Why are the bid-ask spreads larger in the forward market than in the spot market? A) because the forward market is less liquid than the spot market B) because the spot market is more volatile than the forward market C) because the forward market is more liquid than the spot market D) because the spot […]
Date: September 19th, 2020
If the euro is selling at a premium relative to the USD in the forward market, is the forward price of USD /EUR larger or smaller than the spot price of the USD /EUR? A) larger B) smaller C) indeterminate D) the same ANSWER Answer: A
Date: September 19th, 2020
________ is the price of one country’s money quoted in terms of another country’s money. A) Arbitrage B) PPP C) Exchange rate D) Direct rate E) LIBOR ANSWER C
Date: September 19th, 2020
What is the name of the action that uses derivative securities to reduce risks arising from underlying business transactions in financial markets? A) forward contracts B) hedging C) forward rates D) speculating ANSWER Answer: B
Date: September 19th, 2020
If the British pound is selling at a premium relative to the euro in the forward market, is the forward price of EUR/₤ larger or smaller than the spot price of EUR/₤? What will be an ideal response? ANSWER Answer: When the pound is selling at a premium in the forward market, the […]
Date: September 19th, 2020
Using financial information to aid in decision making is called A) “what-if” analysis. B) factor analysis. C) financial analysis. D) quantitative analysis. E) managerial economics. ANSWER C
Date: September 19th, 2020
The U.S. dollar equivalent of one unit of a foreign currency is called the A) base rate. B) counter rate. C) indirect rate. D) direct rate. E) spot rate. ANSWER D
Date: September 19th, 2020
When does delivery occur on a 90-day forward contract? A) in 90 days corresponding to two business days preceding the third Wednesday of the month B) immediately but the contract is not closed for 90 more days C) in 90 days corresponding to the calendar date of the spot value date D) two business days […]
Date: September 19th, 2020
One of the major reasons for the existence of the forward market is to ________. A) provide a location for all currency traders to assemble and trade B) manage currency risk especially risk associated with a transaction C) hedge transactions involving foreign currency that occurred in the past D) prevent default in the transaction […]
Date: September 19th, 2020
Initek Co’s stock trades for $12.50. Initek has too much cash. The CEO, Bill Lumberg, wants to distribute the excess cash with an open market stock repurchase. He is contemplating buying back $5.45M worth of shares at a price of $12.50. Initek is an all equity company with 20M shares outstanding. Pete Gibb owns 2 […]
Date: September 19th, 2020
