Question 1

Why is a currency put or call not profitable to exercise when it is "at the money"?

Accepted Answer

A)  because the spot equals the price but the premium is not recovered if it is exercised resulting in a loss 
B)  When an option is "at the money," the Exchange will charge a higher fee. 
C)  When it is "at the money," the Exchange shuts down trading of the option contract. 
D)  The Exchange will use mark to market accounting to record a loss. 
A)  because the spot equals the price but the premium is not recovered if it is exercised resulting in a loss 
B)  When an option is "at the money," the Exchange will charge a higher fee. 
C)  When it is "at the money," the Exchange shuts down trading of the option contract. 
D)  The Exchange will use mark to market accounting to record a loss.

Question 2

An option that can be exercised only at maturity is known as a(n)________.

Accepted Answer

A)  American option 
B)  European option 
C)  currency warrant 
D)  call option 
A)  American option 
B)  European option 
C)  currency warrant 
D)  call option

Question 3

When a futures contract is purchased,________.

Accepted Answer

A)  no money changes hands 
B)  the only cash flow is at the maturity of the contract 
C)  the buyer must deposit a certain amount of cash into a margin account 
D)  the futures commission merchant marks up the price to cover his commission 
A)  no money changes hands 
B)  the only cash flow is at the maturity of the contract 
C)  the buyer must deposit a certain amount of cash into a margin account 
D)  the futures commission merchant marks up the price to cover his commission

Question 4

Why do options provide insurance against foreign exchange risks in bidding situations? Why can't you hedge with a forward contract in a bidding situation?

Accepted Answer

Let's assume the bidding situation invol

Question 5

The ________ is the primary location in the United States to trade currency options.

Accepted Answer

A)  Philadelphia Stock Exchange 
B)  Chicago Board of Trade 
C)  Chicago Mercantile Exchange 
D)  New York Stock Exchange 
A)  Philadelphia Stock Exchange 
B)  Chicago Board of Trade 
C)  Chicago Mercantile Exchange 
D)  New York Stock Exchange

Question 6

What are you buying if you purchase a U.S.dollar European put option against the Mexican peso with a strike price of MXN10.0/$ and a maturity of July? (Assume that it is May and the spot rate is MXN10.5/$.)

Accepted Answer

A European put option gives you the righ

Question 7

The hedging contract that gives the buyer the right,but not the obligation,to sell a specific amount of foreign currency with domestic currency is known as the ________.

Accepted Answer

A)  call option 
B)  put option 
C)  American option 
D)  European option 
A)  call option 
B)  put option 
C)  American option 
D)  European option

Question 8

Which one of the following is an advantage to the investor of a currency futures contract as compared to a forward contract?

Accepted Answer

A)  more flexibility in contract size 
B)  more liquidity when the investor wishes to sell the contract 
C)  more currencies available 
D)  more payment dates 
A)  more flexibility in contract size 
B)  more liquidity when the investor wishes to sell the contract 
C)  more currencies available 
D)  more payment dates

Question 9

Which one of the following practices in the futures markets adds greater stability to the market?

Accepted Answer

A)  credit checks 
B)  the initial margin 
C)  marking to market 
D)  the right but not the requirement to perform the contract 
A)  credit checks 
B)  the initial margin 
C)  marking to market 
D)  the right but not the requirement to perform the contract

Question 10

What is the name of the total number of contracts outstanding for a particular derivative contract?

Accepted Answer

A)  a long position 
B)  open interest 
C)  settle amount 
D)  open settlement 
A)  a long position 
B)  open interest 
C)  settle amount 
D)  open settlement

Question 11

The last traded futures price in which case appointed traders in the pit establish the value of the futures price by consensus is know as the

Accepted Answer

A)  settle price. 
B)  maintenance margin. 
C)  open interest. 
D)  initial margin. 
A)  settle price. 
B)  maintenance margin. 
C)  open interest. 
D)  initial margin.

