Question 1

Which of the following instruments has the highest turnover?

Accepted Answer

A)  AUD swap foreign exchange. 
B)  Currency options (with AUD leg). 
C)  Currency options (with no AUD leg). 
D)  AUD forward foreign exchange. 
A)  AUD swap foreign exchange. 
B)  Currency options (with AUD leg). 
C)  Currency options (with no AUD leg). 
D)  AUD forward foreign exchange. A

Question 2

is a situation in which a business undertakes offsetting transactions in a foreign currency so that there is no net foreign exchange exposure.

Accepted Answer

A)  A partial hedge 
B)  A natural hedge 
C)  A super hedge 
D)  A currency swap 
A)  A partial hedge 
B)  A natural hedge 
C)  A super hedge 
D)  A currency swap B

Question 3

Over the life of the swap, the three counterparties exchange interest.

Accepted Answer

A) True 
 B)False  False

Question 4

The active management approach is attractive to those who believe that corporate risk management does not add value to a business.

Accepted Answer

A) True 
 B)False

Question 5

As long as there is a positive relationship between gold prices and the USD, a portfolio combining both gold and US dollars would have a value which is more stable than the prices of either of the constituent assets.

Accepted Answer

A) True 
 B)False

Question 6

Corporations do not depend on natural hedges.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an example of transaction exposure?

Accepted Answer

A)  Income from overseas subsidiaries. 
B)  Export income denominated in foreign currencies. 
C)  An importer's payments for goods and services. 
D)  All of the above. 
A)  Income from overseas subsidiaries. 
B)  Export income denominated in foreign currencies. 
C)  An importer's payments for goods and services. 
D)  All of the above.

Question 8

In the construction of a range forward:

Accepted Answer

A)  one will have to use put options only. 
B)  one will have to use call options only. 
C)  the exercise price does not matter. 
D)  it is possible to come up with a zero- cost hedging tool. 
A)  one will have to use put options only. 
B)  one will have to use call options only. 
C)  the exercise price does not matter. 
D)  it is possible to come up with a zero- cost hedging tool.

Question 9

Options are analogous to life or fire insurance and, in those cases, it is clearly desirable that the premium be 'wasted'.

Accepted Answer

A) True 
 B)False

Question 10

The corporate treasurer is judged against the spot rate ruling at the time the export receipts come in.

Accepted Answer

A) True 
 B)False

Question 11

A call on the AUD against the USD is the same as a___________ on the USD against the AUD.

Accepted Answer

A)  put option 
B)  call option 
C)  forward AUD 
D)  collar 
A)  put option 
B)  call option 
C)  forward AUD 
D)  collar

Question 12

The corporate treasurer cannot be judged against the forward rate for settlement on the day that the export receipts come in.

Accepted Answer

A) True 
 B)False

Question 13

In a foreign currency loan, a ___________of the Australian Dollar (AUD) will ___________the AUD value of the outstanding principal.

Accepted Answer

A)  depreciation; increase 
B)  depreciation; decrease 
C)  depreciation; will not change 
D)  none of the above 
A)  depreciation; increase 
B)  depreciation; decrease 
C)  depreciation; will not change 
D)  none of the above

Question 14

A call on the AUD will be a useful hedging instrument for anyone receiving foreign currency and desiring to purchase Australian dollars. Importers and offshore borrowers are typical users.

Accepted Answer

A) True 
 B)False

Question 15

When there is a close, but not perfect, correlation between the values of the offsetting assets and liabilities, the process of hedging is known as :

Accepted Answer

A)  close hedging. 
B)  cross- hedging. 
C)  autocorrelation. 
D)  serial hedging. 
A)  close hedging. 
B)  cross- hedging. 
C)  autocorrelation. 
D)  serial hedging.

Question 16

When the use of financial instruments decreases the uncertainty of cash flows, they are being used for speculation.

Accepted Answer

A) True 
 B)False

Question 17

A variation of the 'covering everything' approach is to cover a fixed proportion of exposures (e.g. 50%) at all times.

Accepted Answer

A) True 
 B)False

Question 18

One problem with options is the high premium cost usually involved.

Accepted Answer

A) True 
 B)False

Question 19

Australian businesses have a low degree of involvement in international trade and international financial transactions.

