Exam 5: Currency Derivatives

A firm sells a currency futures contract, and then decides before the settlement date that it no longer wants to maintain such a position. It can close out its position by:

(Multiple Choice)

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Question 61

Currency futures can be used by MNCs to hedge payables. That is, an MNC would futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would futures.

(Multiple Choice)

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Question 62

A straddle can only be achieved if the exercise prices of put and call options are the same.

(True/False)

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Question 63

There are no transactions costs associated with trading futures or options.

(True/False)

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Question 64

Macomb Corporation is a U.S. firm that invoices some of its exports in Japanese yen. If it expects the yen to weaken, it could ____ to hedge the exchange rate risk on those exports.

(Multiple Choice)

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Question 65

A put option on Swiss franc has a strike (exercise) price of $.92. The present exchange rate is $.89. This put option can be referred to as:

(Multiple Choice)

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Question 66

An option writer is the seller of a call or a put option.

(True/False)

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Question 67

Which of the following does not represent the risk from using forward contracts?

(Multiple Choice)

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Question 68

If the spot rate of the British pound is $1.50, and the one-year forward rate has a discount of 3 percent, the one-year forward rate is $____.

(Multiple Choice)

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Question 69

Thornton, Inc. needs to invest five million Nepalese rupees in its Nepalese subsidiary to support local operations. Thornton would like its subsidiary to repay the rupees in one year. Thornton would like to engage in a swap transaction. Thus, Thornton would:

(Multiple Choice)

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Question 70

When you own , there is no obligation on your part; however, when you own , there is an obligation on your part.

(Multiple Choice)

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Question 71

Currency call options allow the purchaser to lock in the price paid for a currency. Therefore, they are often used by MNCs to hedge foreign currency payables.

(True/False)

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Question 72

If you purchase a straddle on euros, this implies that you:

(Multiple Choice)

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Question 73

The one-year forward rate of the Japanese yen is quoted at $.013, and the spot rate of Japanese yen is quoted at $.011. The forward is percent.

(Multiple Choice)

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Question 74

If you have a position where you might be obligated to sell pounds, you are:

(Multiple Choice)

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Question 75

Non-deliverable forward contracts (NDFs) are frequently used for currencies in emerging markets.

(True/False)

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Question 76

Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of €200,000 in three months. On June 1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, Graylon negotiated a forward contract with a bank to sell €200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. Graylon will receive $____ for the euros.

(Multiple Choice)

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Question 77

A forward rate for a currency is said to exhibit a discount if

(Multiple Choice)

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Question 78

You are a speculator who sells a put option on Canadian dollars for a premium of $.03 per unit, with an exercise price of $.86. The option will not be exercised until the expiration date, if at all. If the spot rate of the Canadian dollar is $.78 on the expiration date, your net profit per unit is:

(Multiple Choice)

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Question 79

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 equal.

(Multiple Choice)

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Question 80

Showing 61 - 80 of 163

A firm sells a currency futures contract, and then decides before the settlement date that it no longer wants to maintain such a position. It can close out its position by:

Currency futures can be used by MNCs to hedge payables. That is, an MNC would futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would futures.

A straddle can only be achieved if the exercise prices of put and call options are the same.

There are no transactions costs associated with trading futures or options.

Macomb Corporation is a U.S. firm that invoices some of its exports in Japanese yen. If it expects the yen to weaken, it could ____ to hedge the exchange rate risk on those exports.

A put option on Swiss franc has a strike (exercise) price of $.92. The present exchange rate is $.89. This put option can be referred to as:

An option writer is the seller of a call or a put option.

Which of the following does not represent the risk from using forward contracts?

If the spot rate of the British pound is $1.50, and the one-year forward rate has a discount of 3 percent, the one-year forward rate is $____.

Thornton, Inc. needs to invest five million Nepalese rupees in its Nepalese subsidiary to support local operations. Thornton would like its subsidiary to repay the rupees in one year. Thornton would like to engage in a swap transaction. Thus, Thornton would:

When you own , there is no obligation on your part; however, when you own , there is an obligation on your part.

Currency call options allow the purchaser to lock in the price paid for a currency. Therefore, they are often used by MNCs to hedge foreign currency payables.

If you purchase a straddle on euros, this implies that you:

The one-year forward rate of the Japanese yen is quoted at $.013, and the spot rate of Japanese yen is quoted at $.011. The forward is percent.

If you have a position where you might be obligated to sell pounds, you are:

Non-deliverable forward contracts (NDFs) are frequently used for currencies in emerging markets.

A forward rate for a currency is said to exhibit a discount if

You are a speculator who sells a put option on Canadian dollars for a premium of $.03 per unit, with an exercise price of $.86. The option will not be exercised until the expiration date, if at all. If the spot rate of the Canadian dollar is $.78 on the expiration date, your net profit per unit is:

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 equal.

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

Filters

Exam 5: Currency Derivatives

A firm sells a currency futures contract, and then decides before the settlement date that it no longer wants to maintain such a position. It can close out its position by:

Currency futures can be used by MNCs to hedge payables. That is, an MNC would ____ futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would ____ futures.

A straddle can only be achieved if the exercise prices of put and call options are the same.

There are no transactions costs associated with trading futures or options.

Macomb Corporation is a U.S. firm that invoices some of its exports in Japanese yen. If it expects the yen to weaken, it could ____ to hedge the exchange rate risk on those exports.

A put option on Swiss franc has a strike (exercise) price of $.92. The present exchange rate is $.89. This put option can be referred to as:

An option writer is the seller of a call or a put option.

Which of the following does not represent the risk from using forward contracts?

If the spot rate of the British pound is $1.50, and the one-year forward rate has a discount of 3 percent, the one-year forward rate is $____.

Thornton, Inc. needs to invest five million Nepalese rupees in its Nepalese subsidiary to support local operations. Thornton would like its subsidiary to repay the rupees in one year. Thornton would like to engage in a swap transaction. Thus, Thornton would:

When you own ____, there is no obligation on your part; however, when you own ____, there is an obligation on your part.

Currency call options allow the purchaser to lock in the price paid for a currency. Therefore, they are often used by MNCs to hedge foreign currency payables.

If you purchase a straddle on euros, this implies that you:

The one-year forward rate of the Japanese yen is quoted at $.013, and the spot rate of Japanese yen is quoted at $.011. The forward ____ is ____ percent.

If you have a position where you might be obligated to sell pounds, you are:

Non-deliverable forward contracts (NDFs) are frequently used for currencies in emerging markets.

A forward rate for a currency is said to exhibit a discount if

You are a speculator who sells a put option on Canadian dollars for a premium of $.03 per unit, with an exercise price of $.86. The option will not be exercised until the expiration date, if at all. If the spot rate of the Canadian dollar is $.78 on the expiration date, your net profit per unit is:

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 equal.

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

Filters

Currency futures can be used by MNCs to hedge payables. That is, an MNC would futures to hedge a foreign payable position. Also, currency futures can be used for speculation. For example, a speculator expecting a currency to appreciate would futures.

When you own , there is no obligation on your part; however, when you own , there is an obligation on your part.

The one-year forward rate of the Japanese yen is quoted at $.013, and the spot rate of Japanese yen is quoted at $.011. The forward is percent.

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 equal.