Question 12

Suppose that you have a foreign currency receivable (payable).What option strategy places a floor (ceiling)on your domestic currency revenue (cost)?

Accepted Answer

If you have a foreign currency receivabl

Why is a currency put or call not profitable to exercise when it is "at the money"?

An option that can be exercised only at maturity is known as a(n)________.

When a futures contract is purchased,________.

Why do options provide insurance against foreign exchange risks in bidding situations? Why can't you hedge with a forward contract in a bidding situation?

The ________ is the primary location in the United States to trade currency options.

What are you buying if you purchase a U.S.dollar European put option against the Mexican peso with a strike price of MXN10.0/$ and a maturity of July? (Assume that it is May and the spot rate is MXN10.5/$.)

The hedging contract that gives the buyer the right,but not the obligation,to sell a specific amount of foreign currency with domestic currency is known as the ________.

Which one of the following is an advantage to the investor of a currency futures contract as compared to a forward contract?

Which one of the following practices in the futures markets adds greater stability to the market?

What is the name of the total number of contracts outstanding for a particular derivative contract?

The last traded futures price in which case appointed traders in the pit establish the value of the futures price by consensus is know as the

Suppose that you have a foreign currency receivable (payable).What option strategy places a floor (ceiling)on your domestic currency revenue (cost)?

Globalization and the Multinational Corporation

The Foreign Exchange Market

Forward Markets and Transaction Exchange Risk

The Balance of Payments

Exchange Rate Systems

Interest Rate Parity

Speculation and Risk in the Foreign Exchange Market

Purchasing Power Parity and Real Exchange Rates

Measuring and Managing Real Exchange Risk

Exchange Rate Determination and Forecasting

International Debt Financing

International Equity Financing

International Capital Market Equilibrium

Country and Political Risk

International Capital Budgeting

Additional Topics in International Capital Budgeting

Risk Management and the Foreign Currency Hedging Decision

Financing International Trade

Managing Net Working Capital

Interest Rates and Foreign Currency Swaps

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Exam 20: Foreign Currency Futures and Options

Why is a currency put or call not profitable to exercise when it is "at the money"?

An option that can be exercised only at maturity is known as a(n)________.

When a futures contract is purchased,________.

Why do options provide insurance against foreign exchange risks in bidding situations? Why can't you hedge with a forward contract in a bidding situation?

The ________ is the primary location in the United States to trade currency options.

What are you buying if you purchase a U.S.dollar European put option against the Mexican peso with a strike price of MXN10.0/$ and a maturity of July? (Assume that it is May and the spot rate is MXN10.5/$.)

The hedging contract that gives the buyer the right,but not the obligation,to sell a specific amount of foreign currency with domestic currency is known as the ________.

Which one of the following is an advantage to the investor of a currency futures contract as compared to a forward contract?

Which one of the following practices in the futures markets adds greater stability to the market?

What is the name of the total number of contracts outstanding for a particular derivative contract?

The last traded futures price in which case appointed traders in the pit establish the value of the futures price by consensus is know as the

Suppose that you have a foreign currency receivable (payable).What option strategy places a floor (ceiling)on your domestic currency revenue (cost)?

Globalization and the Multinational Corporation

The Foreign Exchange Market

Forward Markets and Transaction Exchange Risk

The Balance of Payments

Exchange Rate Systems

Interest Rate Parity

Speculation and Risk in the Foreign Exchange Market

Purchasing Power Parity and Real Exchange Rates

Measuring and Managing Real Exchange Risk

Exchange Rate Determination and Forecasting

International Debt Financing

International Equity Financing

International Capital Market Equilibrium

Country and Political Risk

International Capital Budgeting

Additional Topics in International Capital Budgeting

Risk Management and the Foreign Currency Hedging Decision

Financing International Trade

Managing Net Working Capital

Interest Rates and Foreign Currency Swaps

Filters