Exam 7: Foreign Currency Derivatives: Futures and Options

TABLE 7.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. What was the closing price of the British pound on April 18, 2009?

(Multiple Choice)

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Question 21

Volatility is viewed the following ways EXCEPT:

(Multiple Choice)

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Question 22

An option whose exercise price is equal to the spot rate is said to be:

(Multiple Choice)

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Question 23

Which of the following statements is NOT true about currency option pricing sensitivities?

(Multiple Choice)

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Question 24

A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option?

(Multiple Choice)

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Question 25

The primary problem with volatility is that it is unobservable; it is the only input into the option pricing formula that is determined subjectively by the trader pricing the option.

(True/False)

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Question 26

Which of the following is NOT true for the writer of a put option?

(Multiple Choice)

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Question 27

TABLE 7.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. The exercise price of giving the purchaser the right to sell pounds in June has a cost per pound of for a total price of .

(Multiple Choice)

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Question 28

If the exchange rate's volatility is rising, and therefore the risk of the option not being exercised is decreasing, the option premium would be increasing.

(True/False)

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Question 29

A/An option can be exercised only on its expiration date, whereas a/an option can be exercised anytime between the date of writing up to and including the exercise date.

(Multiple Choice)

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Question 30

The higher the delta the greater the probability of the option expiring in-the-money.

(True/False)

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Question 31

The price at which an option can be exercised is called the:

(Multiple Choice)

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Question 32

Traders who believe volatilities will fall significantly in the near-term will:

(Multiple Choice)

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Question 33

Jack Hemmings bought a 3-month British pound futures contract for $1.4400/£ only to see the dollar appreciate to a value of $1.4250 at which time he sold the pound futures. If each pound futures contract is for an amount of £62,500, how much money did Jack gain or lose from his speculation with pound futures?

(Multiple Choice)

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Question 34

A put option on yen is written with a strike price of ¥105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity?

(Multiple Choice)

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Question 35

A trader who is purchasing a call option on foreign currency should do so before the domestic interest rate rises.

(True/False)

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Question 36

Which of the following is NOT a difference between a currency futures contract and a forward contract?

(Multiple Choice)

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Question 37

Option premiums deteriorate at a/an ________ as they approach expiration.

(Multiple Choice)

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Question 38

The main advantage(s) of over-the-counter foreign currency options over exchange traded options is (are):

(Multiple Choice)

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Question 39

A call option whose exercise price exceeds the spot price is said to be:

(Multiple Choice)

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Question 40

Showing 21 - 40 of 88

TABLE 7.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. What was the closing price of the British pound on April 18, 2009?

Volatility is viewed the following ways EXCEPT:

An option whose exercise price is equal to the spot rate is said to be:

Which of the following statements is NOT true about currency option pricing sensitivities?

A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option?

The primary problem with volatility is that it is unobservable; it is the only input into the option pricing formula that is determined subjectively by the trader pricing the option.

Which of the following is NOT true for the writer of a put option?

TABLE 7.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. The exercise price of giving the purchaser the right to sell pounds in June has a cost per pound of for a total price of .

If the exchange rate's volatility is rising, and therefore the risk of the option not being exercised is decreasing, the option premium would be increasing.

A/An option can be exercised only on its expiration date, whereas a/an option can be exercised anytime between the date of writing up to and including the exercise date.

The higher the delta the greater the probability of the option expiring in-the-money.

The price at which an option can be exercised is called the:

Traders who believe volatilities will fall significantly in the near-term will:

A put option on yen is written with a strike price of ¥105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity?

A trader who is purchasing a call option on foreign currency should do so before the domestic interest rate rises.

Which of the following is NOT a difference between a currency futures contract and a forward contract?

Option premiums deteriorate at a/an ________ as they approach expiration.

The main advantage(s) of over-the-counter foreign currency options over exchange traded options is (are):

A call option whose exercise price exceeds the spot price is said to be:

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 7: Foreign Currency Derivatives: Futures and Options

TABLE 7.1 Use the table to answer following question(s). April 19, 2009, British Pound Option Prices (cents per pound, 62,500 pound contracts). -Refer to Table 7.1. What was the closing price of the British pound on April 18, 2009?

Volatility is viewed the following ways EXCEPT:

An option whose exercise price is equal to the spot rate is said to be:

Which of the following statements is NOT true about currency option pricing sensitivities?

A call option on UK pounds has a strike price of $2.05/£ and a cost of $0.02. What is the break-even price for the option?

The primary problem with volatility is that it is unobservable; it is the only input into the option pricing formula that is determined subjectively by the trader pricing the option.

Which of the following is NOT true for the writer of a put option?

If the exchange rate's volatility is rising, and therefore the risk of the option not being exercised is decreasing, the option premium would be increasing.

A/An ________ option can be exercised only on its expiration date, whereas a/an ________ option can be exercised anytime between the date of writing up to and including the exercise date.

The higher the delta the greater the probability of the option expiring in-the-money.

The price at which an option can be exercised is called the:

Traders who believe volatilities will fall significantly in the near-term will:

A put option on yen is written with a strike price of ¥105.00/$. Which spot price maximizes your profit if you choose to exercise the option before maturity?

A trader who is purchasing a call option on foreign currency should do so before the domestic interest rate rises.

Which of the following is NOT a difference between a currency futures contract and a forward contract?

Option premiums deteriorate at a/an ________ as they approach expiration.

The main advantage(s) of over-the-counter foreign currency options over exchange traded options is (are):

A call option whose exercise price exceeds the spot price is said to be:

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

A/An option can be exercised only on its expiration date, whereas a/an option can be exercised anytime between the date of writing up to and including the exercise date.