Question 1

Currency derivatives are:

Accepted Answer

A) an important category of derivatives and are the most prevalent type of derivative. 
B) very complicated and are not used very often in international finance. 
C) an important category of derivatives but are not the most prevalent type of derivative. 
D) not used in international financial transactions. 
A) an important category of derivatives and are the most prevalent type of derivative. 
B) very complicated and are not used very often in international finance. 
C) an important category of derivatives but are not the most prevalent type of derivative. 
D) not used in international financial transactions.

Question 2

Options are more useful than forwards and futures because options:

Accepted Answer

A) are traded in more markets. 
B) are obtained at a lower cost than forwards and futures. 
C) allow a party to elect not to go through with a transaction that will cause the party a loss. 
D) are easier to value than forwards and futures. 
A) are traded in more markets. 
B) are obtained at a lower cost than forwards and futures. 
C) allow a party to elect not to go through with a transaction that will cause the party a loss. 
D) are easier to value than forwards and futures.

Question 3

Most derivatives that are traded are trade in:

Accepted Answer

A) special divisions of established stock markets. 
B) curb markets. 
C) over-the-counter (OT
C) or wholesale markets. 
D) exchange or retail markets. 
A) special divisions of established stock markets. 
B) curb markets. 
C) over-the-counter (OT
C) or wholesale markets. 
D) exchange or retail markets.

Question 4

The option premium paid by the long counterparty to the short counterparty as compensation for the risk that the short counterparty is assuming as a result of the option is also known as the:

Accepted Answer

A) long premium. 
B) short profit. 
C) premium value. 
D) option value. 
A) long premium. 
B) short profit. 
C) premium value. 
D) option value.

Question 5

Why would a rise in interest rates adversely affect MNCs that produce durable goods?

Accepted Answer

A) A rise in interest rates increases the cost that consumers of those durable goods have to pay and,therefore,reduces the demand for those durable goods. 
B) A rise in interest rates causes the value of the domestic currency to decrease,making the cost of the durable goods worldwide more expensive. 
C) A rise in interest rates indicates economic disruption in the country and makes it more difficult for MNCs to sell their products worldwide. 
D) A rise in interest rates signals the MNCs inability to continue to produce at the level it has been producing,and lower product means lower profits. 
A) A rise in interest rates increases the cost that consumers of those durable goods have to pay and,therefore,reduces the demand for those durable goods. 
B) A rise in interest rates causes the value of the domestic currency to decrease,making the cost of the durable goods worldwide more expensive. 
C) A rise in interest rates indicates economic disruption in the country and makes it more difficult for MNCs to sell their products worldwide. 
D) A rise in interest rates signals the MNCs inability to continue to produce at the level it has been producing,and lower product means lower profits.

Question 6

The typical counterparties in a derivative contract are the:

Accepted Answer

A) the spot seller and the forward buyer. 
B) the offeror and the offeree. 
C) the long (buyer)and the short (seller). 
D) the put option and the call option. 
A) the spot seller and the forward buyer. 
B) the offeror and the offeree. 
C) the long (buyer)and the short (seller). 
D) the put option and the call option.

Question 7

Call options are similar to forwards because they represent ___________ by the long,but they are different from forwards because they offer the long ______________________.

Accepted Answer

A) a preplanned future purchase;the flexibility to opt out of the purchase 
B) a preplanned future purchase;the flexibility to buy more of the asset than originally planned 
C) an opportunity for profit;an opportunity to avoid a loss 
D) an opportunity to profit;no opportunity to avoid a loss 
A) a preplanned future purchase;the flexibility to opt out of the purchase 
B) a preplanned future purchase;the flexibility to buy more of the asset than originally planned 
C) an opportunity for profit;an opportunity to avoid a loss 
D) an opportunity to profit;no opportunity to avoid a loss

Question 8

Options,forwards and futures all have in common that:

Accepted Answer

A) all have a value that is easily determined. 
B) each allows an entity to arrange for the future purchase or sale of an underlying asset at a predetermined price. 
C) all are trade in the Interbank market. 
D) each allows an entity to make an agreement and then get out of that agreement if carrying through with the agreement will result in a loss. 
A) all have a value that is easily determined. 
B) each allows an entity to arrange for the future purchase or sale of an underlying asset at a predetermined price. 
C) all are trade in the Interbank market. 
D) each allows an entity to make an agreement and then get out of that agreement if carrying through with the agreement will result in a loss.

Question 9

The seller of an option will always __________ when the option is exercised,so:

Accepted Answer

A) lose;the buyer of an option pays a premium to the seller of the option as compensation for the risk of loss that the option seller takes. 
B) lose;the seller of an option will also have an option to get out of the option contract. 
C) profit;the cost of options is very low. 
D) profit;the seller of the option will agree to share the profit with the buyer of the option. 
A) lose;the buyer of an option pays a premium to the seller of the option as compensation for the risk of loss that the option seller takes. 
B) lose;the seller of an option will also have an option to get out of the option contract. 
C) profit;the cost of options is very low. 
D) profit;the seller of the option will agree to share the profit with the buyer of the option.

Question 10

How are credit default swaps used in international financial transactions?

Accepted Answer

Credit default swaps are complex derivat

Currency derivatives are:

Options are more useful than forwards and futures because options:

Most derivatives that are traded are trade in:

The option premium paid by the long counterparty to the short counterparty as compensation for the risk that the short counterparty is assuming as a result of the option is also known as the:

Why would a rise in interest rates adversely affect MNCs that produce durable goods?

The typical counterparties in a derivative contract are the:

Call options are similar to forwards because they represent _ by the long,but they are different from forwards because they offer the long ____________.

Options,forwards and futures all have in common that:

The seller of an option will always __________ when the option is exercised,so:

How are credit default swaps used in international financial transactions?

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

Currency derivatives are:

Options are more useful than forwards and futures because options:

Most derivatives that are traded are trade in:

The option premium paid by the long counterparty to the short counterparty as compensation for the risk that the short counterparty is assuming as a result of the option is also known as the:

Why would a rise in interest rates adversely affect MNCs that produce durable goods?

The typical counterparties in a derivative contract are the:

Call options are similar to forwards because they represent ___________ by the long,but they are different from forwards because they offer the long ______________________.

Options,forwards and futures all have in common that:

The seller of an option will always __________ when the option is exercised,so:

How are credit default swaps used in international financial transactions?

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

Call options are similar to forwards because they represent _ by the long,but they are different from forwards because they offer the long ____________.