Question 1

The price at which a long can exercise a right to buy a specified asset from a short at a specified future date is the:

Accepted Answer

A) contract price. 
B) forward price. 
C) settled price. 
D) strike price. 
A) contract price. 
B) forward price. 
C) settled price. 
D) strike price.

Question 2

Margin accounts are required to maintain a minimum balance which is usually lower than the initial margin balance,called a:

Accepted Answer

A) continuing balance. 
B) maintenance margin. 
C) futures balance. 
D) call balance. 
A) continuing balance. 
B) maintenance margin. 
C) futures balance. 
D) call balance.

Question 3

A call option gives the long party the right to buy the underlying asset at a predetermined price,so:

Accepted Answer

A) the price of the underlying asset and the call price are positively related. 
B) the price of the underlying asset and the call price are negatively related. 
C) the long party will not exercise the option unless the call price is more than the price of the underlying asset at the maturity date of the option. 
D) the long party will have to exercise the option no matter the price of the underlying asset at the maturity date of the option. 
A) the price of the underlying asset and the call price are positively related. 
B) the price of the underlying asset and the call price are negatively related. 
C) the long party will not exercise the option unless the call price is more than the price of the underlying asset at the maturity date of the option. 
D) the long party will have to exercise the option no matter the price of the underlying asset at the maturity date of the option.

Question 4

If the forward price in a currency forward is lower than the spot price of the base currency,the currency forward is said to contain a(n):

Accepted Answer

A) error. 
B) bonus. 
C) forward premium. 
D) forward discount. 
A) error. 
B) bonus. 
C) forward premium. 
D) forward discount.

Question 5

Currency derivatives were created:

Accepted Answer

A) to provide speculative investment opportunities for individuals. 
B) by Interbanks seeking to expand the investment opportunities that they offered. 
C) because MNCs often require foreign currencies and seek ways to limit their exposure to currency value fluctuations. 
D) so that governments could control the value of their currencies. 
A) to provide speculative investment opportunities for individuals. 
B) by Interbanks seeking to expand the investment opportunities that they offered. 
C) because MNCs often require foreign currencies and seek ways to limit their exposure to currency value fluctuations. 
D) so that governments could control the value of their currencies.

Question 6

The majority of options used in international transactions expire:

Accepted Answer

A) in 30 days. 
B) when the exchange rate changes. 
C) in 90 days. 
D) in six months. 
A) in 30 days. 
B) when the exchange rate changes. 
C) in 90 days. 
D) in six months.

Question 7

What are derivatives and what role do they play in international financial transactions?

Accepted Answer

Derivatives are securities that are esse

Question 8

Real options can be described as:

Accepted Answer

A) similar to financial options but without the involvement of cash or currency. 
B) options whose value is determined without reference to the inflation rate. 
C) options that have actually been exercised. 
D) business opportunities for firms to acquire assets that will increase their cash flow. 
A) similar to financial options but without the involvement of cash or currency. 
B) options whose value is determined without reference to the inflation rate. 
C) options that have actually been exercised. 
D) business opportunities for firms to acquire assets that will increase their cash flow.

Question 9

Futures are traded anonymously on markets,so markets regularly require trading parties to establish:

Accepted Answer

A) margin accounts. 
B) insurance policies. 
C) collateral accounts. 
D) futures accounts. 
A) margin accounts. 
B) insurance policies. 
C) collateral accounts. 
D) futures accounts.

Question 10

A forward contract that is standardized and that is traded on an exchange is called a(n):

Accepted Answer

A) future. 
B) exchange forward. 
C) traded forward. 
D) option. 
A) future. 
B) exchange forward. 
C) traded forward. 
D) option.

Question 11

Currency forwards,also known as ____________,are traded in the:

Accepted Answer

A) swap forwards;over-the-counter markets. 
B) currency swaps;Interbank market. 
C) credit default swaps;over-the-counter markets. 
D) outright forwards;Interbank market. 
A) swap forwards;over-the-counter markets. 
B) currency swaps;Interbank market. 
C) credit default swaps;over-the-counter markets. 
D) outright forwards;Interbank market.

Question 12

When an option is exercised,the party exercising the option has a profit equal to:

Accepted Answer

A) the cash flow resulting from the exercise of the option. 
B) the cash flow resulting from the exercise of the option less the premium paid for the option. 
C) the premium originally paid for the option. 
D) the cash flow resulting from the exercise of the option plus any savings resulting from changes in exchange rates. 
A) the cash flow resulting from the exercise of the option. 
B) the cash flow resulting from the exercise of the option less the premium paid for the option. 
C) the premium originally paid for the option. 
D) the cash flow resulting from the exercise of the option plus any savings resulting from changes in exchange rates.

Question 13

The counterparty risk in forward contracts:

Accepted Answer

A) means that most MNCs do not participate in the forward markets. 
B) restricts forward market participants to large firms with good credit ratings. 
C) dictates that only financial institutions can participate in the forward markets. 
D) the forward markets are very small and facilitate only very small transactions. 
A) means that most MNCs do not participate in the forward markets. 
B) restricts forward market participants to large firms with good credit ratings. 
C) dictates that only financial institutions can participate in the forward markets. 
D) the forward markets are very small and facilitate only very small transactions.

Question 14

In calculating forward pricing,the underlying asset,currency,is called the ________________ and is represented in calculations as:

Accepted Answer

A) target asset;T. 
B) the real asset;r. 
C) spot asset;S. 
D) the nondeliverable asset;n. 
A) target asset;T. 
B) the real asset;r. 
C) spot asset;S. 
D) the nondeliverable asset;n.

