate and in a different designated currency.

Introduction

International Financial Markets: Structure and Innovation

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

Optimizing and Financing Working Capital

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters