Exam 5: Currency Derivatives

The existing spot rate of the Canadian dollar is $.82. The premium on a Canadian dollar call option is $.04. The exercise price is $.81. The option will be exercised on the expiration date if at all. If the spot rate on the expiration date is $.87, the profit as a percent of the initial investment (the premium paid) is:

(Multiple Choice)

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Question 41

A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally?

(Multiple Choice)

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Question 42

Hedgers should buy calls if they are hedging an expected outflow of foreign currency.

(True/False)

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Question 43

Which of the following is not true regarding options?

(Multiple Choice)

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Question 44

The annualized forward premium on the euro is 7%. What is the 90-day forward rate on the euro if the spot rate today is $1.25?

(Multiple Choice)

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Question 45

The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.

(True/False)

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Question 46

If the forward rate for a currency is less than the spot rate for that currency, the forward rate is said to exhibit a premium.

(True/False)

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Question 47

Forward contracts are usually negotiated with a commercial bank, while futures contracts are traded on an organized exchange.

(True/False)

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Question 48

The premium of a currency put option will increase if:

(Multiple Choice)

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Question 49

A currency put option is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

(True/False)

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Question 50

Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will:

(Multiple Choice)

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Question 51

If the futures rate is above the forward rate, actions by rational investors would put upward pressure on the forward rate and downward pressure on the futures rate.

(True/False)

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Question 52

Assume that a currency's spot and future prices are the same, and the currency's interest rate is higher than the U.S. rate. The actions of U.S. investors to lock in this higher foreign return would the currency's spot rate and the currency's futures price.

(Multiple Choice)

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Question 53

The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.

(True/False)

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Question 54

The the existing spot price relative to the strike price, the valuable the put options will be.

(Multiple Choice)

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Question 55

Futures and options are available for crossrates.

(True/False)

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Question 56

American style options can be exercised any time up to maturity.

(True/False)

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Question 57

Currency options are commonly traded through the ____ system.

(Multiple Choice)

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Question 58

Assume the spot rate of a currency is $.37 and the 90-day forward rate is $.36. The forward rate of this currency exhibits a of on an annualized basis.

(Multiple Choice)

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Question 59

Which of the following are most commonly traded on an exchange?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 163

A U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally?

Hedgers should buy calls if they are hedging an expected outflow of foreign currency.

Which of the following is not true regarding options?

The annualized forward premium on the euro is 7%. What is the 90-day forward rate on the euro if the spot rate today is $1.25?

The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.

If the forward rate for a currency is less than the spot rate for that currency, the forward rate is said to exhibit a premium.

Forward contracts are usually negotiated with a commercial bank, while futures contracts are traded on an organized exchange.

The premium of a currency put option will increase if:

A currency put option is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will:

If the futures rate is above the forward rate, actions by rational investors would put upward pressure on the forward rate and downward pressure on the futures rate.

Assume that a currency's spot and future prices are the same, and the currency's interest rate is higher than the U.S. rate. The actions of U.S. investors to lock in this higher foreign return would the currency's spot rate and the currency's futures price.

The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.

The the existing spot price relative to the strike price, the valuable the put options will be.

Futures and options are available for crossrates.

American style options can be exercised any time up to maturity.

Currency options are commonly traded through the ____ system.

Assume the spot rate of a currency is $.37 and the 90-day forward rate is $.36. The forward rate of this currency exhibits a of on an annualized basis.

Which of the following are most commonly traded on an exchange?

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 U.S. corporation has purchased currency put options to hedge a 100,000 Canadian dollar (C$) receivable. The premium is $.01 and the exercise price of the option is $.75. If the spot rate at the time of maturity is $.85, what is the net amount received by the corporation if it acts rationally?

Hedgers should buy calls if they are hedging an expected outflow of foreign currency.

Which of the following is not true regarding options?

The annualized forward premium on the euro is 7%. What is the 90-day forward rate on the euro if the spot rate today is $1.25?

The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.

If the forward rate for a currency is less than the spot rate for that currency, the forward rate is said to exhibit a premium.

Forward contracts are usually negotiated with a commercial bank, while futures contracts are traded on an organized exchange.

The premium of a currency put option will increase if:

A currency put option is a contract specifying a standard volume of a particular currency to be exchanged on a specific settlement date.

Assume no transactions costs exist for any futures or forward contracts. The price of British pound futures with a settlement date 180 days from now will:

If the futures rate is above the forward rate, actions by rational investors would put upward pressure on the forward rate and downward pressure on the futures rate.

Assume that a currency's spot and future prices are the same, and the currency's interest rate is higher than the U.S. rate. The actions of U.S. investors to lock in this higher foreign return would ____ the currency's spot rate and ____ the currency's futures price.

The lower bound of the call option premium is the greater of zero and the difference between the spot rate and the exercise price; the upper bound of a currency call option is the spot rate.

The ____ the existing spot price relative to the strike price, the ____ valuable the put options will be.

Futures and options are available for crossrates.

American style options can be exercised any time up to maturity.

Currency options are commonly traded through the ____ system.

Assume the spot rate of a currency is $.37 and the 90-day forward rate is $.36. The forward rate of this currency exhibits a ____ of ____ on an annualized basis.

Which of the following are most commonly traded on an exchange?

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

Assume that a currency's spot and future prices are the same, and the currency's interest rate is higher than the U.S. rate. The actions of U.S. investors to lock in this higher foreign return would the currency's spot rate and the currency's futures price.

The the existing spot price relative to the strike price, the valuable the put options will be.

Assume the spot rate of a currency is $.37 and the 90-day forward rate is $.36. The forward rate of this currency exhibits a of on an annualized basis.