Question 1

As an option moves further out-of-the-money,delta moves toward ______.

Accepted Answer

A)  1 
B)  0 
C)  -1 
D)  large negative numbers 
A)  1 
B)  0 
C)  -1 
D)  large negative numbers

Question 2

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

Accepted Answer

A)  premium. 
B)  spot rate. 
C)  strike price. 
D)  commission. 
A)  premium. 
B)  spot rate. 
C)  strike price. 
D)  commission.

Question 3

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

Accepted Answer

A)  in-the-money. 
B)  at-the-money. 
C)  out-of-the-money. 
D)  under-the-spot. 
A)  in-the-money. 
B)  at-the-money. 
C)  out-of-the-money. 
D)  under-the-spot.

Question 4

The time value is asymmetric in value as you move away from the strike price (i.e.,the time value at two cents above the strike price is not necessarily the same as the time value two cents below the strike price).

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  The maximum loss is limited to the strike price of the underlying asset less the premium. 
B)  The gain or loss is equal to but of the opposite sign of the buyer of a put option. 
C)  The maximum gain is the amount of the premium. 
D)  All of the above are true. 
A)  The maximum loss is limited to the strike price of the underlying asset less the premium. 
B)  The gain or loss is equal to but of the opposite sign of the buyer of a put option. 
C)  The maximum gain is the amount of the premium. 
D)  All of the above are true.

Question 6

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.

Accepted Answer

A)  American; European 
B)  American; British 
C)  Asian; American 
D)  European; American 
A)  American; European 
B)  American; British 
C)  Asian; American 
D)  European; American

Question 7

The value of any option that is currently in-the-money (ITM)is made up entirely of time value.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  The futures contract is marked to market daily, whereas the forward contract is only due to be settled at maturity. 
B)  The counterparty to the futures participant is unknown with the clearinghouse stepping into each transaction, whereas the forward contract participants are in direct contact setting the forward specifications. 
C)  A single sales commission covers both the purchase and sale of a futures contract, whereas there is no specific sales commission with a forward contract because banks earn a profit through the bid-ask spread. 
D)  All of the above are true. 
A)  The futures contract is marked to market daily, whereas the forward contract is only due to be settled at maturity. 
B)  The counterparty to the futures participant is unknown with the clearinghouse stepping into each transaction, whereas the forward contract participants are in direct contact setting the forward specifications. 
C)  A single sales commission covers both the purchase and sale of a futures contract, whereas there is no specific sales commission with a forward contract because banks earn a profit through the bid-ask spread. 
D)  All of the above are true.

As an option moves further out-of-the-money,delta moves toward ______.

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

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

The time value is asymmetric in value as you move away from the strike price (i.e.,the time value at two cents above the strike price is not necessarily the same as the time value two cents below the strike price).

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

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 value of any option that is currently in-the-money (ITM)is made up entirely of time value.

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

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

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

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

As an option moves further out-of-the-money,delta moves toward ______.

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

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

The time value is asymmetric in value as you move away from the strike price (i.e.,the time value at two cents above the strike price is not necessarily the same as the time value two cents below the strike price).

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

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 value of any option that is currently in-the-money (ITM)is made up entirely of time value.

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

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

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

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.