Processing float is the delay between the receipt of a check by a payee and its deposit in firm’s account. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which one of the following would be the most logical reason to use a synthetic forward contract to hedge? A) forward contracts are not available in the currency of choice B) when time horizons are short, forward contracts can be expensive C) the underlying transaction is too risky D) the underlying transaction gives you an […]
Date: September 19th, 2020
Receipts and disbursements management techniques are aimed at minimizing a firm’s financing requirements by taking advantage of certain imperfections in the collection and payment system. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A bond that promises to pay the owner a single payment denominated in euros or pounds is known as a ________ bond. A) debenture B) variable interest rate C) pure discount D) foreign ANSWER Answer: C
Date: September 19th, 2020
The term covered means the investment is ________ transaction foreign exchange risk. A) hedged against B) exposed to C) completely free from D) structured to activate forward contracts that free it from ANSWER Answer: A
Date: September 19th, 2020
The difference between the interest rate that a bank charges on its loans and the interest rate that the banks pay their depositors is known as the A) percent spread. B) arbitrage opportunity. C) bid-ask spread. D) covered interest arbitrage opportunity. ANSWER Answer: C
Date: September 19th, 2020
When parity conditions are not in effect in currency and money markets, traders could make extraordinary profits from a practice known as ________. A) covered interest rate parity B) covered interest rate arbitrage C) triangular arbitrage D) forward market arbitrage ANSWER Answer: B
Date: September 19th, 2020
Which one of the following is NOT a reason for using hedges such as a synthetic forward? A) In some currency markets, forward contracts may not be available, but they can be manufactured using a money market hedge. B) Individual companies are not able to borrow and lend at the interest rates available in the […]
Date: September 19th, 2020
What is the name of the interbank interest rate used in external currency markets that is the most important and used in various cities globally in contractual loan agreements? A) the fed funds rate B) twelfth district interest rate C) LIBOR D) the U.S. prime rate ANSWER Answer: C
Date: September 19th, 2020
When there are no intervening cash flows between the time a deposit is made and the maturity of the deposit, the interest rates are said to be ________. A) discount rate B) compound interest rate C) covered interest rate D) spot interest rates ANSWER Answer: D
Date: September 19th, 2020
