Reference no: EM13517209
1.An expected receipt of British pounds in ninety days can be fully hedged:
(a)with a ninety-day forward contract to buy pounds.
(b)with a ninety-day forward contract to sell pounds.
(c)with a thirty-day contract to buy pounds.
(d)with a thirty-day contract to sell pounds.
2.If a company uses a forward contract to fully hedge a required payment of yen in ninety days:
(a)changes in the dollar price of yen will have no effect on the net (hedged) dollar value of the yen payment.
(b)the net dollar value of the payment will fall if the yen depreciates.
(c)the net dollar value of the payment will rise if the yen depreciates.
(d)the net dollar value of the payment will change by less than the change in the dollar price of yen.
3.A risk management product which is similar to a cylinder is:
(a)a free range call.
(b)a range-forward contract.
(c)a written swap.
(d)a range-backward contract.
4.A corporate treasurer could set a cap and a floor on the interest rate for a future loan by:
(a)buying an interest-rate put option and then writing an interest-rate call option.
(b)writing an interest-rate put option and then buying an interest-rate call option.
(c)buying an interest-rate call option and then writing an interest-rate put option.
(d)writing an interest-rate call option and then buying an interest-rate call option.
5.A bank could set a cap and a floor on its funding cost (cost of bank deposits) by:
(a)buying an interest-rate put option and then writing an interest-rate call option.
(b)writing an interest-rate put option and then buying an interest-rate call option.
(c)buying an interest-rate call option and then writing an interest-rate put option.
(d)writing an interest-rate call option and then buying an interest-rate call option.
6.A bank could set a cap and a floor on the interest rate it receives from a commercial loan by:
(a)buying an interest-rate put option and then writing an interest-rate call option.
(b)writing an interest-rate put option and then buying an interest-rate call option.
(c)buying an interest-rate call option and then writing an interest-rate put option.
(d)writing an interest-rate call option and then buying an interest-rate call option.
7.A corporate treasurer could convert a floating-rate loan to a synthetic fixed-rate loan by:
(a)buying interest rate futures.
(b)selling interest rate futures.
(c)writing interest-rate call options.
(d)writing interest-rate put options.
8.If interest rates are expected to rise:
(a)the December 1994 three-month Eurodollar futures contract will sell for more than the June 1994 three-month Eurdollar futures contract.
(b)the December 1994 three-month Eurodollar futures contract will sell for less than the June 1994 three-month Eurodollar futures contract.
(c)the December 1994 three-month Eurodollar futures contract will sell for the same price as the June 1994 three-month Eurodollar futures contract.
(d)the yield on the December 1994 futures contract will be less than the yield on the June 1994 futures contract.
9.A synthetic loan constructed with interest-rate options:
(a)will be less expensive than one constructed with FRAs.
(b)will be less expensive than one constructed with interest-rate futures contracts.
(c)will be more expensive than one constructed with interest-rate futures contracts.
(d)will be the same price as one constructed with interest-rate futures contracts.
10.The cost of setting an interest rate cap on borrowing costs can be:
(a)reduced by writing interest-rate put options.
(b)reduced by writing interest-rate call options.
(c)reduced by buying interest-rate call options.
(d)reduced by buying foreign-currency options.