Accepted Answer

A) True 
 B)False

Question 20

Foreign exchange exposures can be managed by:

Accepted Answer

A)  passive risk- management techniques. 
B)  selective hedging. 
C)  active risk- management techniques. 
D)  all of the above. 
A)  passive risk- management techniques. 
B)  selective hedging. 
C)  active risk- management techniques. 
D)  all of the above.

Which of the following instruments has the highest turnover?

is a situation in which a business undertakes offsetting transactions in a foreign currency so that there is no net foreign exchange exposure.

Over the life of the swap, the three counterparties exchange interest.

The active management approach is attractive to those who believe that corporate risk management does not add value to a business.

As long as there is a positive relationship between gold prices and the USD, a portfolio combining both gold and US dollars would have a value which is more stable than the prices of either of the constituent assets.

Corporations do not depend on natural hedges.

Which of the following is an example of transaction exposure?

In the construction of a range forward:

Options are analogous to life or fire insurance and, in those cases, it is clearly desirable that the premium be 'wasted'.

The corporate treasurer is judged against the spot rate ruling at the time the export receipts come in.

A call on the AUD against the USD is the same as a___________ on the USD against the AUD.

The corporate treasurer cannot be judged against the forward rate for settlement on the day that the export receipts come in.

In a foreign currency loan, a _of the Australian Dollar (AUD) will _the AUD value of the outstanding principal.

A call on the AUD will be a useful hedging instrument for anyone receiving foreign currency and desiring to purchase Australian dollars. Importers and offshore borrowers are typical users.

When there is a close, but not perfect, correlation between the values of the offsetting assets and liabilities, the process of hedging is known as :

When the use of financial instruments decreases the uncertainty of cash flows, they are being used for speculation.

A variation of the 'covering everything' approach is to cover a fixed proportion of exposures (e.g. 50%) at all times.

One problem with options is the high premium cost usually involved.

Australian businesses have a low degree of involvement in international trade and international financial transactions.

Foreign exchange exposures can be managed by:

Financial Markets

Debt Securities and Markets

Introduction to Financial Calculations

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

Interest Rates, the Yield Curve and Monetary Policy

The Foreign Exchange Market

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Interest Rate Risk

Filters

Exam 13: Managing Foreign Exchange Risk

Which of the following instruments has the highest turnover?

is a situation in which a business undertakes offsetting transactions in a foreign currency so that there is no net foreign exchange exposure.

Over the life of the swap, the three counterparties exchange interest.

The active management approach is attractive to those who believe that corporate risk management does not add value to a business.

As long as there is a positive relationship between gold prices and the USD, a portfolio combining both gold and US dollars would have a value which is more stable than the prices of either of the constituent assets.

Corporations do not depend on natural hedges.

Which of the following is an example of transaction exposure?

In the construction of a range forward:

Options are analogous to life or fire insurance and, in those cases, it is clearly desirable that the premium be 'wasted'.

The corporate treasurer is judged against the spot rate ruling at the time the export receipts come in.

A call on the AUD against the USD is the same as a___________ on the USD against the AUD.

The corporate treasurer cannot be judged against the forward rate for settlement on the day that the export receipts come in.

In a foreign currency loan, a ___________of the Australian Dollar (AUD) will ___________the AUD value of the outstanding principal.

A call on the AUD will be a useful hedging instrument for anyone receiving foreign currency and desiring to purchase Australian dollars. Importers and offshore borrowers are typical users.

When there is a close, but not perfect, correlation between the values of the offsetting assets and liabilities, the process of hedging is known as :

When the use of financial instruments decreases the uncertainty of cash flows, they are being used for speculation.

A variation of the 'covering everything' approach is to cover a fixed proportion of exposures (e.g. 50%) at all times.

One problem with options is the high premium cost usually involved.

Australian businesses have a low degree of involvement in international trade and international financial transactions.

Foreign exchange exposures can be managed by:

Financial Markets

Debt Securities and Markets

Introduction to Financial Calculations

Banks and Other Deposit Taking Institutions

The Payments System

Managed and Superannuation Funds

Interest Rates, the Yield Curve and Monetary Policy

The Foreign Exchange Market

Listed Securities

Fixed Rate Derivatives

Options

Global Financial Crisis

Managing Interest Rate Risk

Filters

In a foreign currency loan, a _of the Australian Dollar (AUD) will _the AUD value of the outstanding principal.