Question 15

Put options allow the long the opportunity but not the obligation to:

Accepted Answer

A) buy the underlying asset at a predetermined price. 
B) buy or sell the underlying asset at a predetermined price. 
C) sell the underlying asset at a predetermined price. 
D) to force the short to sell the underlying asset at a predetermined price. 
A) buy the underlying asset at a predetermined price. 
B) buy or sell the underlying asset at a predetermined price. 
C) sell the underlying asset at a predetermined price. 
D) to force the short to sell the underlying asset at a predetermined price.

Question 16

If a long counterparty has the right but not the option to buy the underlying asset but that right can only be exercised at the maturity date of the agreement,the agreement is a(n):

Accepted Answer

A) American-style option. 
B) maturity option. 
C) European-style option. 
D) delayed option. 
A) American-style option. 
B) maturity option. 
C) European-style option. 
D) delayed option.

Question 17

If the underlying asset in a forward cannot actually be delivered on maturity,a derivative in the form of a(n)___________________________ can still be used.

Accepted Answer

A) illusory forward 
B) mimic derivative 
C) nondeliverable forward 
D) restricted derivative 
A) illusory forward 
B) mimic derivative 
C) nondeliverable forward 
D) restricted derivative

Question 18

Differences between future prices on one market and forward prices on another market:

Accepted Answer

A) do not happen because of the degree of control that the markets exercise over prices. 
B) are allowed to continue to encourage speculation. 
C) give individual investors opportunities to make large profits. 
D) offer opportunities to profit by buying at the lower price and selling at the higher price. 
A) do not happen because of the degree of control that the markets exercise over prices. 
B) are allowed to continue to encourage speculation. 
C) give individual investors opportunities to make large profits. 
D) offer opportunities to profit by buying at the lower price and selling at the higher price.

Question 19

If a party has the right but not the obligation to buy the underlying asset,the party has a(n)_____________________;if the party has right but not an obligation to sell the underlying asset,the party has a:

Accepted Answer

A) call option;put option. 
B) put option;call option. 
C) buy option;sell option. 
D) option;future. 
A) call option;put option. 
B) put option;call option. 
C) buy option;sell option. 
D) option;future.

Question 20

If a long agrees to buy a specified asset from a short at a specified future date for a specified price,the result is a(n):

Accepted Answer

A) unenforceable contract. 
B) forward contract. 
C) option contract. 
D) futures contract. 
A) unenforceable contract. 
B) forward contract. 
C) option contract. 
D) futures contract.

The price at which a long can exercise a right to buy a specified asset from a short at a specified future date is the:

Margin accounts are required to maintain a minimum balance which is usually lower than the initial margin balance,called a:

A call option gives the long party the right to buy the underlying asset at a predetermined price,so:

If the forward price in a currency forward is lower than the spot price of the base currency,the currency forward is said to contain a(n):

Currency derivatives were created:

The majority of options used in international transactions expire:

What are derivatives and what role do they play in international financial transactions?

Real options can be described as:

Futures are traded anonymously on markets,so markets regularly require trading parties to establish:

A forward contract that is standardized and that is traded on an exchange is called a(n):

Currency forwards,also known as ____________,are traded in the:

When an option is exercised,the party exercising the option has a profit equal to:

The counterparty risk in forward contracts:

In calculating forward pricing,the underlying asset,currency,is called the ________________ and is represented in calculations as:

Put options allow the long the opportunity but not the obligation to:

If a long counterparty has the right but not the option to buy the underlying asset but that right can only be exercised at the maturity date of the agreement,the agreement is a(n):

If the underlying asset in a forward cannot actually be delivered on maturity,a derivative in the form of a(n)___________________________ can still be used.

Differences between future prices on one market and forward prices on another market:

If a party has the right but not the obligation to buy the underlying asset,the party has a(n)_____________________;if the party has right but not an obligation to sell the underlying asset,the party has a:

If a long agrees to buy a specified asset from a short at a specified future date for a specified price,the result is a(n):

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

The price at which a long can exercise a right to buy a specified asset from a short at a specified future date is the:

Margin accounts are required to maintain a minimum balance which is usually lower than the initial margin balance,called a:

A call option gives the long party the right to buy the underlying asset at a predetermined price,so:

If the forward price in a currency forward is lower than the spot price of the base currency,the currency forward is said to contain a(n):

Currency derivatives were created:

The majority of options used in international transactions expire:

What are derivatives and what role do they play in international financial transactions?

Real options can be described as:

Futures are traded anonymously on markets,so markets regularly require trading parties to establish:

A forward contract that is standardized and that is traded on an exchange is called a(n):

Currency forwards,also known as ____________,are traded in the:

When an option is exercised,the party exercising the option has a profit equal to:

The counterparty risk in forward contracts:

In calculating forward pricing,the underlying asset,currency,is called the ________________ and is represented in calculations as:

Put options allow the long the opportunity but not the obligation to:

If a long counterparty has the right but not the option to buy the underlying asset but that right can only be exercised at the maturity date of the agreement,the agreement is a(n):

If the underlying asset in a forward cannot actually be delivered on maturity,a derivative in the form of a(n)___________________________ can still be used.

Differences between future prices on one market and forward prices on another market:

If a party has the right but not the obligation to buy the underlying asset,the party has a(n)_____________________;if the party has right but not an obligation to sell the underlying asset,the party has a:

If a long agrees to buy a specified asset from a short at a specified future date for a specified price,the result is a(n):

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