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MCQ Question
Hedgers who are short in an asset can establish the maximum price they will have to pay for that asset by:
- 1. Buying a put option on the asset
- 2. Buying a call option on the asset
- 3. Writing a call option on the asset
- 4. Writing a put option on the asset
- 5. Either the first or fourth answer
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Practice set and Exam Quiz
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MCQ Question
Futures prices are arrived at by:
- 1. bids and offers
- 2. officers and directors of the exchange
- 3. written and sealed bids
- 4. the Board of Trade Clearing Corporation
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MCQ Question
Suppose there is a risk premium of $0.50. The spot price is $20 and the futures price is $22. What is the expected spot price at expiration?
- 1. $21.50
- 2. none are correct
- 3. $24.50
- 4. $22.50
- 5. $20.50
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MCQ Question
Margin in a futures transaction differs from margin in a stock transaction because
- 1. stock transactions are much smaller
- 2. delivery occurs immediately in a stock transaction
- 3. no money is borrowed in a futures transaction
- 4. futures are much more volatile
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Practice set and Exam Quiz
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MCQ Question
Hedging involves:
- 1. taking a futures position opposite to one’s cash market position
- 2. taking a futures position identical to one’s cash market position
- 3. holding only a futures market position
- 4. holding only a cash market position
- (e) none of the above
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MCQ Question
Graylon, Inc., based in Washington, exports products to a German firm and will receive payment of 200,000 in three months. On June1, the spot rate of the euro was $1.12, and the 3-month forward rate was $1.10. On June 1, Graylon negotiated a forward contract with a bank to sell 200,000 forward in three months. The spot rate of the euro on September 1 is $1.15. Graylon will receive $…for the euros.
- 1. 224,000
- 2. 220,000
- 3. 200,000
- 4. 230,000
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MCQ Question
Most futures contracts are closed by
- 1. exercise
- 2. offset
- 3. default
- 4. none are correct
- 5. delivery
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MCQ Question
Find the forward rate of foreign currency Y if the spot rate is $4.50, the domestic interest rate is 6 percent, the foreign interest rate is 7 percent, and the forward contract is for nine months.
- 1. $5.104
- 2. none are correct
- 3. $4.458
- 4. $4.532
- 5. $4.468
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MCQ Question
Forward contracts:
- 1. contain a commitment to the owner, and are standardized
- 2. contain a commitment to the owner, and can be tailored to the desire of the owner
- 3. contain a right but not a commitment to the owner, and can be tailored to the desire of the owner
- 4. contain a right but not a commitment to the owner, and are standardized
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MCQ Question
Gains and losses on futures positions are settled:
- 1. by signing promissory notes
- 2. each day after the close of trading
- 3. within five business days
- 4. directly between the buyer and seller
- (e) none of the above
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MCQ Question
Which of the following contract terms is not set by the futures exchange?
- 1. the price
- 2. the deliverable commodities
- 3. the dates on which delivery can occur
- 4. the size of the contract
- 5. the expiration months
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Practice set and Exam Quiz
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MCQ Question
The existing spot rate of the Canadian dollar is $.82. The premium on a Canadian dollar call option is $.04. The exercise price is $.81. The option will be exercised on the expiration date, if at all. If the spot rate on the expiration date is $.87, the profit as a percent of the initial investment (the premium paid) is:
- 1. 0 percent
- 2. 25 percent
- 3. 50 percent
- 4. 150 percent
- none of the above
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MCQ Question
The price of an S&P 500 Index futures contract is $988.26 when you decide to enter a long position. When the position is closed the futures price is $930.32. If there are no settlement requirements, what is your percentage gain or loss under a 15.0% margin requirement? (Ignore opportunity costs)
- 1. ) 39% gain
- 2. ) 43% loss
- 3. ) 43% gain
- 4. )39% loss
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Practice set and Exam Quiz
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MCQ Question
A U.S. firm is bidding for a project needed by the Swiss government. The firm will not know if the bid is accepted until three months from now. The firm will need Swiss francs to cover expenses but will be paid by the Swiss government in dollars if it is hired for the project. The firm can best insulate itself against exchange rate exposure by:
- 1. selling futures in francs
- 2. buying futures in francs
- 3. buying franc put options
- 4. buying franc call options
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Practice set and Exam Quiz
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MCQ Question
Which of the following is not a forward contract?
- 1. an automobile lease non-cancelable for three years
- 2. none are correct
- 3. a signed contract to buy a house in six months
- 4. a long-term employment contract at a fixed salary
- 5. a rain check
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Practice set and Exam Quiz
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MCQ Question
Which of the following is the most unlikely strategy for a U.S. firm that will be purchasing Swiss francs in the future and desires to avoid exchange rate risk (assume the firm has no offsetting position in francs)?
- 1. purchase a call option on francs
- 2. obtain a forward contract to purchase francs forward
- 3. sell a futures contract on francs
- 4. all of the above are appropriate strategies for the scenario described
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Practice set and Exam Quiz
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MCQ Question
A firm wants to use an option to hedge 12.5 million in receivables from New Zealand firms. The premium is $.03. The exercise price is $.55. If the option is exercised, what is the total amount of dollars received (after accounting for the premium paid)?
- 1. $6,875,000
- 2. $7,250,000
- 3. $7,000,000
- 4. $6,500,000
- 5. none of the above
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Practice set and Exam Quiz
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MCQ Question
Futures trading gains credited to a customer’s margin account can be withdrawn by the customer:
- 1. as soon as the funds are credited
- 2. only after the futures position is liquidated
- 3. only after the account is closed
- 4. at the end of the month
- (e) at the end of the year
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Practice set and Exam Quiz
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MCQ Question
Futures contracts are:
- 1. the same as forward contracts
- 2. standardized contracts to make or take delivery of a commodity at a predetermined place and time
- 3. contracts with standardized price terms
- 4. all of the above
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Practice set and Exam Quiz
Yes! You can do Online MCQ practice of Financial Engineering question set and give online exam quiz test for Financial Engineering, so you can check your knowledge. You can get MCQ Study and Exam link from home page.
MCQ Question
Your company expects to receive 5,000,000 Japanese yen 60 days from now. You decide to hedge your position by selling Japanese yen forward. The current spot rate of the yen is $.0089, while the forward rate is $.0095. You expect the spot rate in 60 days to be $.0090. How many dollars will you receive for the 5,000,000 yen 60 days from now?
- 1. $44,500
- 2. $45,000
- 3. $526 million
- 4. $47,500
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Practice set and Exam Quiz
Yes! You can do Online MCQ practice of Financial Engineering question set and give online exam quiz test for Financial Engineering, so you can check your knowledge. You can get MCQ Study and Exam link from home page.
Important note for exam preparation: Must try Online MCQ Quiz Test after practice these Forex Banking MCQ, so you can check your knowledge and improve efficiency. You can get link from above mention for these subjects.